Let me finish the question. Did you negotiate your contract with PFMC with the 1983 Obermayer opinion in mind?
So you believed, when you negotiated your contract and signed it sometime in, I believe, January of 1996, that the amounts that were in the contract were the actual amounts, you weren't anticipating any other amount, you weren't expecting to have some other expenses paid from some other account somewhere else. The numbers were what the numbers were. Was that your understanding when you signed your contract?
My understanding of the contract were these: That my base salaries would be $212,000 73 11/18/98 FINANCE COMMITTEE - Resolution No. 980731 a year to begin, to continue for two years, with the prospect of a merit adjustment at the end of the second year or the beginning of the third year; That my opportunity to have incentive compensation paid annually would be $ 45,000, based on certain criteria that was set up in the contract, at paragraph 4; That in the absence of a defined executive compensation program, that at the end of each fiscal year, the board would make an evaluation of my performance, along with the CEO, to determine how much of the opportunity of $45,000 I could get; That at the beginning of each fiscal year, the board and the CEO would set out the criteria that would determine the opportunity for the $45,000 incentive compensation for the upcoming year; That the PFMC would pay my relocation expenses, my temporary living expense, my house-hunting trips for my family to Philadelphia. And those were the basic compensation 74 11/18/98 FINANCE COMMITTEE - Resolution No. 980731 provisions. I knew nothing about any opinion. I had no attorney to negotiate that contact with me; I negotiated it myself.
Okay. In response to an earlier question from Councilwoman Verna, I believe she asked -- and I'd like to ask pretty much the same question -- with the exception of the $212,000 in base salary and with the exception of the incentive compensation that's laid out in your contract, can you tell us how much you have received from PGW in reimbursement of all other expenses associated with your relocation, any kind of gross-up, any kind of federal tax payments as a result of dollars that were given to you that are considered compensation, or any other expenses that you've incurred since 1996, when you relocated to Philadelphia?
Councilman, I cannot at this point in time give you those numbers. I will be glad to give them to you in a follow-up written response to you. 75 11/18/98 FINANCE COMMITTEE - Resolution No. 980731
Okay. With regard to the various reports that are circulating -- and I tried to provide the same opportunity at the last hearing to another individual -- what is your explanation for the various reports that seem to indicate that there were fairly excessive dollars repaid to the three officers, in excess of their various caps in their contract? How do you explain the various reports and the incidents that have taken place, that have led us to where we are today? What is your explanation for all of this?
Councilman, I don't have an explanation. I read about and probably understood as much as the average individual who opened the newspaper up on a daily basis and read whatever accounts were there. I don't know the source of the information. I can tell you that as I read the newspaper reports, I found them to be fragments of fact. 76 11/18/98 FINANCE COMMITTEE - Resolution No. 980731
I found them to be fragments of facts, as I know them, some misinformation, and so I cannot explain the reports that you and myself and others have read in the newspapers and heard otherwise.
So your testimony is that you've not exceeded any cap on allowable expenses by way of your contract.
That is not my testimony. My testimony is that with respect to the relocation expenses outlined -- proscribed at paragraph 6b., I have not exceeded it. With respect to the other provisions, the temporary living exceptions at paragraph 6c., I believe that I may have exceeded by about $2,000. The amounts of money that, if one would take a strict or literal interpretation of the contract, the $12,000 that were outlined there. But otherwise, that's the only provision that I believe that there was an exceeding of. And I've made that point clear to the independent auditor who questioned my expenses, and I made that clear to him in writing. 77 11/18/98 FINANCE COMMITTEE - Resolution No. 980731
I seem to recall reading on one record regarding credit-card use, one, I believe I'm aware that you may have turned your card in as a result of some of these reports. When you were given the card, what were you told that it was for?
I'm sorry, I didn't hear the last part of your question, Councilman.
When you were given the card -- or did you ask for a credit card.
So someone showed up at your office one day and said, Hi, I'm the credit card person, here's a credit card from PGW.
Someone showed up to my office and said, "Here's a credit card."
