BRADENTON, Fla. - An attorney investigating Delray Beach's bond issues since 1999 cleared city employees of any wrongdoing but found the city's bonding procedures "technically inconsistent" with Florida law and best practices recommended by the Government Finance Officers Association.
The conclusions were reached
Brown was hired by commissioners earlier this year after the city's name surfaced in federal documents bringing charges against Mary McCarty, who resigned from the Palm Beach County commission Jan. 8, and her husband Kevin McCarty, a bond underwriter whose firms won business with the city. The McCarty's live in Delray Beach, a municipality in Palm Beach County.
Federal prosecutors charged that Mary McCarty used her influence to steer municipal bond business to her husband's firms. Kevin McCarty is scheduled to be sentenced Friday for failing to report his wife's crime. She is expected to plead guilty to fraud on Friday.
Brown's report said his investigators found no evidence that any inside information from the city provided Kevin McCarty or his firm with an unfair advantage. Investigators did not find any "quid pro quo" relationships between the McCarty's and city officials or employees, and no evidence was found that anyone received gifts in exchange for bond business, the report said.
"In short, our investigation did not reveal any substantive violations of law or substantive violations of city policies or procedures that govern the city's bond issues," the report said. "The city's bonding practices are, arguably, technically inconsistent with Florida statutory requirements and the city's administrative policies and procedures because the use of negotiated sales has become the norm for the city rather than the exception."
Florida law favors competitive bond sales, but issuers are allowed to sell negotiated transactions if specific details are documented as to why a negotiated deal is better. And Brown's report pointed out that Florida cities and counties - similar to most issuers around the country - more frequently sell bonds by negotiation.
Brown's report said the city did not document or make publicly available the criteria and process used to select its underwriter. Delray Beach had a long-held practice of keeping the same person as underwriter even if he or she moved from firm to firm. Brown's report recommended that the city follow GFOA practices and seek competitive proposals from underwriters to form a pool for future bond issues.
Prior to yesterday's special meeting, commissioner Fred Fetzer said that he was not surprised that investigators cleared city officials and employees. But he felt competitively selecting underwriters should be "considered very strongly," he said.
"We need to keep these things above board and completely transparent," said Fetzer, who was appointed to oversee Brown's contract. "We're proud of our city and need to make sure we don't damage the trust we have with our citizens."
Having the bond deals reviewed by Brown's law firm could cost Delray Beach as much as $56,000.
"It was just a necessary evil we had to go through to demonstrate that we had someone completely objective from outside of Palm Beach County evaluate our bond issues," Fetzer said. "The city could have done some things better, but there was no willful intent to do anything illegal or inappropriate. Hopefully, we've learned some better ways to do things."
