Fraud, Facades, Faeries, and Feigned Foolishness in Grantgate

[XLFD]

It behooves you to read this article as a bit of background on this subject, but you may perhaps skip it if you listen to the video starting with the comments at the June 8, 2015 Ludington city council meeting's public hearing on façade grants, starting about 14 minutes into the video, and read what is basically alleged summarized here:

1) The city manager prepared an application for façade grants (likely with generous help from Heather Venzke Tykoski, the Community Development Director hip deep in other shady procurement issues).  This application was for two businesses wanting façade grants, one of which is co-ran by the treasurer of the DDA (and President of the Ludington/Scottville Chamber of Commerce Kathy Maclean, pictured left).

2)  In the application, two questions pertain to disclosing any sort of ties the grantees may have with the local unit of government set to administer the grant.  The application fails to do this by saying no city official or their family members are involved. 

3)  The application further says there is a $1000 contribution from the DDA to the treasurer of the DDA, a contribution which she would have to explicitly approve.  There is no indication in the budget or the DDA minutes of the last two years that this contribution has been approved by the DDA, with her abstention and notification to the DDA that she will benefit greatly from the grant.

4)  KDMAC's own pre-application and application, likely signed by her husband and not yet available, also failed to note these facts of association, for then the grant application would have noted that admission.  Their application also officially claims they are not meeting their obligations for their $100,000+ rental rehab grants they received throughout 2010 and 2011.  Both Shay and Maclean state they have no renters in their four upstairs apartments, nor are they advertising them anywhere, especially at the state site.  They must do this to be compliant with state rules.

With that in mind as a base, let's take a look at how the Ludington leadership handled the revelations that Shay, Maclean, and Tykoski (Councilor Tykoski's wife) were engaged in fraud and deceit in their filling out of applications.

After he closes the public hearing after I spoke, the mayor makes the motion to approve the application for façade grants, and opens the floor up to discussion at 19:20 into the video.  With the current council's apathy for doing things lawfully, I figured they might just vote this fraudulent application through without discussion, but they didn't.  The transcript of the majority of the discussion follows, with some annotations in RED.

June 8, 2015, Ludington City Council from Mason County District Library on Vimeo.

Councilor Holman:  Your Honor, are we going to separate these our are we voting on both of them at the same time.

City Manager Shay:  I do want to make a note here, because there were some allegations, baseless allegations by Mr. Rotta that Kathy expends funds, she writes the checks for the DDA and so forth, that is not true.  All the expenditures for the DDA actually go through the DDA budget, which is a portion of the city's budget, and that goes through our accounts payable portion that our city clerk oversees and it's something that the Finance Committee also reviews in terms of payments, bills, as well.  [How Clintonian!  Her position requires her to approve every single voucher to be paid by the DDA, so what if she doesn't physically write the checks] 

So Kathy Maclean does not have this checkbook that she writes out checks for DDA purchases at all.  It all goes through the City accounts payable section that is overseen by the entire DDA Board.  Any expenditures that they want to make is also, then goes through the accounts payable portion, and is reviewed by the Finance Committee as well as the city council.  [Note, the $1000 has never been approved by the DDA Board, at least in open session which it must be, to be set aside for this purpose.]

Councilor Holman:  And I am the chairman of the Finance Committee.

CM Shay:  That is correct.  [...and a very vigilant one-- ha, ha]

Councilor Johnson:  John, can I?  Is Kathy even considered a city official?  [Background:  Les Johnson served on the DDA Board as secretary for many years before becoming a city councilor and did both jobs for a few years.  Never did he note in his minutes when any DDA Board member would be financially benefitting from the DDA's decisions, including the yearly influx his party store got for selling liquor at various city functions such as NYE Ball Drop, FNL and Oktoberfest.  The answer to his question is obvious, but when your city manager doesn't swear an oath and your mayor swears an oath as a police officer and mayor at the same time, faeries and unicorns are possible.]