Well, I had the first part of the story right. 78 11/18/98 FINANCE COMMITTEE - Resolution No. 980731
Okay. And what was the explanation or what was the documentation --
Pardon me. Also -- it was also brought to my attention, and which is true, that I also have a gas credit card for the Sunoco gasoline. So I have two credit cards.
Do you find that to be other than better than some other brands or --
Pardon? I think we found a better deal with this particular --
Okay, I understand. So they show up with the credit cards, and what do they tell you? What's the policy? Did they give you anything in writing or is it just past practice, or "Greg, go out and have a ball" or what did they say?
Councilman, nobody explained to me what the policies were. My practice is that when taking on a new assignment in a new organization, I do a couple of things. One is to take a look at whatever policies and procedures that are outlined for the company, whatever the written policies and 79 11/18/98 FINANCE COMMITTEE - Resolution No. 980731 procedures were. So I found with my assistant, the policy governing expense reports, which includes credit cards, cash expenses, and others -- that's Policy No. 778.01. I read it, I think I understand it, and I try to comply with it the. The other thing that I try to do is to basically look at any of the -- in any governmental agency as this is or a quasi governmental instruments for its operation. That is, the articles of incorporation or any bylaws or anything else. And those are typically my practices when moving into a new organization. I read the policy myself. I understand what it says.
And when you made your purchases, you then fill out a voucher and send it in to someone?
With respect to any purchases, whether they are cash or credit purchases, if one seeks reimbursement -- well, 80 11/18/98 FINANCE COMMITTEE - Resolution No. 980731 with respect to the credit card purchases --
What was the purpose of the credit card, the PGW American Express card?
Did someone tell you that, did you figure it out from reading the policy, or is that your personal policy?
Figured it out from reading the policy, and that's typically the way I would try to perform in any of that.
Do you have a general definition of business expenses?
When I'm conducting business on behalf of PGW or the organization that I was employed by -- in this case PGW -- it would be a business expense.
Okay. All right. Mr. Hallyar, what's the City's policy on relocation, credit cards, expenses, checks, reimbursement and the like?
It's very, very 81 11/18/98 FINANCE COMMITTEE - Resolution No. 980731 conservative. We have paid location to some senior managers for the cost of the moving, for the physical cost of the moving. We have not, to my knowledge, paid any taxes, either for closing costs on houses or income taxes because relocation benefits are treated by the IRS as a taxable event, it affects your year-end income tax. So we have done that for a few thousand dollars from time to time. In regards to expenses, we permit reimbursement if there is a legitimate business purpose with a non-City person that -- and most typically, it's lunch that is conducted. For example, from time to time, I do not want the person I'm having lunch with to pick up the check, if it's a vendor or a potential vendor. I will pick up the check and for that and then I will seek reimbursement. It's basically that limited.
All right. Either Mr. Driscoll or Mr. Hallyar and Mr. Sharbutt and Mr. Martin, you may have some insight in this. The one consultant contract that we have in the large book -- there are a number of them but one 82 11/18/98 FINANCE COMMITTEE - Resolution No. 980731 of them is pretty extensive. This is the Hanson Consulting Group are you familiar with this contract?
Are you saying that you were not aware of this contract by way of reading it, or you were not aware that this contractor for service existed until recently?
I think we were aware that there were consultants assisting in putting together not only a strategic plan for the company but also trying to bring the many diverse and not always well-integrated units of the company to understand what that plan was and what their role in it was so it became a very massive collaborative effort, with every level of PGW becoming a party to defining what it is that the company did. Now, this was done in a period where it appeared to be all but certain that there would be 83 11/18/98 FINANCE COMMITTEE - Resolution No. 980731 deregulation and unbundling of the gas industry, as there is in electric. So there was a major revolution afoot, and this seemed to be appropriate. The board never passed -- to my knowledge, the board never passed the resolution 8 because it was originally a contract -- excuse me, it never approved the contract because it was basically a small dollar amount. I think it was $62,000 was the cap.
