L E G ISL A T IV E A U D IT O R ~

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1 S T A T E O F L O U ISIA N A L E G ISL A T IV E A U D IT O R ~ oo~e~ /5 C ity of N atchitoches N atchitoches,louisiana N ovem ber 25,1998 Investieative A udit D anielg.k yle,p h.d.,c P A,C F E L egislative A uditor

2 LE G ISL AT IV E A U D IT A D V ISO R Y C O U N C IL M EM BER S Senator R onald C.Bean,C hairm an R epresentative Francis C.Thom pson,v ice C hairm an Senator R obertj.b arham Senator W ilson E.Fields Senator T hom as A.G reene Senator C raig F.R om ero R epresentative F.C harlesm cm ains,jr. R epresentative E dw in R.M urray R epresentative W arren J.T riehe,jr. R epresentative D avid V itter L EG ISL A T IV E A U D IT O R D anielg.k yle,ph.d.,c PA,C FE D IREC TO R O F IN VESTIG A TIVE A UD IT A llen F.B row n,c PA,C FE Underthe provisions ofstate law,this reportis a public docum ent. A copy ofthis report has been subm itted to the G overnor,to the A torney G eneral,and to other public ofi cials as required by state law. A copy ofthis report has been m ade available forpublic inspection atthe Baton Rouge office ofthe Legislative Auditor and atthe ofice ofthe parish clerk ofcourt. This docum entis produced by the Legislative Auditor,State oflouisiana,post O fice Box 94397, Baton Rouge, Louisiana in accordance with Louisiana Revised Statute 24:513. Fifty-eightcopies of this public docum ent were produced atan approximate co stof$ This materialwas produced in accordance w ith the standards forstate agencies established pursuantto R.S. 43:31. An executive sum m ary ofthis docum entis available on the Legislative Auditor's W eb site atwww.lla.state.la.us, In com pliance w ith the Am ericans W ith Disabilities Act, if you need specia assistance relative to this docum ent,orany docum ents ofthe Legislative Auditor ptease contactw ayne "Skip"Irw in,directorofadm inistration,at225/

3 C ity of N atchitoches N ovem ber 25,1998 Investigative A udit O fi ce of the L egislative A uditor State of L ouisiana D anielg.k yle,ph.d.,c PA,C FE L egislative A uditor

4 T able of C ontents Legislative A uditor's Transm ittalletter Executive Sum m ary Background an d M ethodology Finding and Recom m endation V... vii ix Page C ity Attorney Contracts W ith H is O w n Law Firm in Possible V iolation of Law A tta chm enti. A ttachm entii M anagem ent'sresponse LegalProvisions

5 O I)AN IEL G.KYLE,PI1.D. CPA,CFE LEGISLATIVE AUDITOR OFFICE OF L EG ISLA TIV E A U D ITO R STA TE O F LOU ISIAN A BATON ROUGE,LOUISIAN A N ovem ber25, NORTIITIIIRD STREET POST OFFICE BOX TELEPtlONE:(225) FACSIM ILE: (225) TH E H O N O I~ BLE JO E SA M PITE,M AY O R, A N D M EM BER S O F TH E CITY C O U N CIL C IT Y O F N A T C H ITO C H E S N atchitoches,louisiana Transm itted herew ith isourinvestigative reporton the City of N atehitoches. O ur exam ination w asconducted in accordance w ith Title 24 of the Louisian a Revised Statutesand w asperform ed to determ ine the propriety of certain allegationsreceived by thisofi ce. Thisreportpresentsourfinding an d recom m endation asw ellasthe response of m anagem entfor the City of N atchitoches. Copiesof th isreport have been delivered to authoritiesasrequired by state law. pectfulysubmite~ D anielg.k yle,cpa,cfe Legislative A uditor SLC :EK L:A FB :ss

