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.”
Poor record-keeping
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.
More third-party vendors
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.”
According to the investigative report, the choice of three companies was presented to small businesses to handle their marketing: Battleground Media LLC, Visit Us, Inc. and Real Estate Management Consultants, Inc.
Tom Kurrie, Stonecrest’s first city attorney, founded Municipal Resource Partners, and also founded Visit Us last July. It has since been transferred to Robert Burroughs, an attorney, who also founded the other two companies in October, according to Secretary of State business records.
Burroughs could not be reached for comment. In an email, Kurrie told The AJC that he was unaware of the allegations, adding that, “I unequivocally deny them and will review any such allegations and weight the avenues I have to address them.”
A marketing ‘pitch’
About 450 entities applied for grants through the small business relief program. A total of 138 were given awards.
The awards varied between $2,400 and $250,000. The top recipient was Arizona’s Steak House, which permanently closed at the onset of the pandemic only to reopen months later. It’s owned by the teenage daughters of Gizelle Bryant, a reality star from “The Real Housewives of Potomac,” and Pastor Jamal Bryant, the pastor at New Birth Missionary Baptist Church. The restaurant’s management could not be reached before publication.
On Common Ground, a local newspaper that covers south DeKalb and the surrounding area, received $100,000. Editor Valerie Morgan told the AJC that the money saved her business, which led them to brush off any questions of impropriety.
“We were surprised, shocked and relieved, because we were going to have to shut down,” she said.
She said yes to both of the marketing-related questions on the application.
“It was pitched to us that it would be a good way for us to market our business,” Morgan said. Sold on the idea, she paid the $25,000 to Visit Us for marketing. She said she hasn’t received anything yet in return for that payment.
“There is no evidence that the so-called ‘marketing’ services have ever been provided, and it is unknown where the money actually went,” the investigative report said.
The report mentions that Jacobs is conducting its own investigation. On Tuesday night, Jacobs told the AJC, “The behavior and actions in Stonecrest as described by the City Attorney’s report are abhorrent … all contractors and employees found to have been involved in the conduct in Stonecrest have been terminated.”
“At best, the administration of the City’s CARES Act funds was marked by serious mismanagement,” Denmark concluded. “At worst, it was yet another regrettable instance of public corruption in DeKalb County.”
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