Okay, $72,000 was the cap. To my knowledge, the board never met with the consultant, so that our knowledge of the individual was basically limited to the knowledge that the company was undergoing -- in this case, I think -- a very appropriate self-analysis and self-definition of what to wanted to be.
Well, the original contract is dated to go from a period of May 20, '96 to December 21, 1996, for $72,000. Did anyone think it was unusual that the person was still doing work in 1997 or 1998? 84 11/18/98 FINANCE COMMITTEE - Resolution No. 980731
I don't think anybody -- certainly at the board, I don't think anybody knew that the individual was still doing work.
Well, wasn't the individual doing work with people in the company or people at the board? I mean, the nature of the with work was strategic planning for the company, right?
Yeah, but I do not believe the board knew the individual was still working by that time. I don't think we ever met or knew the individual other -- until the anonymous letters began to arrive making various allegations about her. But other than that, I think this was the first time I ever heard about it.
I mean, this is a round-robin. Who at PGW is responsible for monitoring the contracts and the payment procedures? 85 11/18/98 FINANCE COMMITTEE - Resolution No. 980731
In this case, obviously, it was not well-monitored. It was -- the contract was executed by the chief executive officer at that time, and when invoices came to be paid, they were paid to the -- just simply by the normal function of paying bills. Apparently, nobody was involved, and I can be corrected 'cause I don't know what the procedure was then, but apparently, nobody was aware that the payments has exceeded the contracts. They did not have a system that you have in the city, where you check every payment to make certain it is not exceeded either at the time or of the dollar amount of the contract.
So how do we know what if any benefit we received from this contractor and how long he was working? I mean, we simply paid $316,000 in October of '98 because somebody said he was doing something? Where did it come from?
I have no idea, I've never met the person, and I believe it's a she.
Who from PGW knows? 86 11/18/98 FINANCE COMMITTEE - Resolution No. 980731
Chairwoman Verna, I know the individual. I'm unfamiliar with the contract, I've never read the contract. And, as Mr. Hallyar said, I believe that the contract -- not having seen it -- was executed by the chief executive officer at the time.
You know, I find this very disturbing because this is only one that we know of that has been called to our attention reading into some of the literature that you sent us. I wonder how much more contracts there are existing that we're paying for that do not -- yes, do you want to say something, Mr. Martin.
With respect to the contracts that are in my areas of responsibility, I know that we have identified all the contracts and what we are paying on them and how they're being administered. I can speak to the areas of -- my areas responsibility. We outlined those in that one question -- that one response that we gave to you. 87 11/18/98 FINANCE COMMITTEE - Resolution No. 980731
How do we know -- how do they monitor expenses then if they don't know what we're paying? What are we paying for all these contractors? If we didn't even have a written contract for this Miss Hanson and we're just paying out, my question is, how do we then know what the expenses are? How are we going to correct problems like this, Mr. Hallyar?
That is a situation that is -- you're correct, it is was wrong.
As Finance Director, would you allow that to happen in the city?
Of course not. And you can't make the accusation that anybody allowed that to happen 'cause nobody knew it was happening. We are putting in and have put in fiscal controls to prevent that kind of thing from happening again. Certainly, the board must approve contracts and must be knowledgeable of contracts that are being signed. We already have a policy that any contract that exceeds a certain dollar limit over a period of time must go to the board's attention no matter how small it might be. This is a matter of having good fiscal procedures, which we are about the business of installing now -- modeled in great part over what the City does. But in this particular case, one individual got a contract through, authorized the payments, and the company paid them because it was on the authority of the boss.
