What is your understanding of what a proper company expense is? And how do you monitor the use of the cards for the people that you supervise?
Chairwoman Verna, I'd like to go back to answer again the previous question that you asked me.
There are two other people -- I'm sorry, three other people: Dennis Stenson, who is the Vice President for Operations; the Security Director, Hugh Bridges; and John Kelly, the Executive Director for Materials Management. They are the other people who report directly to me, who have American Express credit cards. And I'll answer your follow-up questions.
Well, what criteria is used for one to get a credit card? 37 11/18/98 FINANCE COMMITTEE - Resolution No. 980731
As I said before, Chairwoman Verna, it relates to the person's position. Typically, if they're senior officers in the company, they get a credit card; if they show a need for one when they're doing company business so that they don't have to use their own credit worthiness in order to support the company; or if they do travel. So those are typically the criteria that are used, to my understanding.
Mr. Martin, I like you to review with us your understanding of your relocation expenses as they related the your employment contract with PFMC. Did your contract contain a cap on relocation expenses. And if so,, at what amount?
Chairwoman Verna, this is my understanding of the contract and the way the expenses were handled: When I negotiated my contract in December of 1995, I was asked, What would it take to sell your property in Pittsburgh, purchase a property in Philadelphia, move your family and your personal effects from Pittsburgh to 38 11/18/98 FINANCE COMMITTEE - Resolution No. 980731 Philadelphia? I outlined what those costs would be. They were approximately there are $5,000 for moving my personal effects from Pittsburgh to Philadelphia; approximately $35,000 on the closing costs of my property in Philadelphia; and approximately $15,000 in closing costs on the sale of my property in Pittsburgh. And those figures approximated $50,000, exclusive of anything else, $50,000. And that was the figure that was included in my contract for the relocation expenses.
For the relocation expenses, it was $50,000. I've spent so far for the items that I outlined about, let's see, there was $33,000 in the closing of my property here in Philadelphia, $4,777 on the transfer of my property from Pittsburgh to here. So that amounts to about $38,000, is what I spent on the closing costs of the $50,000 that were -- I'm sorry, of the relocation expenses that were outlined in that provision of the contract. 39 11/18/98 FINANCE COMMITTEE - Resolution No. 980731
Does the amount include the gross-up for federal taxes?
As I said Councilwoman Verna, I'll go to the provision of the contract, and I don't have a copy of that in front of me. (Mr. Martin approaches committee table to get copy of the contract.)
At paragraph 6b. is the $50,000 that I was alluding to in my previous answers to you. Relative to the expenses related to relocation of personal property to an address within the City of Philadelphia and other expenses incidental to moving, such as closing costs on sale and purchase, gross-up of moving expense reimbursement on account of taxes, transfer taxes, not to exceed $50,000. 40 11/18/98 FINANCE COMMITTEE - Resolution No. 980731 That's the provision that I'm reading from in paragraph 6.
According to the information that we've received, Mr. Martin, it indicates that your relocation payment to date has been $69,599.
Chairwoman Verna, what is also not included in the information which has been sent to you is a memo from myself to Mr. Sharbutt stating that I don't agree with the totals that have been provided to this committee, and I also believe that you've gotten a recent delineation of my costs at a figure that's about $10,000 less than that.
This makes things so clear to me that A doesn't know what B is doing. I mean, how do you calculate expenses when they're -- we're given one figure, now you're telling us that you told them that it was incorrect. We never got information on it. I don't know. 41 11/18/98 FINANCE COMMITTEE - Resolution No. 980731 How much has really been reimbursed to you to date?
Councilwoman Verna, I am not quite sure, but I can tell you this, that on August 27, 1996, I provided a memo outlining what my relocation -- or rather the closing costs are on my property here in Philadelphia. I don't know that the committee has been provided a copy of that. But in any event, it's a memo where I ask that a sum of $32,139.50 be submitted to the National Penn Bank on the account of E&M Abstract Agency. That would have been the amount for the purchase of my property and the closing cost of my property in Philadelphia. I submitted my temporary living expenses regularly, according to procedure. That was outlined in a policy that's numbered 778.01, and it's one of the 792 procedures that we have. It outlines how you're to report your expenses, both cash and credit-card expenses. My expenses were submitted regularly according to that policy. I don't keep a running tally on that. I expect that the people who are responsible for 42 11/18/98 FINANCE COMMITTEE - Resolution No. 980731 that would do that.
