By Jesse Marx
By Chris Parker
By Jake Rossen
By Jesse Marx
By Michelle LeBow
By Alleen Brown
By Maggie LaMaack
By CP Staff
For the previous 10 years, a series of bus company audits had been saying essentially the same thing. Back in 1980, an evaluation by the Legislative Auditor's office pointed out that the quantity and value of parts listed in company records were different from what was actually on the shelves, and that purchasing procedures were not adequately documented. A 1983 audit specifically cited a lack of accountability in tracking the daily delivery of parts to each garage. By 1989, an internal audit by the bus company concluded that a $500,000 computerized Materials Management System, installed in 1986, had failed to adequately track the inventory.
A 1991 audit by Deloitte & Touche noted that bus company personnel were able to change purchase order information on the computer. That made it possible for employees to skim materials out of the system without leaving a trail. Or conversely, employees could order 100 parts and keep 50, changing the inventory figures to indicate that all 100 had been sent to various work locations. Once the parts bins containing bulk items were reduced to a certain level, they were automatically reordered, keeping the flow of merchandise going. The abuse of this system seems to have been chronic: The cost of inventory purchases at the transit company was $1.3 million over budget in 1990 alone.
Between 1980 and 1991, there were seven audits (not counting internal audits) by five different firms that criticized the MTC's purchasing procedures and/or inventory control. After each one, upper-level managers at the bus company claimed that the auditor's concerns were being properly addressed or were already fixed.
Michael Christenson had only recently taken over as head of the MTC when he says he was confronted by evidence of massive cost overruns. Christenson says he initially asked various state agencies to conduct an investigation, but that "they had no interest without the evidence already there to make a case." So in February 1991, he authorized the bus company's skeletal police force to conduct an internal investigation and okayed another audit to determine the extent of the problem. Less than a month later, employees came in with their allegations.
In March, the firm of McGladrey & Pullen delivered their findings in unusually blunt terms. There were "significant weaknesses" in the bus company's accounting systems. There was no way to track parts once they left the Central Stores. There was no inventory control over receipts, issues, or transfers of parts. Individual employees were allowed both to order and approve inventory purchases, which, combined with problems in the tracking system, "does not include adequate safeguards to ensure that public funds are not expended on items which are never received at an MTC location... or used in MTC operations." Lest bus company managers still not get the message, McGladrey & Pullen wrote: "A reasonable conclusion could be drawn that those individuals who support the current open stockroom policy, which is conducive to inventory shrinkage and theft, may do so for self-serving purposes."
Transit police officers had been given a pretty good indication that thefts were occurring within the company; now all they had to do was prove it. And that would prove very difficult.
"We started off with five employees making approximately 80 allegations," says Gary Cayo, one of the first police officers assigned to the investigation. "As we tried working our way through them, separating the garbage from the ones we could charge and dispose of, it became very frustrating." According to Lindgren, who helped coordinate the probe, "In many, many cases we couldn't prove that theft had occurred because we couldn't even prove that we owned the property because of the lack of a tracking system in the computers."
The problems faced by investigators are perhaps best portrayed by one incident in particular. An employee at one MTC garage had a falling-out with his brother-in-law, who went to Cayo and showed him a large new vise worth approximately $450. The brother-in-law said the employee had given him the vise and told him to keep it. In accordance with company policy, a serial number had been put on the vise with a metal stamp. But when Cayo tried to track the serial number through the company computers, he came up empty. Unable to tell where MTC had purchased the vise, he couldn't prove the company owned it, despite the serial number. But Cayo kept digging. Simultaneously combing through the tools at the garage and the invoices on the computer, he came upon a record of a 10-year-old vise whose serial number was exactly the same as the one given to the brother-in-law, except for one less number. When he tracked down that vise, the serial number had been written in magic marker on the side.
Inadequate tracking systems were not the only thing hindering the investigation. The transit police were not even a full-fledged law enforcement agency at the time, and most of the officers on the case were part-time workers. Lindgren and Cayo were both moonlighting from their full-time positions with the Minnetonka Police Department. In addition to working only 20 hours a week, they were occasionally diverted by other cases. Beginning in October 1991, they spent three or four months investigating charges against an employee who was suspected of stealing $10,000 per month out of the fareboxes at the Nicollet garage in Minneapolis. In February 1992, they were able to catch him in the act. The employee subsequently admitted he had been stealing farebox revenue since 1985, something he said he had been trained to do by other mechanics using handmade tools Cayo and Lindgren recovered.