Can I address the issue that I think is more within my area, the monitoring of these costs. I don't think there's 89 11/18/98 FINANCE COMMITTEE - Resolution No. 980731 any question that they were monitored. The contract itself, I didn't know the existence of the contract until it came out in the discussions that we're having here, but the procedures and policies used to make disbursements were followed, we know how much was paid, we had the proper authorization to make the payment from the proper person with the level that gave them the approval level to make those expenditures. So I think the process was not violated. We have improved it but it --
The question that I have is: If the contract was for $72,000, at one point does the red flag come up from you or the people at your department to say you've reached the $72,000 amount? Because, evidently, more was spent for the contract than $72,000. And even though the CEO may have authorized the payment, where is the red flag to say this exceeds the contract, and you need to amend or renegotiate the contract. I think that's the question that we all are concerned about, where is the control over things? Because if this person has a contract, 90 11/18/98 FINANCE COMMITTEE - Resolution No. 980731 the CEO has the power and authority to exercise the contract. Then if the $72,000, if the spending exceeds that amount, who tells the CEO that the contract has to be renegotiated or amended? I think that is the question. And then the question becomes: If the board has an amount that they have to -- say if it's under $100,000, and I don't know what it is, and if this contract is going over a $100,000, at what point do you notify the board that this contract is going over a $100,000? Or what happens, the CEO negotiates a contract for a smaller amount without the board's approval and further extends the contract or pays the person for the services without going before the board to have approval. That is the issue, at least for me. How do you control that spending by the CEO who has to report to the board and is not -- what control can you put in place to prevent that from happening to exceed the authority of the contract?
As far as that applies to my responsibility for monitoring the contract, 91 11/18/98 FINANCE COMMITTEE - Resolution No. 980731 I did not have access to the contract and did not know of its existence until I got --
If the board -- if the CEO executed a contract, who in PGW revoked the contract, who reviewed the contract? That is the question. And then after the contract is reviewed, it seems to me that the contract or a copy of it should go to the Finance Department so you have the authorization to pay the bills as they come in.
You are correct, and that was not done, and it's not going to happen again. We are putting in controls that are similar to the City's so that there were be, A, copies of the contract to check off of when bills are paid. Secondly, there must be a not-to-succeed amount in the contact so they don't -- you set up $100,000 contract, the board will never see that, and then you just let it run till it hits, you know, 600 $700,000. That process has to be put in place to prevent that, and that is being done now. In my taking overtime interim appointment, we lowered the board -- the 92 11/18/98 FINANCE COMMITTEE - Resolution No. 980731 requirement that the board approve all contracts from the $1 million to $500,000, so the board will now be seeing more of the contracts that are let, and these are both in the public works service supply and professional services area. And we are going to have those fiscal controls in place so that this does not happen again. We are also, regarding the tax matter, working with Mr. Volpe. We are setting up first a certification process where a contractor must certify they owe no taxes. And then, as contracts are put in place, have the City Controller verify that no taxes are owed and that the appropriate licenses are in place, same procedure as we use here. That will delay things by (unintelligible), and that's certainly a day worth spending --
We're working on it now. David and I have talked about it a number of times.
If I might, Madame Chair. At the end of our last session, I think we had the beginnings of a debate about what is PGW. 93 11/18/98 FINANCE COMMITTEE - Resolution No. 980731 And my review of this kind of looks in arrears. I kind of look back at it and say, What does it look like this was all about to me? And I'm a person from the private sector, as you know. In the private sector, there are very few people in any organization that if the CEO has an arrangement for someone doing planning work or another kind of work and the CEO says there is value in this and there is no contract, that they wouldn't pay it. Now, that's not appropriate here, right? However, returning once again to the hiring of Mr. Hawes -- and I don't want to say anything bad about Mr. Hawes per se -- but Mr. Hawes was from the private sector, and I believe Mr. Hawes brought with him a private sector view and a private sector approach to making PGW a competitive organization in a deregulated world. And from the first day, he intended to conduct it in a private sector way. And that is kind of at the crux of this debate that we're having, it seems to me. And what is PGW? It is a public sector entity that is chartered to perform certain functions for the 94 11/18/98 FINANCE COMMITTEE - Resolution No. 980731 City in a reliable and safe manner, and it has to act that way. The controls that are being put in, we're working closely with the Gas Commission, we're working closely certainly with Council and with everyone else who is investigating, and those controls continue to go in. And this they be ironclad as we move forward. It is sad about the past, it is sad about the past. You know, I am terribly disappointed --
I'll tell you, with some of the articles that I have read, I will tell you, it actually nauseated me because I see what happens in the city, and we have in the Police Department, for instance, where a captain wants to get beepers for his officers, and he's told that there is no money, and we're squandering money like I'm hearing here? I find that very, very upsetting.