6 E xecutive Sum m ary Investigative A uditr eport C ity of N atchitoches The follow ing sum m arizes the finding and recom m endation as w ellas m anagem ent's response that resulted from this investigation. D etailed inform ation relating to the finding and recom m endation m ay be found atthe page num berindicated. M an agem ent's response m ay be found ata ttachm enti. C ity A ttorney C ontracts W ith H is O w n Law Firm in Possible V iolation of L aw (Page 1) Finding R ecom m endation M anagem ent'sr esponse: From M ay 31, 1995,to A ugust 31, 1998,partners of the law firm W atson,m urchison,crew s,a rthur,and Corkern w ere paid $128,861 in salary an d related benefits w hile serving as employeesofthe City of Natchitoches(City).During thesame period of tim e, these em ployees, M r. Tom M urchison, Sr., M r.w illiam Crew s,m r.steven Crew s,m r.raym ond A rthur, an d M r. Ronald Corkern, Jr., w ere also paid $144,579 for contract legal serv ices. Thus, these em ployees m ay be in violation of Louisian a law, w hich prohibits em ployees from contracting w ith theirem ployer. W e recom m end thatthe City of N atchitoches seek an opinion from the Louisiana Board of Ethics asto w hetherornotthese actions ar e in violation of sta te law The City of N atchitoches plan s to seek an opinion from the Louisian a B oard of Ethics.

7 B ackground and M ethodology The City of N atehitochesislocated w ithin the parish of N atchitoches. In 1975,the City Council adopted a hom e rule charter form of governm ent. The m unicipalgovern m entconsists of five elected councilm em bers serving asthe legislative branch and an elected m ayor serving asthe chief executive officerand head of the executive bran ch. The O fi ce of the Legislative A uditorreceived inform ation indicating thatthe C ity's attorneys w ere listed as em ployees of the City w hile also contracting w ith the City to provide legal serv ices. This investigation w as conducted to determ ine the accuracy of this inform ation and otherm atters thatcam e to ourattention. Our procedures consisted of (1) interv iewing employees and officials of the City; (2)interv iewing otherpersonsasappropriate;(3)examining selected docum entsan d recordsof the City;(4)m aking inquiriesan d perform ing teststo the extentwe considered necessary to achieve ourpurpose;and (5)reviewing applicable state an d federallaws. The resultof ourinvestigation isthe finding an d recom m endation presented herein

F inding and R ecom m endation C IT Y A T T O R N EY C O N TR A C T S W ITH ltls O W N LA W FIR M IN PO SSIBLE V IO LA TIO N O F LAW From M ay 31, 1995, to A ugust 31, 1998, partners of the law firm

8 F inding and R ecom m endation C IT Y A T T O R N EY C O N TR A C T S W ITH ltls O W N LA W FIR M IN PO SSIBLE V IO LA TIO N O F LAW From M ay 31, 1995, to A ugust 31, 1998, partners of the law firm W atson,m urchison, C rew s, A rt hur, and C orkern w ere paid $128,861 in salary and related benefits as employees ofthe City of Natchitoehes (City). During the sam e period of time,these em ployees,m r.tom M urehison,sr.,m r.w illiam C rew s,m r.steven C rew s,m r.r aym ond A rthur,and M r.r onald C orkern,jr.,w ere also paid $144,579 for contractlegalservices. T hus,these em ployees m ay be in violation of L ouisiana law,w hich prohibits em ployees from contracting w ith their em ployer. A ccording to M r.tom M urchison,sr.,the law firm that becam e W atson,m urchison,crew s, A rthur,and Corkem has represented the City since M r.m urchison stated that he has served as the official city attorn ey since M r. W illiam Crew s, M r. Steven Crew s, M r.r onald C orkern,and M r.r aym ond A rthurhave allserved underm r.m urchison asassistan t city attorneys. From M ay 31,1995,to August31,1998,the City paid a totalof $128,861to the attorneys in salariesand related benefits. These benefitsinclude the City'scontributionsforhealth insurance, life insuran ce, w orker's com pensation, taxes, an d in M r. M urchison's case, retirem ent contributions. A ccording to M ayorjoe Sam pite,the m onthly salaries paid to the attorn eys are a retainer,lie explained thatm r.m urehison'ssalar y should coverm r.m urchison'sattendance atcity Council meetingsand an y contactthathe (Sampite)haswith M r.m urchison between councilmeetings. M ayor Sam pite furtherexplained th athe asks M r.m ur chison to sitinside his office during the councilm eetings so thatc ity em ployees can consultw ith him w hen he is on the payroll. M r.m urchison stated num erous tim es that he believes that the city attorney is a full-tim e position as one of the C ity's departm entheads. H e explained thatthe salar ies are consideration for him an d the assistant attom eys being available to the City 24 hours per day and for the attorneys nottaking cases againstthe City. H e stated thathis payrollchecks have the w ord "em ployee" printed on them and if thatdid notm ake him an em ployee,then he did notknow w hatone is. M r.m ur chison further sta ted thatthe City takes deductions from the attorneys' payrolchecksjustlike an y othercity employee.