It's my understanding that your house in the Pittsburgh areas remained unsold; is that true?
Is it accurate that PFMC will still have to pay the transfer costs and other associated costs from the sale of that house?
Chairwoman Verna, my interpretation of my employment agreement is yes.
That's what we thought. Mr. Hallyar, what is the procedure that PGW's required to follow when it wishes to enter 43 11/18/98 FINANCE COMMITTEE - Resolution No. 980731 into professional services contracts? What approvals, if any, is PGW required to obtain from PFMC before entering into these contracts?
I believe that the PFMC board needs to approve contracts of a million dollars or more. The chief executive officer has signatory authority, which is basically unlimited, but requires board authority for over a million dollars. The officers underneath the chief executive officer have various signing authorities at various levels -- 200,000, 250,000 and so forth.
There was a contract between PFMC and Sheila Hanson that I requested as part of the discovery.
Unfortunately, it appears that I did not receive a fully executed agreement in so much as there was no witness listed, nor is there a date on the signed agreement.
Do you know on what date this agreement was signed? 44 11/18/98 FINANCE COMMITTEE - Resolution No. 980731
No, I don't, but I don't believe it was with PFMC; I believe it was PGW. It should have been with the contractor at PGW, 'cause I don't believe that PFMC ever approved of that contract.
Well, I find it very interesting in that this particular contract was supposed to be for approximately six months --
-- at the amount of $72,000. And as of this date, Miss Hanson has been billed and paid over $316,000. Who -- was there any formal amendment to that original contact or terms? Who decided that they were going to extend the contact? And who gave approval for it?
My understanding is that there is no extension to that contract, either in time or in the dollar amount that the contract was to be for. And it was a contract signed without the approval or knowledge of the board. It was signed with the chief executive officer and the individual. The payments were run through the chief executive officer at that time, 45 11/18/98 FINANCE COMMITTEE - Resolution No. 980731 and it was done on his authority.
The contract is still in existence, but it certainly -- there are no 10 further services being asked, nor do I expect there will be. There no contract; it's been exceeded.
Do you know if the Hanson Consulting Group had a business privilege number to do business in the City of Philadelphia?
You're jamming me up. Yes, I know. But, as you know, I am not -- by law, we cannot divulge individual tax matters other than those pertaining to real estate tax.
But you know they were billed and paid for in October of '98. Now, you had to have some knowledge, Ben, come on.
No, I didn't have any knowledge of this until it appeared in an 46 11/18/98 FINANCE COMMITTEE - Resolution No. 980731 anonymous letter, I guess, some six months ago. This is an individual that --
Did they ever pay the appropriate wage taxes, revenue, licenses, and other fees to the City of Philadelphia prior to the publication in The Daily News articles concerning the contract?
No, you can answer it; you don't want to answer it, and I will tell you --
The law prohibits me from discussing any tax matters other than dealing with real estate tax, I'm sorry.
Well, have you had any internal conversations with the Revenue Department to determine compliance for this consulting group?
I am certain that the revenue commissioner knows about this matter. 47 11/18/98 FINANCE COMMITTEE - Resolution No. 980731
Well, you can yes or no; you don't have to elaborate. Did you have any conversations with him internal conversations? Yes?
Thank you. Mr. Martin, within your areas of responsibility, does PGW hire consultants?
Chairwoman Verna, PGW does hire consultants in my areas of responsibility.
How many and what services do they provide, and what is the cost?
Chairwoman Verna, I'd have to look at the responses that we provided to you. I'm not quite sure off the top of my head what it is that we've outlined as the consultant and the fees that we're paying them in the responses that we sent to you, so I would have to get them.
