Audit: Former drainage supervisor directed $2.5M in business to his own company

From 2009 to 2013, St. Mary Parish Consolidated Gravity Drainage District No. 2 in Morgan City had more than $2.5 million in improper expenditures, as well as missing equipment and a lack of board oversight, according to a report issued this morning by state Legislative Auditor Daryl Purpera’s office.
The report said Peter Businelle, the district’s maintenance supervisor, used his position to improperly direct $2,582,115 of public funds to himself while doing business as PAB Welding Service from January 2009 through November 2013, according to a state auditor news release.
The payments were for maintenance and improvement jobs allegedly performed at district properties “with little to no verification of the need for the work, whether the work was actually performed or whether rates charged were appropriate,” the release said. Auditors concluded in the report that “some of the payments may have been for services that were not provided, unnecessary or performed at inflated prices.”
The investigative audit was initiated after the Louisiana legislative auditor received a letter from the 16th Judicial District Attorney’s office stating it received allegations that an independent contractor may have misappropriated district funds, the release stated.
Businelle also was accused of making payments to former Board Chairman Carl Kraemer totaling at least $42,833 from 2009 through February 2013 “but could not provide a verifiable explanation for the payments,” the news release stated.
By making payments to Kraemer, Businelle may have violated state law, according to the audit report. Additionally, by receiving payments from a district employee or contractor, Kraemer may have violated state law, the report stated.
Auditors found that 42 pieces of equipment or tools worth at least $10,990 were purchased with district funds from November 2009 through January 2013, but are not in the district’s possession, the release stated. Records indicate that Businelle received 35 of these items, and Kraemer received three of the items, according to the state auditor’s office.
Kraemer served as district board chairman from November 1997 until he resigned April 1, 2013, the audit report stated.
In response to the accusations, Businelle said this morning that everything he did for the district was passed by the drainage district’s board before any payments were made to him. Businelle retired as the district’s maintenance supervisor a year and a half ago, he said.
The Daily Review attempted to reach Kraemer this morning by phone but was unsuccessful.
St. Mary Parish Consolidated Gravity Drainage District No. 2 is a political subdivision of the state created by the St. Mary Parish Council. The district is “empowered to drain lands by the construction, maintenance, and operation of gravity and/or forced drainage facilities, including drains, drainage canals, ditches, pumps, pumping plants, dikes, levees, and other related works,” the report stated.
The district is governed by a five-member board appointed by the St. Mary Parish Council. Members of the board serve four-year terms, according to the audit report.
The state auditor’s report also said that the district board failed to create, adopt, maintain or file the appropriate written policies and procedures, public meeting procedures, required tax forms, fiscal controls or other records “to properly govern district affairs and safeguard public funds,” according to the news release.
By failing to safeguard public funds, board members may have violated state law, the report stated.
The district is responsible for nine pumping stations and several drainage ways. Seven of these stations are within the Morgan City incorporated limits. The city and district have a cooperative endeavor agreement for the maintenance of the drainage ways, levees and other aspects of the drainage system within the city limits.
Copies of this report were delivered to the district attorney for the 16th Judicial District of Louisiana and the U.S. attorney for the Western District of Louisiana, the news release stated.
The Daily Review couldn’t confirm whether any criminal charges have been filed yet in response to the investigative audit.
According to a letter in the audit report, current Drainage District No. 2 Board Chairman Lee Dragna said the current board, under the direction of the district attorney’s office, contacted the legislative auditor to assist “in reconciling certain matters related to activities” conducted by the prior board and district staff.
“No allegations or findings in the audit relate to any acts or omissions of any commissioner sitting on the current board,” Dragna said in the letter.
The current board and staff will use the auditor’s findings and recommendations to improve the district’s operations, handling of its finances and compliance with state laws, federal regulations and program requirements, Dragna said.
Since being appointed, the current drainage board has “taken steps to promote transparency in its operations, tighten internal controls, minimize risks, and adopt best practices, policies and procedures,” Dragna said.
According to the letter, specifically, the current board:
—Hired an administrative professional to manage the district’s day-to-day office affairs and administrative functions.
—Engaged CPA firm Darnall, Sikes, Gardes & Frederick to handle its financial matters.
—Engaged law firm Coats Rose Yale Ryman and Lee as special counsel to advise the current board on board governance, develop certain policies and procedures, advise on compliance with Louisiana public bid laws, ethics, state and federal program requirements, perform contract negotiations and assist with intergovernmental relations.
—Adopted bylaws.
—Created sub-committees on the current board to review contracted professional service providers’ invoices and payments.
—Entered into intergovernmental cooperative endeavor agreements for support and assistance.
In response to the legislative auditor’s specific recommendations, the current board will “make every effort to implement the following in a timely manner.”
—Attend a minimum of one hour of education and training on the Code of Governmental Ethics during each calendar year.
—Adopt, implement and adhere to a procurement policy that complies with Louisiana Public Laws and its exceptions.
—Maintain a centralized file system and document retention policy.
—Adopt, implement and monitor levels of authority policies concerning third party agreements.
—Adopt, implement and monitor, the current board subcommittees, policies concerning the reviews of third party invoices to ensure services were provided in accordance with contractual terms, proper supporting documentation is attached to ensure payments are for legitimate public purposes.