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Leaders act quickly in fiscal agency scandal.

It It is the worst scandal in 50 years in Michigan. Nearly $2 million allegedly went to the House Fiscal Agency director, his staff and his friends. And then rumors surfaced that some of the money even went to buy arms for Croatia.

Shared power in the Michigan House of Representatives has helped correct an abuse that produced the state Capitol's worst scandal in half a century.

Michigan's new co-speakers, who share power because of the 55-55 partisan split in the House, reacted swiftly and decisively to "Bonusgate" at the House Fiscal Agency (HFA), which tapped a spigot it was supposed to guard and passed at least $1.8 million in unreported funds to its leaders and friends.

Democrat Curtis Hertel and Republican Paul Hillegonds moved rapidly to correct the mess in a watchdog agency that apparently was not being watched by lawmakers responsible for oversight.

In a Jan. 26 letter to the Big Four leaders of the House and Senate, Governor John Engler expressed his "outrage over the growing allegations of scandal and possible criminal activity associated with the House Fiscal Agency.

"As you are acutely aware," he wrote, "these reported abuses have fueled growing public discontent among citizens who are already disenchanted by a government they feel is unaccountable, unresponsive and self-serving. The failure to provide proper management and oversight to the House Fiscal Agency has allowed the questionable conversion of public funds for private purposes and alleged kickbacks--the result of a system fraught with nepotism, secrecy and no accountability."

While the dual speakers helped unravel the scandal, they did not uncover it. That was largely the result of disclosures by Detroit News correspondent Jim Mitzelfeld of a widening check-writing scandal that prompted a federal-state investigation, audit, personnel shakeups and over sight reforms.

"It's unbelievable stuff," Hillegonds said of Mitzelfeld's initial report.

House Fiscal Agency Director John Morberg told The Detroit News that the prospect of being forced to retire early if Republicans took control of the House prompted him to give himself a $21,884 bonus two days after the election. This bonus, added to his regular salary of $80, 808 and other compensation, boosted his total 1992 earnings to $111,523. Governor Engler's salary is $106,900.

Mitzelfeld also disclosed that Morberg gave more than $100,000 in unreported bonuses to some of his employees and wrote a $119,000 check to a friend for unspecified legal services for an agency created to monitor and analyze state spending.

It got more unbelievable in subsequent stories about expanding investigations by three state agencies-attorney general, auditor general and state police--and at least four federal agencies--FBI, IRS, U.S. Attorney and U.S. Customs Service.

After it was revealed that the federal-state task force was investigating whether state money was used to finance the sale of weapons to Croatia, Representative Bill Martin observed, "You couldn't make a movie this bizarre."

Morberg and 10 other agency employees and contractors were suspended during the investigation of agency operations for the 1986-92

"They evidently developed a carelessness because it went on so long, and they must have felt themselves impervious," said Auditor General Thomas McTavish in reporting that the questionable spending totalled at least $1.8 million.

Reporter Mitzelfeld called McTavish's report "a portrait of a government agency out of control with phantom trips, falsified documents, no-show employees, unsupervised consultants, no-bid contracts and unauthorized bonuses."

McTavish, whose auditors hadn't reviewed the fiscal agency's finances since 1978, is appointed by the Legislature. He praised its leaders for taking corrective action.

Hillegonds, who as minority leader unsuccessfully demanded an accounting of how the House spent its funds, did not appear in early 1993 to be trying to take political advantage of the scandal.

"We're all culpable for not paying more attention," Hillegonds said, referring to the fact that ousted Appropriations Committee Chairman Dominic Jacobetti was virtually the only lawmaker overseeing the agency.

Hillegonds said he did not favor making the agency scandal a political issue. He said the public attitude is "all sides are bums. To finger point is not productive."

But the Michigan Republican Party said it would make the scandal an issue in a June 29 election in Jackson to fill a House vacancy.

Tom Shields, a media consultant who helped Engler and many GOP lawmakers win elections, said, "Republicans are watching this scandal unfold with big smiles on their faces."

Hertel acted quickly upon disclosure of what happened before his watch when Democrats had undisputed control. "When I was made aware of allegations by a staff member of a kickback, I acted literally within 30 seconds" in asking Attorney General Frank Kelley to investigate, he said.

It was Hertel who removed the 20term Jacobetti, dean of the Legislature and 17-year czar of the Appropriations Committee, as the top Democrat on the committee.

Hertel named Democratic Representative Dick Young as Appropriations co-chairman. Hillegonds picked Representative Don Gilmer.

Gilmer said, "You can,t have $1.8 million improperly spent and say that numerous people were not caught with their hands in the cookie jar."

"They knew government, and they also knew how to manipulate it for their purposes," Young said.

Kelley said there was such administrative negligence in the House it was "like leaving a baby in a candy store all alone."

The first charges came May 25 and included Representative Stephen Shepich, a former HFA staffer, who was arraigned on nine felony counts of embezzlement stemming from the alleged receipt while working for the agency of a $2,045 reimbursement from the state for travel expenses that were not incurred. Two other former agency staffers were arraigned at the same time on similar charges.

Shepich had no comment for Capitol reporters, but told radio stations in his district he is innocent of the charges, which he said are politically motivated.

Hertel believes the scandal would have been exposed even if Democrats had maintained House control. "There's no question in my mind that it would have come to light anyway," he said. "The information came to light through a freedom of information request that eventually, I'm convinced, would have been granted no matter what."

Nonetheless, the leadership change and balance of power helped prompt rapid response. The Hillegonds-Hertel tandem expedited untangling the mess and enacting reforms.

"Give a lot of credit to the electorate," Hillegonds said. Once it was known after the election that there would be shared power, "information started to open up" about the agency.

Beyond calling for an audit and investigation, House leaders hired Bob McKerr, a respected former associate superintendent of state schools, as interim director for the 34-employee agency that had spent 46 percent of its $2.8 million budget in the first quarter of the fiscal year. He vowed to ensure that the agency is non-political.

The 1993 probe has not produced anything of the dimensions of the 1940s investigation of legislative corruption involving payments from lobbyists. In 1945, Senator Warren G. Hooper was murdered three days before he was to testify in the case. There were more than 40 convictions. And the 1940s scandal propelled flamboyant prosecutor "Hollywood Kim" Sigler into the governorship.

Then, the issue was lobbyist money. Today, the issue is taxpayer money.

Both sides await outcome of the June 29 special election for political fallout of the HFA scandal. Loss of the traditionally Republican seat would put the House back under Democratic control, barring death or unforeseen developments elsewhere.

Despite Hillegonds, reluctance to trumpet the scandal for partisan gain, Hertel says, "I know it will be an issue in the Jackson race." But he is confident the blame will not stick to any one party.

Understandably, despite their cooperative working relationship, Hillegonds and Hertel have different spins for voters.

Hillegonds, message: Shared power helped pry out information and end gridlock. "Don't send us back to business as usual."

From Hertel: New leaders have corrected old problems. Regardless of the June 29 outcome or of future elections, "there's no going back to being a closed shop again."
COPYRIGHT 1993 National Conference of State Legislatures
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Copyright 1993, Gale Group. All rights reserved. Gale Group is a Thomson Corporation Company.

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Title Annotation:corruption in Michigan's House Fiscal Agency
Author:Weeks, George
Publication:State Legislatures
Date:Jul 1, 1993
Previous Article:Taking turns.
Next Article:Sunshine State detente.

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