Madame Chair, please don't misconstrue my view about the private sector that says they do squander money. They have responsibilities too. 95 11/18/98 FINANCE COMMITTEE - Resolution No. 980731
They can squander money. And as far as I'm concerned, with all of that I have read about PGW, I think it's a disgrace the way it's operated. And I agree with you -- that was the past and I want to make certain that we don't do it in the future.
And this is the process that has been going on for a few months.
And I commend you for being firm in your commitments with PGW, Mr. Driscoll. Yes, Councilwoman?
I have a question. I want to go back to the initial negotiation of the contract. Who other than Mr. Duretsky negotiated this contract?
I negotiated some of the contract with Mr. Martin. The majority of it, in terms of the similarities of the three contracts, the Solicitor handled. 96 11/18/98 FINANCE COMMITTEE - Resolution No. 980731
On what basis did the City Solicitor draft the contract, and why were they different from the City rules on contracts and relocation? You said earlier that you may pay some relocation expenses but you don't get into taxes. Do you do gross-ups?
So how did we come to negotiating contracts that involved the relocation expenses? Which, I understand, is the policy. But also, how do we get into the tax gross-up, which seems to be a real question, and -- since PGW is viewed as a city agency asset?
Well, allow me to walk back into the hornets' nest. At the time, there was this suggestion that we should run it like a business, and the effort was to try to get private-sector experience, people who had utility experience from the private sector, to run PGW. And the terms in which we could get talented people -- and they are talented, Mr. Hawes is extremely talented -- the terms in which we'd get them required us to meet the terms that they would expect from the private 97 11/18/98 FINANCE COMMITTEE - Resolution No. 980731 sector. And that's what we did.
Can I make some comments? I was there at the time, as were the other two. And I have relocated, the first time when I was a laborer, in 1968. I still have my tax returns from every year, and I was reimbursed as a laborer moving with a tax gross-up in 1968. I moved again in 1976, I still have the calculations with the tax gross-up. When I came to discuss a possible job here, the initial piece of paper that was given to me with salary proposal, benefits, others, did not have anything referring to that. I discussed it with Mr. Martin and Mr. Hawes. And I said I wouldn't sign a contract anywhere without a gross-up because I know of the impact of it. I also asked a couple of others things that were of concern to me at the time. One, I would certainly hope to have pension vesting, but after discussing that issue, I knew that we had a ten-year vesting, which was different than what I would experience in the private sector. So the primary issues that I brought up in the negotiating process were pension, which I 98 11/18/98 FINANCE COMMITTEE - Resolution No. 980731 gave in on, relocation, and specifically the gross-up issue. I think many of the people during that process have never even heard of the issue.
I think that's the issue here, not having had to relocate personnel for this -- for PGW and to have this reported without people having any knowledge or sense of what it's all about raises the question, Mr. Hallyar and Mr. Driscoll, in terms of what will -- and I believe you -- we have to set some policy on what and with all the critical stakeholders so that as we move forward to find a new CEO, what will be the understanding around the hiring policy, what they -- what their benefits are, and I think that should be made clear, some decision about that policy should be made before we launch anything to get anyone. And I do believe that the critical stakeholders have to be consulted so that they will know what we are offering a new CEO, and in the future, how we handle bringing on new staff.
I believe one of the reasons you're a member of the search committee is to give us guidance into that area. What is, you 99 11/18/98 FINANCE COMMITTEE - Resolution No. 980731 know, now, what would be anticipated in that regard. I mean, that's -- I look to you for help in that.