9 Page 2 City ofn atchitoehes City payrollrecordsindicate thatthe assistantcity attom eys'(m r.w illiam Crews,M r.steven Crews,M r.ronald Corkem,and M r.raym ond Arthur)salariesare enough to covertheirportion of the health insuran ce prem ium sand otherm iscellan eousdeductions.the resultsar e netpayroll checksam ounting to approxim ately $2 to $19. Dur ing each of the pastthree years,the assistant attorn eyshave received three separate pay raises(m r.m ur chison received two pay raises),which coincide w ith increasesin the em ployee'shealth insur ance prem ium s. Each of the assistantcity attorn eys confirm ed thatthey received pay raises to cover the increases in their health insuran ce In addition to receiving a m onthly salary,the attorneysbillthe City from theirprivate law firm at leastonce each m onth forlegalservices. From June 7,1995,to A ugust13,1998,the City paid W atson,m urchison,crew s,a rthur,an d Corkern $144,579 forlegalservices. The m onthly billsentto the City by the law firm for generalservices such as correspondence, telephone conversations,and attendan ce atthe C ity Councilm eetings is reduced by a discount. A ccording to M r.m ur chison,the discountisa creditto the City forthe attorneys'salar ies,w hich ar e paid separ ately by the City'spayr olldepartm ent.m r.m urchison stated thatin prioryearsthe m onthly creditwas $600 an d wasequalto the sum of allof the atorneys'netsalar ies. The m onthly creditiscurrently $1,000 even th ough th e salariesand related benefitspaid by the City anaountto atleast$4,694 perm onth. M r.m urchison furtherstated thatthe attorn eysare responsible foralllegalw ork forthe City an d they can notperform allthe City's legalw ork forth e sm allsalary they receive;therefore,they billthe C ity for the additionalw ork.each of the attorn eys,including M r.m urchison,further slated thatthey allprovide w ork to the C ity th atth ey do notinclude in theirbillings. Louisian a Revised Statute (R.S.)42:1113 providesthatno public servan tormemberofhis im m ediate fam ily shallenterinto an y contract,subcontract,orothertran saction thatisunderthe supervision orjurisdiction of the agency of such public serv an t. Because M r.m urchison, M r.w illiam Crew s,m r.steven Crew s,m r.a rthur,an d M r.corkern ar e considered em ployees of th e City,itappearsthatR.S.42:1113 w ould prohibitthem from also contracting w ith the City. W e recom m end thatthe City of N atchitoches seek an opinion from the Louisian a Board of Ethics as to w hether or notthese actions ar e in violation of state law.

10 A ttachm ent I M anagem ent's R esp onse

11 :-~5:7 :,'! O ffice of the M ayor t': JoeSam pit6 C ity of N atchitoches (318) (318) Fax N ovem ber 3,1998 PostO fficebox 37 N atchitoches,louisiana M r.d anielg.k yle Legislative A uditor O fi ce of the Legislative A uditor P.O.B ox B aton R ouge,la R E: M anagem cnt'sr esponse to R eportof O ctober 26,1998 D ear M r.k yle: T hank you for giving usan opportunity to respond to your auditreportof O ctober 23,1998,in connection with feesand salariespaid by thecity of Natchitoehesto itscity A ttorney and A ssistantc ity A ttorneys. W e w illcertainly abide by your recom m endation thatw e seek an opinion from the L ouisiana B oard of E thicsto explore the "possibility" that ourlong-tim e arrangem entswith the City Attorneysfor legalrepresentation m ightbein any w ay im proper. W e willseek thisopinion im m ediately.h owever,in furtheranceof theopportunity so generously given by you,w e w ould m ake the follow ing shortresponse. Y our reportindicated thatthese gentlem en had been paid a totalof $128, over a forty (40)m onth period during theyears1995 through 1998.Thisisan averageof $3, per m onth for the exclusive serviceoffive{5)attorneys.thisam ountisof course,a grossfigure,and includes allordinary benefitspaid to any other C ity em ployee. A sa m atter of fact,asyou pointed outin your reportthe am ountof netsalary received by these gentlem en isvery low,averaging only $8.00 per m onth to each assistantand $1, per m onth to the C ity A ttorney. D uring a portion of your auditperiod and for the previous twenty som e years,the totalam ountofsalariespaid to allfiveofthecity 'sattorneys averaged only $ per m onth! M oreover,tile totalam ountsthatyou show paid to the attorneysw ere notalllegal fees. These am ounts included litigation expenses,courtcosts,recording cost,costs of depositions,expertw itnesses,and other out-of-pocketreim bursem entexpensesincurred by the attorneys on behalf of the C ity.