CM Shay:  I didn't, I mean, I didn't consider her a city official.  She's the Treasurer on the DDA Board, and when we have our monthly DDA meetings, the city prepares a report of the expenditures the DDA has spent and then she simply summarizes that report.  She doesn't even prepare the report, that's done by the city, she only is presenting what the city has given her.[She swears an oath after her appointment and approval, she votes on matters of public policy for the city of Ludington-- but she's not an official?  Is John Shay really this dumb?  Or is it an act to assuage his understanding bosses on the council?]

Councilor Johnson:  Any business downtown can apply for this façade grant

CM Shay:  Umm-hmm.  Yes.

City Attorney Wilson:  First of all, I am going to assume that what Mr. Rotta said was correct; that Kathy has a major interest in KDMAC...

CM Shay:  Yes.  It's true.

CA Wilson:  Any contract that KDMAC has then with the DDA or the City needs to be approved, after notice, by a 2/3 roll call vote of the DDA and I don't know whether, if that's been done.  It's possible under Michigan law for a public official to have a contract with the government unit that he or she is a public official of, and that's probably not a very good grammatical way of saying that sentence, but you have to follow process of written notice, the secretary of that body, then have a 2/3's roll call vote of what would be the proposed contract, before the official can enter into that contract.

(Cross talk with Shay)  I'm new into this so I... [Wilson does tackle a part of the contracts between public agencies with public officials legislation, which is noteworthy that he does, he does it very delicately throughout.  But he doesn't address the fraudulent representations until Krauch does later.]

CM Shay:  That has not happened.

CA Wilson:  OK.  Then that needs to happen.  

CM Shay:  Now for purposes of, let me ask you of the timing of that for the purposes of this.  This is to apply for a grant which the City of Ludington is the grantee.  You're talking about you say a contract that the terms of the contract or in terms of the actual repair work problem?  [if you look at the video, Shay throws out a bunch of nervous 'tells' and he becomes slightly confused as to what his best tactic to take is throughout the discussions.  He effectively dodges the city throwing the fraud word at him.]

CA Wilson:  It would be whatever contract KDMAC would enter into either with the DDA or the City to be awarded some of these funds.  OK?

CM Shay:  So at this point is this resolution is to apply for the grant, so...

CA Wilson:  It's probably premature that, at this point there has been no contract between the DDA or the City and KDMAC...

CM Shay:  It's just to apply for a grant...

CA Wilson:  Then I don't have any objection to approving the application for the grant [despite the obvious fraud and undeclared conflict of interest funding on the application?]; going further down the road, however, we need to make sure that the contracts with public officials statute is complied with.

CM Shay:  It has to be noticed and then a 2/3's majority vote by the DDA Board?  ["I'm just learning this fact after being a village and city manager for twenty years people"]

CA Wilson:  It's whichever public entity she is entering into the contract with; okay?  Okay; we can talk after the meeting about what the details are about that, then I'll guide you through it.  But there is a process for doing that, that provides public notice and so on.

CM Shay:  And there has not, there has not been a 2/3's vote at all on that.

Councilor Holman:  Has there been a 2/3's vote on the Sandcastles?  Does that have to come also?

CA Wilson:  Is there any public official that is a member of the Sandcastle people?

Councilor Holman:  No.  Are we ready now for a motion?

Councilor Krauch:  I have a question.  I'm just curious... do we feel, Richard (Wilson), that this application would need to be amended in any way?  Particularly...[... to avoid the clear fraud involved.]

CA Wilson:  Well Item 4 is a little (Krauch:  4 and 5.) UGLG... Unit of general local government.... I think yeah, they probably need to, need to disclose that. 

Councilor Krauch:  My thought is, absent any amendment, four and five are problematical.

Councilor Holman:  I agree Mike.  Okay so then once again, do we split this or...

Mayor Cox:  I can entertain a motion then to, is this time sensitive, John?

CM Shay:  I... probably the cleanest way would be to put it back on the agenda for the 22nd?