This is probably an oversimplification, but it seems to me that what we're talking about here is an organization that's been run for a long time in a somewhat haphazard fashion. I know when I first came into Council, back in the 1960s, that was our attitude towards PGW, it was being run then by UGI, and we all still felt that it was not producing as effective an organization as we'd like to have. And since then, we've stayed away from it pretty much, Council, letting the people who are supposed to run it run. And we finally reached a conclusion led on by the mayor, back several years ago, that we ought to go about restructuring. We talked about selling, we talked about some other alternatives, and decided that what we'd do is hold on to it and approve it, do it better, and that business contact was something that was very, very much present in those discussions. 100 11/18/98 FINANCE COMMITTEE - Resolution No. 980731 So seems to me that we hired someone to do this. And certainly, the results, the financial results seem to be pretty good. And I don't think we should lose sight of the fact that some of the things that were done apparently worked pretty well, if you look at the numbers of the last several years and compare them to what had preceded. There are some irregularities that are occurring, but I think it would be a great mistake to let those irregularities become our total objective. To point them out and to cure them, that's important, of course. And I'm surprised at some of the things that were being done and the fact that nobody really knew that they were. I think we should recognize particularly, Mr. Hallyar, that you've come on board several weeks ago and have been given an onerous assignment. And I think we must be very careful to separate the people who have been there for a while and can be held responsible for some of the things that we don't like; and, at the same time, crediting those same people with the things we do like. 101 11/18/98 FINANCE COMMITTEE - Resolution No. 980731 So I would be very anxious from my standpoint not to see this turn into a witch hunt, where we're trying to hang a group of people, some of whom may be guilty of bad judgment. And at the same time, I think that, obviously, you have the responsibility of shaking things up a little bit during the next few months while you're in the process of looking for your successor and getting a new team, if necessary, individual or team on board as soon as possible. So I think it's very healthy that we're holding these hearings 'cause it brings out a lot of things that we should have known about before here in Council, I think. But, at the same time, I don't want to lose sight of the fact that there are a number of people who have done a very good job at PGW during the recent years, and they should not be indicted across the board with foolishness and with bad management, because that's a very small part of the picture.
We thank you for the acknowledgment of that which has been positive, and we are working with Council to make certain that the errors are corrected and not repeated. 102 11/18/98 FINANCE COMMITTEE - Resolution No. 980731
Thank you, Madame Chairwoman. I really haven't been here as long as Councilman Longstreth -- he was here before the building was built. I do agree with everything he's saying. And he mentioned one point that people are guilty of bad judgment. Mr. Hayllar, I certainly -- I know you and I respect the job you're doing, and (unintelligible), but it is a tough task for what you have to do, but I think what people are guilty here of is Section 303 of the stupidity code. I mean, it's hard for me to go to Kensington Juniata, and Frankford knock on doors and ask people to vote for me for City Council in May when I have to run and have people say, Look, they shut my gas off. Or what's going on there? Because the people out there think that it's a big joke. And we are flooded every day with phone calls like, Well, why don't this guy pay his gas bill, why don't this person? Why is somebody taking limo rides when they live six blocks away? 103 11/18/98 FINANCE COMMITTEE - Resolution No. 980731 Why are they going here, why are they doing that? I'm not prepared to answer all that stuff. And then we come here and everybody's looking around like -- some people like look like they're on Thorazine. I mean, oh, boy, this is a problem. Yeah, it's a problem. It's a problem when we go back up there or we go out to West Philly or we go to where Councilwoman Tasco's from, and you have to answer to people that work every day and try to do their job and don't have American Express credit card. I mean, it is just stupidity and arrogance. You should know when you have an American Express credit card to the Gas Works that you don't do certain things with it. It's quite obvious. Why was that never there? Like Councilman Longstreth said, we're certainly trying to get this into a business, and we need to go get those great people that are business people, but the business people are the ones that came here and did the things they would never do in private industry, correct?
It's a good question, and let me add to the dilemma. There's approximately 104 11/18/98 FINANCE COMMITTEE - Resolution No. 980731 1990 PGW employees who are mortified about what they read about, and there's no reason for them to be embarrassed, but it's something we have to deal with and correct and make certain that the pride they have in their work is returned.