12 M r.d anielg.k yle L egislative A uditor Page 2 W e are notsure how you calculated your totalfigures,butin any eventyou did not indicate thatthese salariesw ere excessive or unreasonable and in fact,you m ade no adverse com m entsconcerning these fees or benefits. Your criticism appearsto bedirected to thesum spaid to the City Attorney'sfirm for additionallegalservicesperform ed by individualm em bers of the firm. W e w ould call your attention to the factthatm ostif notallof these feesw ere actually paid for defending the city in over forty (40)lawsuitseither filed,or in progress,or concluded during the period covered by your audit. These feesw ere paid under an insurance contractw ith R isk M anagem ent,w hich has a contractualdeductible of $25, per occurance. U nder the contractbetw een the City and Risk M anagem ent,the latter hasthe obligation ofdefending the C ity in alllaw suits,and under the contract,r isk M anagem enthasthe exclusive control over the handling of the litigation,including the exclusive rightto designate itsow n attorney or attorneysto representthe City. W hen a suitisfiled againstthe City,the pleadings arc im m ediately forw arded to R isk M anagem entand they contractw ith an attorney or attorneysfor the defense of the suit. M any tim es,butnotalw ays,the defense file isassigned to an attorney w ho isalso one of our A ssistanta ttorneys. H ow ever,it should be clearly noted that R isk M anagem entm akesthis assignm ent,notthe C ity or the City Attorney! The feesin thesecasesarc billed to Risk M anagem entand under the deductible clause in the contractthe C ity isobligated to reim burse these legalfees, som etim es,directly to the attorney handling the case. Y our reportdid notm ention this contractw ith R isk M anagem entand w e m ust assum e thatyour auditorsoverlooked this. Allof thepartnersin thecity Attorney'sfirm areassistantcity Attorneys,duly appointed underthetlom e RuleCharter ofthecity ofnatchitoches.thishasbeen the case since tbe adoption of the C ity C harter in T he C ity A ttorney,in our opinion,did not"contract" w ith his ow n law ofi ce for any legalservices. W hen ordinary w ork is required by the City itissentto theoffice ofthecity Attorney,som etim esto a particular A ssistant. Such an assignm ent,w e w ould think islegaland correctsince allof the Assistantswork for the City. T he H om e R ule C harter providesthat"the city attorney shallserve aschief legal advisor to the m ayor,council,and alldepartm ents,ofi ces,agencies..,and shallperform any other dutiesprescribed by thischarter or by ordinance." (Hom erule Charter, Section 4.02B) In addition,the C harter specifically providesthattile City A ttorney "SItALL REPRESENT THE CITY IN ALL LEGAL PROCEEDINGS." (HRC Section 4.02B)

13 M r.d anielg.k yle L egislative A uditor Page 3 Y ou have suggested thatw e consultw ith the EthicsB oard and seek an opinion from thatbody. W e feelthatthe EthicsBoard w illunderstand our position. In any event,w e w illcertainly adhere to the recom m endation of the B oard of E thics. A gain,w e thank you for your courtesy in this m atter,and for the opportunity to respond to your report. R espectfully subm itted, M em bersof tile N atchitoehesc ity C ouncil M r.t om M urchison,c ity A ttorney M r.scottl.c arlton,senior Investigative A uditor

14 A ttachm ent II L egalprovisions

15 L egalprovisions The follow ing legalcitation is referred to in the Finding and R ecom m endation section of this reporl: R.S.42:1113 provides thatno public servan t,excluding any legislatorand an y appointed m em ber of an y board or com m ission an d an y m em ber of a govern ing authority of a parish w ith a population of ten thousan d or less,orm em berof such a public servan t's im m ediate fan lily,or legalentity in w hich he has a controlling interestshallbid on or enterinto any contract,subcontract,orothertran saction thatisunderthe supervision or jurisdiction of the agency of such public servan t.

The,recommendation in this report represents,in ourjudgment,thatmostlikely to bring about

The,recommendation in this report represents,in ourjudgment,thatmostlikely to bring about LEGISLATIVE A UDITOR LO UISIA NA SYSTEM IC INITIATIVES PRO G RA M C O U NC IL STATE O F LO UISIA NA M anagem entletter,dated February 19,1997 Page 2 M anagem entattributes the noncom pliance to insta lation