Mayor Cox:  I will entertain a motion...

CM Shay:  Well you might as well do both, MEDC requires a minimum of two applications for the façade program.

Councilor Krauch:  Is there a deadline before these have to be submitted? 

Clerk Luskin:  Excuse me, we are meeting on June 11th as well as the workshop...

CM Shay:  Again, that's considered a special meeting... we will see if we can do it on June 11th.

CA Wilson:  You need to amend the agenda for that meeting and post that.

The decision is made to table the resolution and resume looking at it on the June 11th meeting.

Councilor Winczewski:  Can I ask another question on this, just for clarity?  If, like, the owner of the Blu Moon was on the DDA Board... she would have to go through the same process to get the façade?  (Wilson:  Yes)  Anybody who's on the DDA Board?

CA Wilson:  Any public official, and I don't have the statute in front of me, but any public official or any public employee who enters into a contract with the government that he or she works for...

CM Shay:  She don't work for the government ["None of us work for the government, we work for the people damn it-- and my six figure salary paid by money faeries"]. 

CA Wilson:  But if she's an appointed member of the DDA she can't have a contract with the DDA without going through the process.  Just like anybody on this council could not have a contract with the City of Ludington without going through this same process.

The discussion ends with Councilor Krauch labelling the incorrect information on the application as an 'administerial error', where they finally and officially table the issue.

But complete falsehoods knowingly put on an application for hundreds of thousands of dollars in state grants does not stop at just an "administerial error".  KDMAC Ventures LLC and its members, Kathy and David Maclean filled out and signed their own applications for this without noting that Kathy would be a city official taking her part in "approving all vouchers for the expenditures of funds for the [Ludington DDA] authority."

John Shay saying that the DDA is contributing $1000 to KDMAC's efforts is totally incorrect.  The 2015 budget has no such claim, and there has been no vote on this expenditure ever taken at the Ludington DDA, with the notable abstention of Kathy Maclean with her conflict of interest noted in the minutes of the meeting.  John Shay cannot predict what the DDA will commit to in the future without it being openly discussed, and cannot put so on an application without that also being fraudulent.

Such, simple, easy to correct 'oversights', shows the levels of corruption and incompetency in the management of our city and in the administerial levels of the grants.  But what do they do to correct the situation after being called on it and talking openly about the issues involved?  Take a look for yourself in the amended packet for today's (June 11, 2015) special meeting [ packet ], with what should be an amended application.  A quick check on p. 25 and p. 26 shows they refuse to acknowledge that they are dealing with a Ludington City official in questions four and five, and then that contribution of $1000 from the DDA which has not been made or budgeted for on p. 33. 

Apparently, our city manager who has been working over a dozen years as a Ludington city official without actually taking the time to become one by swearing an oath of office, is just too stupid to know what a 'city official' or 'city employee' is after all this time.  Or realize that filling out an official application like this falsely is a crime of fraud.  When you can willfully swear falsely on a court affidavit when the city you manage is on trial, it comes rather easy to do this.  His bosses on the city council positively adore it.

[XLFD]

Perceptive observations, Jasper, but I would tell you that Councilor Castonia talks like that at the council and on the radio for local sports on WMOM, that's just his normal way of talking-- I don't believe he has anything special in his red cup.

The first question is a good one.  The practice only began in earnest with Mayor Henderson and City Manager Shay at the helm, witness the public comment interaction back in this September 1998 meeting.  But Mayor Henderson codified rules early in his administration limiting comments to five minutes, and effectively barring any dialog between city leaders and the public by allowing the public to comment and ask questions only at the beginning of the meeting and remaining silent for the rest of the meeting. 

The standard practice throughout the county is to allow time for the public to talk at the beginning and ending of the meeting, and doesn't outlaw any meaningful banter/questioning during those comments.  If it seems like the Ludington leaders are apathetic and elitist because of this insane system, where they ignore questions and important matters is because they obviously are.