I believe we outlined the -- if Mr. Sharbutt can help me here, he's responsible for sending in the responses. I believe we identified all of the consultants that 48 11/18/98 FINANCE COMMITTEE - Resolution No. 980731 we have -- that we have retained at PGW.
So we got them. But they were broken down by departments. So can you give us any indication as to how many there are, what services they provide, and what the figure is that we pay for the consultants?
Chairwoman Verna, as I said, I'd have to try to pull out the specific response because I believe that there was a data request from the committee asking for --
And they've just separated them into divisions. We don't have that kind of personnel that we could do what many of your people can do for us with the push of a button.
Well, we can do some that with the push of a button, Chairwoman Verna, but I've got to say to you that the level of detail that you're asking for is typically not the level of detail that I would have at the tip of my fingers. I now have some information and I will be glad to provide that to you.
Do you have that 49 11/18/98 FINANCE COMMITTEE - Resolution No. 980731 before you now?
Yes, I do. In response to question number 14, the question is: Copies of all contracts with outside consultants and list of all the consultants retained by PGW. A response was provided on 10/23/98.. And as you can see, it's voluminous, and I'd have to go through this and pick them out for you. I can do that now if you'd like.
No, no. I prefer you do it at a later date and send it to both myself and members of the committee.
Very well. Chairwoman Verna, I also have now before me the exhibit that I referred to earlier where I stated that you received, or should have received, a revised relocation expense payments. And it shows revised 10/22/98, in response to question number 5, and it shows the amount that was paid to Martin, Gregory D., Senior Vice President and Chief Operating Officer -- that's -- I'm Executive Vice President -- at $59,102.22. The response that was given to you 50 11/18/98 FINANCE COMMITTEE - Resolution No. 980731 before showed $69,013.62. That's what I was referring to.
Mm-hmm. Thank you. Mr. Sharbutt, according to an internal memorandum that was provided to the committee, there was a problem with a specific employee's paychecks back in 1996. On three different occasions, a particular employee's paychecks were alleged to have been stolen. On each of these three occasions, the check was replaced, despite the fact that the check had already been cashed. Yet, when asked to sign an affidavit stating that the employee had not cashed the checks or received the money, he declined to do so. Can you tell me why would the checks be replaced in light of the employee's refusal to sign such an affidavit when the checks were actually cashed?
I don't recall reading the memo. There were thousands of pages in what was submitted to you, but I do recall the incident. I believe it was in '96. Is that what you said initially? 51 11/18/98 FINANCE COMMITTEE - Resolution No. 980731
Okay. I don't recall it being in there, but I do recall the instance.
Yes, if you could, please. (Sergeant at arms brings memo in question to Mr. Sharbutt. )
Yes, ma'am, I recall this incident. What happened in this particular case was that at the time payroll checks in bulk for entire departments were delivered to the departments and no one signed for them, they were left at different locations around the company. In the case of this particular employee, he was not there at the time, and his check was left at the first floor reception security desk at PGW. Before he arrived on a shift a couple hours later, that check or his payroll checks were taken outside and cashed.
His paychecks were 52 11/18/98 FINANCE COMMITTEE - Resolution No. 980731 -- are you saying "check" or "checks"? I'm sure there was one check at a time, on three different occasions.
I think this was one check at a time. Each week, we get checks, but the same thing did happen. It was taken outside and cashed at one of the street vendors. And after investigating the process, we could not determine who was doing it or what was happening here. It was not the employee's fault; it was the security and the delivery system. From this experience, we drastically changed the procedures that we used to govern the transfer of checks from the printing to the employees.
Do your employees get paid every week or every two weeks?
They are paid every week. In this case, it was not the employee's fault that the check was missing and he did not get it, and we could not recover it from the street vendor. It was just one of those 53 11/18/98 FINANCE COMMITTEE - Resolution No. 980731 situations where we --
I don't understand. Why wouldn't he sign an affidavit saying that he never received his check?
I questioned that myself. And after finding out which particular employee it was, I'd rather not discuss this individual, but I determined that he just would not in his judgment sign anything. It was -- it's a very good employee. He just is -- is opposed to signing things. It was just -- I know the individual, and I did not suspect there was any wrongdoing on his part, and I respected his disagreement with signing any kind of a document. It's a very unique individual.
