CHARLESTON. — West Virginia’s government had opportunity after opportunity to halt its monthly $30,907.34 payments for office suites it vacated in 2015.
“I think our folks were always intent on doing the right thing,” Bill Crouch, the secretary for the Department of Health and Human Resources, said Friday June 29. “It was simply a failure of the process.”
Controversy has spiraled over the past week because the state paid almost $1 million total for office suites at Middletown Mall in Fairmont — offices that DHHR vacated in 2015. Lawmakers and the public have expressed outrage.
The state Auditor’s Office, which caught the mistake and ended the payments this past February, also observed a series of missed chances to stop the payments.
“The overriding question throughout this investigation has been how did this happen,” the state Auditor’s Office wrote in its investigation released last week.
“The investigation revealed multiple failures, both at an individual employee level and at a larger department oversight level. These failures collectively lead to the continued payment of monies, and could have been stopped at any time had there been closer oversight or management by DHHR.”
The missed opportunities stretch across multiple administrations, starting in 2015 when the state vacated the property at Middletown Mall.
The offices were relocated to a new Fairmont building that received plenty of attention as it opened.
The state’s lease at the mall had been renewed in 2014 and wasn’t set to expire until spring 2019. But the lease agreement had a clause allowing the state to provide a 30-day cancellation notice.
An email exchange among state employees in September 2015 demonstrated concern over making sure the payments would stop.
David Hildreth, deputy director of the state Real Estate Division in the Department of Administration, was seeking assurances.
“Would you please cancel these two old leases and make it effective at the end of the month that they moved out,” Hildreth wrote in a Sept. 21, 2015, email to Anthony Signorelli, a realty agent.
Signorelli responded, referring to a colleague, David Bailey: “I looked this one up. It looked like Bailey worked on it in May. Do you still want me to take care of it?”
Hildreth responded. “Can you look over his shoulder and be sure it gets done? I promised it would be done and don’t want it to look like I dropped the ball.”
No problem, Signorelli wrote back: “Completed and going in the mail.”
The result was a document that remains in dispute to this day, an unsigned and undated memo with Bailey’s name.
The notification appeared to notify no one.
The payments continued.
“While the emails reflect DHHR (and WVRED) diligently tried to make sure termination occurred, it also highlights that DHHR nonetheless never took steps to stop the payment from occurring or demanding proof of termination,” the state Auditor’s Office concluded.
“Instead, the concern appeared to wane after these emails, without proof or demonstration of termination. Nearly five months after vacating the property, there simply does not appear to have been a concern to preserve taxpayer money from continuing to be paid.”
Two years later there was another opportunity to act definitively.
Pin Oak Properties, which owned the mall at the time, owed on a loan by General Acquisitions of Morgantown. The leases and rents at the mall were collateral.
On March 1, 2017, General Acquisitions sent a letter to the West Virginia Real Estate Division. It intended to exercise a provision in the lease to receive monthly rental payments on behalf of Pin Oak. It asked that the checks that had been going out — mistakenly in the first place — be redirected.
Delbert Casto, a DHHR employee, sent out a puzzled email to George Montgomery, executive director of operations for DHHR.
“We have received the attached from General Acquisitions about Pin Oak Properties. It sounds as if they are in the middle of a transaction or something. As you know we no longer have offices there and are forwarding this information to you. Thank you.”
Montgomery forwarded the issue to Hildreth, the Real Estate Division deputy director who had not wanted the ball dropped two years earlier.
“I’ll reply stating the termination date of your lease at Middletown Mall,” Hildreth wrote. “Thanks.”
But the change that General Acquisitions had requested was processed anyway. As the state auditor noted, DHHR changed the invoices to reflect payment to General Acquisitions.
The state auditor questioned how and why that approval occurred. The investigation also questioned why there did not appear to be more attentiveness.
“Overall, had officials at DHHR placed a higher concern or provided better oversight on the DHHR leases at the Middletown Mall, these payments could have been avoided and/or stopped by DHHR,” the Auditor’s Office wrote.
“There were multiple opportunities for this to have been discovered and/or stopped but this failed to occur.”
Even David Biafora, one of the new owners of Middletown Mall, expressed bewilderment over what happened.
“What’s kind of odd is why the state kept paying,” Biafora said last week, referring to the full duration of the situation.
“I can’t believe with all the changes and letters that went out to them — switch to this, switch to that. The state couldn’t have picked up on it that they didn’t have the lease?”
The Real Estate Division released a statement Friday, vowing to do better.
“At this time, we continue to investigate the actions that occurred within the Real Estate Division. We do take these issues seriously and have and will continue make any adjustments to our processes as necessary to ensure situations such as this will not reoccur,” the statement reads.
DHHR, likewise, issued a statement saying it would work toward improvement.
“It is clear that past practices and policies have been insufficient, and the department is committed to making the necessary changes to ensure such incidents do not happen again. DHHR is working with the Attorney General’s Office in exploring legal options to recoup funding from this landlord for the improper payments they received.”
Gov. Jim Justice, whose administration oversees both agencies, last week released a statement blaming the previous administration and both agencies. The headline was “Gov. Justice Takes Swift Action on Middletown Mall Leasing Issue.”
Justice stated, “This is an issue that began in the previous administration, and it appears that the fault lands squarely in the lap of both the DHHR and the Department of Administration’s Real Estate Division. Immediately after I became aware of this gross misconduct a couple months ago, I directed that anyone involved be disciplined. As of today, two employees remain suspended without pay, and one has been terminated. I also directed both agencies to use every available method to recover these misspent taxpayer dollars.”
The auditor’s report concluded that employee punishment might be necessary, but would not be enough.
“Over the course of this investigation, it has become clear that multiple state agencies failed to act in accordance with statutory requirements or expected protocol,” according to the report.
“While it may be easy to simply discipline individual employee conduct, there are larger control and oversight issues that need to be examined and fixed to prevent this type of waste of taxpayer money from occurring again.”
Brad McElhinny is the statewide correspondent for WVMetroNews.com. Follow him @BradMcElhinny or contact him at brad.mcelhinny@wvmetronews.com.
