An internal investigation found that Stonecrest’s use of $6.2 million of federal COVID-19 relief funds was mismanaged and included several improper contracts that resembled a kickback scheme.
The report, which was created by City Attorney Winston Denmark at the request of the Stonecrest City Council, found several ethical violations by city employees overseeing the funds and recommended further investigation by law enforcement.
“While this investigation cannot definitely conclude that this was a ‘kickback’ scheme, the appearance of such is overwhelming,” according to the report, which was delivered to the City Council on Monday and later provided to The Atlanta Journal Constitution.
The report also stated the city’s Coronavirus Aid, Relief, and Economic Security (CARES) Act program was “plagued by mismanagement and serious departures from both legal standards and generally accepted accounting protocols.”
The report comes on the heels of Sen. Emanuel Jones calling for the FBI and Department of Justice to investigate the city’s CARES Act program while also calling for Gov. Brian Kemp to remove Mayor Jason Lary from office. Jones told the AJC that Lary used the program for his own benefit and participated in deals with murky companies run by some of his closest allies.
“Their purpose in the scheme was very simple,” Jones said. “That is to create a vehicle for the mayor and his cohorts to receive kickbacks, plain and simple.”
Lary has denied allegations of wrongdoing, accusing Jones of having a vendetta against him. He did not respond for comment Tuesday evening.
The city contracts with an outside firm, Jacobs Engineering, to provide staff and operational services. The report laid many of the allegations of mismanagement at the feet of those outside staffers, who bypassed policies and safeguards by executing emergency contracts that were not reviewed and approved by the City Council and City Attorney.
According to the investigation’s findings, “the City staff failed to adhere to the City’s Purchasing Policy when contracting with third-party vendors and did not gain the required approvals of Mayor and Council nor the City Attorney.”
The report also detailed a marketing scheme where businesses and charities chosen to receive the CARES funds were required to agree to pay 25% of their award to one of three pre-selected marketing companies — all created by city officials or with “deep ties to city staff.” This marketing scheme was not revealed to the Mayor or City Council, the investigation concluded.
At a Monday roundtable, where Lary and CARES recipients touted the program’s success, he said he would take any blame that came out of this internal investigation.
“If something has gone awry or folks aren’t pleased about what has happened, you can blame it on me. Not anybody else. Not the team, not the folks that worked the opportunity, not the people who distributed the money,” Lary said. “You put it squarely on my shoulders as mayor, and I’ll take whatever it is that comes our way. This is the job, that is the position and that is the leadership sense that I have.”
On Nov. 6 the city signed a contract with Municipal Resource Partners, a nonprofit founded last May, to oversee the city’s CARES program.
Lary said he has no connection to Municipal Resource Partners and was battling cancer for the second time when the nonprofit was chosen. Council members have said they were not aware of the contract and didn’t receive a copy until Feb. 5, following an open records request filed by the council.
Four checks totaling $6 million were written to Municipal Resource Partners in November. The checks were signed by Clarence Boone, who was the city’s economic development director. The city paid Municipal Resource Partners $510,000 to oversee the program by selecting small businesses to receive the funds.
Boone previously presented the organization’s bookkeeping records at a February meeting, but there were multiple discrepancies. The largest one was how much money Municipal Resource Partners actually disbursed to small businesses. Boone’s presentation had a $150,000 discrepancy in that figure. Boone’s wife holds a “fiduciary role” with Municipal Resource Partners and signed many of the organization’s checks.
Municipal Resource Partners also provided $855,000 to Stonecrest Cares, a philanthropic program within the city that distributed the funds to nonprofits and churches. Stonecrest Cares is not a registered nonprofit. Lary has previously said he hopes it’ll become a permanent arm of the city government.
Denmark said the most troubling finding in his investigation revolved around potential kickbacks through the use of multiple newly founded companies that claimed to offer marketing and promotional services.
As part of the grant application, businesses had to answer two odd questions. One asked if a business owner would sign an agreement to “work with one of our small business advisors to discuss your business plan for recovery and sustainability planning,” while the other asked, “Are you willing to allocate 25% of your grant to marketing your business?”
At Lary’s Monday roundtable, he said answering yes was not a requirement to receive funding.
“There’s nothing wrong or shady about that,” Lary said. “There’s nothing inhibiting folks from being able to go out and spend their awarded money by being able to market their business.”
The report goes through all sorts of, um, interesting spending. There was $20,000 for personalized wellness programs for Stonecrest residents; $20,000 for stress-release programs; $3,000 for “COVID self-care stress packages including candles, butter, oils and tea”; $20,000 for “Financial Service Education for Higher Net Earners”; and $3,500 “to provide healing hands and massage to every City staff member who desires using therapeutic holistic wellness massage.”
The massive New Birth Missionary Baptist Church was awarded $160,000. And the Arizona’s steakhouse — whose owners included the teenage daughters of New Birth’s pastor, the Rev. Jamal Bryant — got $250,000, the biggest grant to a business.
It all reminds me of the frenzy that occurs when someone throws a thick wad of cash into the air at a nightclub.
J. Tom Morgan, who used to be DeKalb’s district attorney, said: “My guess, this is just the tip of the iceberg. We’ll see this all over. When you have that much money coming in with that little oversight, there’s going to be corruption.”
Democratic state Sen. Emanuel Jones, who this year passed legislation to limit Lary’s power, said: “When they got that money, (Lary) and his posse couldn’t help themselves. There’s a lot of money missing and we have to find out whose pockets it went into.”