Well, I can understand something like that happening once, but not twice or three times. What is the company's policy? Do they still keep the checks downstairs so that anybody and everybody could help themselves to a check if the security guard turns his back? I don't understand it.
No. This process was 54 11/18/98 FINANCE COMMITTEE - Resolution No. 980731 changed immediately after these events occurred. This employee was one who could be taken advantage of over and over. And rather than worry about this anymore, we just changed the practice.
They are signed out and witnessed. We do not take down, people pick them up and sign for each individual department and check, and they are responsible. The supervisor within the department has assigned someone to pick them up, and if that person loses the check or anything happens to it, it's their responsibility.
Thank you, Madame Chair. How much money was involved in total?
Each check. I don't recall the exact amount. 55 11/18/98 FINANCE COMMITTEE - Resolution No. 980731
They are always notified and we, I believe, had an investigation and review done of the transaction and the incident, which we customarily do. I'm not responsible for notifying the police, and I can't say that I know specifically whether they were notified. We do have security who --
So we're not sure whether or not there was an actual theft report filed with the Philadelphia police and investigated by the appropriate detective division.
Any such report would have been filed by the head of security, and I'm not sure if a report was filed, but it could be a situation where it was determined that we had no 24 -- no one to accuse or no -- no evidence.
Well, is the same 56 11/18/98 FINANCE COMMITTEE - Resolution No. 980731 sidewalk vendor or check casher still there?
I mean, to me, it would seem to -- Madame Chair, I apologize for --
This whole thing is kind of silly, but it's so intriguing that there's a check that somebody had to sign fraudulently, had to present, get cash in return. There's a paper record showing that the check was returned back to the bank that issued it. I can't believe that there's not a detective. I mean, a junior detective could probably track down the information at least to determine who forged the person's signature and whether or not -- you don't know if the check-casher, I mean the guy who may have been in complicity with this whole operation is still on the street cashing checks?
Actually, Councilman, I can answer your question. First off, there was an internal 57 11/18/98 FINANCE COMMITTEE - Resolution No. 980731 investigation. Security reports to me. There was an internal investigation, the Philadelphia Police Department was involved, the person was apprehended, charged, and was convicted of a crime related to this.
Okay, both the person who stole the check and the check-casher, or the check-casher was not culpable?
Thank you, Madame Chair. Mr. Driscoll and Mr. Hallyar, for a 58 11/18/98 FINANCE COMMITTEE - Resolution No. 980731 moment I'd just like to just refresh my recollection of where we've come from and where we are right now. How long have the two of you and the other members, for the moment, of the PFMC board been in your positions? There are seven members; is that correct?
Mr. Driscoll, you're the newest of the board members, and you're the chair; is that correct?
Well, I was the newest until this week. I was appointed in December of -- 16
I was appointed by the 19 mayor in of December 1997 as chairperson, and I had no involvement prior to that time.
Right, I understand. Now, does anyone have any particular institutional history -- Mr. Hallyar, how long have you been on the board? 59 11/18/98 FINANCE COMMITTEE - Resolution No. 980731
Since '96, okay. And did you come along around about the time of the three chief officers?
I believe Reverend Moore spoke to the fact that he had been on the board four years during his testimony last time.
We were all appointed when Phoenix was brought on, and that would be about, I'm sorry, 1995.
So with the exception of Mr. Driscoll, all of the other board members came on about 1995.
And so all of those board members were here at the time that the ordinance was passed, 950694, which put into place 60 11/18/98 FINANCE COMMITTEE - Resolution No. 980731 the financial package for the as yet unhired, possibly interviewed, but not yet hired three officers; is that right?
Now, it's my understanding, only from news accounts, that Mr. Hallyar, you are now and you identified yourself this afternoon as the interim chief executive officer; is that right?
Do you now find yourself slightly in a position of being a board member overtime same agency that you run?
I haven't had a board meeting yet, and I wanted to discuss it with the 61 11/18/98 FINANCE COMMITTEE - Resolution No. 980731 board when we meet on Friday. It is not unusual for a senior officer of an organization to also be a board member, so I don't think that causes any discomfort. I want to say what the other board members feel about --
Are you talking about in the private or in the public sector?
Probably in either. It's not an unusual situation. If the other board members feel uncomfortable with it, then I will abstain from activity as a board member.
Well, are there any examples of quasi-public or publicly-owned entities where the chief executive officer or the president also serves as a member of the unpaid board of directors?
I'm not aware of any, but as I'm sure you agree, there are boards that are constituted where the CEO also serves as either chairman of the board or as a board member.
Well, I understand that in theory, but I'm talking about PGW, which 62 11/18/98 FINANCE COMMITTEE - Resolution No. 980731 is a publicly-owned utility. I mean, we can have more of this discussion, but do you think you automatically remove any real or perceived conflict of interest by continuing in your services as interim or temporarily CEO and not serving on the PFMC board?
I'm not asking you that; I'm asking you about a perception of confident of interest. I'm just engaging in a discussion about it.
I don't think there is one. But if anyone raises the issue and would prefer that I not be on the board, no one be happier to get off this board than I would be. I don't think it's what my job is or what my call to service is, but that's -- being on the PFMC board is not terribly important.
I've sat on 63 11/18/98 FINANCE COMMITTEE - Resolution No. 980731 about a dozen business and civic and charitable boards over the last ten years or so, and I think in every instance that I can identify, the chief executive officer of the organization has served on the board.
Thank you, Councilman. I'm aware of that also, I just thought the issue needed to be raised and get Mr. Hallyar's perspective on it. Now, is it also my understanding, again, just from newspaper accounts, that you are also serving in capacity of either chair or director of the search committee for the new CEO or president?
This is a search committee that will report to the board, and it has had one meeting, and I was asked to chair it.
Okay. By your service as chair of the search committee, does that automatically mean that you remove yourself as a potential candidate for president or CEO job?
It's been my experience that people who are asked to serve on search 64 11/18/98 FINANCE COMMITTEE - Resolution No. 980731 committees are the people that you don't want to have get the job. So my assumption is that that's a sign I'm not supposed to have this job. I will also tell you, by my chairing this committee, it is a highly motivated group.
I'm sure. There have been conflicting reports with regard to the scope of the search of the CEO. At one point in time, because of the relocation expense and gross-up issue, it was apparently decided that rather than face that prospect again, that we would only look for people who might be a car ride away or a bus token away from coming to work at PGW. Then a couple days later, it seems that the position was reversed on that and that the scope would be wider, if not national, in perspective. Can you comment at this point in time as to whether or not you are only looking at people who are in Philadelphia or the five-county area, or do you plan to expand the search?
You are correct. There was a great deal of confusion on that point. As the committee is functioning now, we 65 11/18/98 FINANCE COMMITTEE - Resolution No. 980731 will answer three questions that have just -- on the floor and need to have some -- that need to have some answer, and our answers will be taken to the board with full documentation. The first question is -- and these are the issues of the future of PGW. The first question is: Should PGW be sold as some people have advocated? The second question is: Should we not hire a management firm or another utility to manage PGW in place of senior management? And the third issue, the one you're concentrating on is: If none of those two options are viable, find a new chief executive officer. In doing that, we will look in three smaller circles. The larger circle is we will conduct a national search, as we've been asked to do. We will focus also and concentrate on the Philadelphia area -- in Philadelphia, the Philadelphia area. And thirdly, we want to look inside PGW for that candidate. And that will all take place simultaneously.
Why are the 66 11/18/98 FINANCE COMMITTEE - Resolution No. 980731 questions being asked or possibly decided in the rank order that you laid them out as opposed to, first and foremost, trying to ensure that there is strong, qualified, top-level management to run the company before you get into the issues of possible sale or anything else? It sounds like -- I mean, the current situation, at least from the public perspective, is that the place is rather a mess. Why would you engage in a discussion -- and is this only at the board level? -- as to whether or not a decision should be made to potentially sell the company?
Because those questions have been asked that are in the -- they are in the public arena. And for sometime, the City has had a consultant working on that question on evaluation of it, and it's just simply a question that needed to be answered.
Well, suppose the board decided that that was the thing to do, what next?
They would make that recommendation to the appropriate people.
To whom? 67 11/18/98 FINANCE COMMITTEE - Resolution No. 980731
Wouldn't it make any sense to have that discussion with most of us before you get into that issue at the board? I mean, do you have any idea what the members of City Council, for instance, think about the prospect of keeping or selling the company as we speak?
There are a variety of opinions. Our focus is on what is the value of the company. If it were to be put on the block, what could you get for it? That, to a very large extent, answers much of the question. Whether there is a public policy reason to do it is not within our purview; that's yours.
Yeah. I mean, it actually is in our purview to make that decision. You only run manage it. It seems to me, in the first instance, you are not necessarily the group to either make that decision or possibly shape that discussion, but if that's the path you want to go down -- and we can revisit this particular topic -- when do you anticipate going through that 68 11/18/98 FINANCE COMMITTEE - Resolution No. 980731 process to get back to the point where you can get back to what you are in the government to do and having a full-time CEO running the company?
Do you mean dissolve the search committee because its work is done? I would like to do that by very early this winter.
Are you talking about the end of the first quarter of '99 or --
That would be an ideal deadline, yes. The mayor, when he made the announcement, suggested the end of June of next year, but I think we could be more expeditious than that.
Okay. Mr. Hallyar, you testified in favor, I believe, of Bill 950694 -- that was the compensation bill -- back in the in 1995; is that correct?
No, it's not, I never testified or appeared before Council on that. Are you talking about for the three executives? 69 11/18/98 FINANCE COMMITTEE - Resolution No. 980731
No, I did not, I never attended Council on it. And, in fact, my understanding of the --
My mistake. (Unintelligible, parties talking over each other.)
My understanding of what took place was completely wrong. When I read the transcripts at the Councilwoman's request, things I thought had taken place had not. So I'm the least expert on that issue.
Well, that often happens in the function of the government. We often think that things that happen never actually happen and vice versa. Is it your understanding, though after reading the transcript and reading the bill, that the compensation for these executives and any 70 11/18/98 FINANCE COMMITTEE - Resolution No. 980731 expenses associated with their service or getting them here or even expenses of the company were supposed to be covered by these annual fiscal allocations by way of the management agreement as laid out in the bill for five specific fiscal years and in a formula for FY 2001 and thereafter?
It is unclear. The PFMC account which, at that time, was $700,000 and goes up little bit each year thereafter in the agreement, is to cover base salary and, I believe, bonuses and other costs of PFMC. It is unclear what all that, including what other costs was. If you're leading to the question of whether contract limits were exceeded, I believe that is the case. But I think it is unclear as to what was supposed to come out of the PFMC account and what did not come out of the PFMC account.
Well, the particular session in question reads: The amount needed to pay or provide for the payment of base salaries chief for the chief executive officer, chief operating officer, and chief financial officer, and to pay the other expenses of the 71 11/18/98 FINANCE COMMITTEE - Resolution No. 980731 company, not to exceed the following amounts for the specified fiscal years -- '96 at 700,000, '97 at 725, '98 at 750, '99 at 775, 2,000 at 800, and 2001 and thereafter, based on consumer price index for all urban consumers, and it goes on from there. So it was certainly our belief and our intention, by way of the legislation which amended the PFMC agreement that had all costs associated with these executives would come out of this base amount, exclusive of compensation, which is dealt with in a separate section, which seems to, quite honestly, be in conflict with the earlier discussion about a particular opinion from a law firm and other expenses, which seems to have been a very narrow case. It is clear in my mind, as an active participant in that hearing, that all expenses associated with these three individuals was to come out of these annual disbursements.
I yield to your opinion. I did not participate in those hearings.
Yes, Councilman? 72 11/18/98 FINANCE COMMITTEE - Resolution No. 980731