Let me tell you the last thing I'll say here, let me tell you what's real in my world. When they're fixing the streets up on Kensington Avenue and I stop and I talk to the gas workers, and I say, Hey, guys and ladies, what's happening? And they go, Well, we used to do this every day, and then they would take us on Saturday when we would go around and do the emergency turn-ons, but now we don't do that because they don't have the overtime to pay us on Saturday. And you know what? I was a construction worker for a long time. It's either feast or famine. So that bonus money that they give 'em, which is -- they're working for it on Saturdays, from Thanksgiving on or from Halloween on, to have extra money for Christmas. Now they're going out doing that stuff during the day, during the week 'cause they don't have the extra 105 11/18/98 FINANCE COMMITTEE - Resolution No. 980731 money for Saturdays, so these guys don't get a bonus, okay, that's fine. But what happens to the work that's being done on Kensington Avenue? That has to stop, there's independent contractors with backhoes, walking around, and everybody's sitting on their hands. Mr. Martin, you're looking at me like you know a little bit about this. Maybe you can elaborate how the worker suffers because of the perception in the press and in The Daily News where we're reading every day all that's going on. Can you help me with that?
There is the issue of what this does to the morale. And that we recognize. In terms of overtime, and if you're the recipient of overtime, you're not going to agree with this, but the fact is, PGW was very rich in overtime, and the overtime has been racheted back. And I would submit that that is, by and large, a good thing because it has been, I think, in the past, it has been excessive. Just as, in 1994, there were 2700 employees and -- 106 11/18/98 FINANCE COMMITTEE - Resolution No. 980731
But, Ben, that's easy to sell if you're a business man like you, but you tell the guy working in the ditch in Kensington or Frankford Avenue, and then he says, Yeah, but everybody's going to the opera and taking limos and having American Express cards. All I'm asking for is eight extra hours of bonus time on Saturday. I don't get it because I'm not that smart -- I just graduated from high school, I didn't go to college, they pushed me out. These are the people we're dealing with. That's my constituency, and they're mad and morale is a problem.
Councilman Mariano, I do know something about that. I am the chief operating officer for the company. I basically set the policies and practices that we follow. With respect to the issues that you outlined, there are several things I'll say. The first is that when I was hired here, I was told that you're going to be a change agent, you're going to make this company run as an efficient, effective operation. Get rid of the waste, make sure the people have the tools that they need, the 107 11/18/98 FINANCE COMMITTEE - Resolution No. 980731 infrastructure is supported, customers are getting service and so on. In 1996, when I came here, overtime amounted to approximately $12 million, $12 million. We're as productive today as we were in 1996. Today we have allocated $5,888,000 for overtime. We're as productive today as we were in 1996. You know, I go around and I probably have spoken to more employees than any individual in this company, including the union officers individually. And I can tell you that one of things that I have told them, and I say to this body today, if we do business today the way we did it yesterday, this company will not exist. And it is my responsibility, the management responsibility and the average employee's responsibility to get the most done in a day's time as possible. There has not been one opportunity where -- one situation that I can think of, that I know about, where we need to do get work done, it was productive work and it required overtime to do it that we didn't do it. The issue for me is that people have 108 11/18/98 FINANCE COMMITTEE - Resolution No. 980731 come to believe that overtime is an entitlement, that regardless of how much work we get done, that we still have to get paid overtime. It sickens me also when I ride around the City in the morning time, before I come into work, where individuals who have started work at 7 o'clock in the morning and they're sitting at a delicatessen with a distribution truck and four people sitting in the truck, drinking coffee, eating donuts. That's something also that our consumers don't necessarily want to see. So the point is that, yeah, we have reduced overtime dramatically. We are trying to make this company a very efficient operation. We have practices that we need to change, and we're going to do that. But the most important thing is that we have an efficient, effective operation, where people feel like they're contributing to what they're supposed to be doing. And I've got to agree with you, that some of the things that we've read about in the newspapers is appalling to me also. And what I've got to say is that this body, and I would agree with Councilman Longstreth, that, you know, we 109 11/18/98 FINANCE COMMITTEE - Resolution No. 980731 shouldn't paint with a broad brush all of the executive management with all of the things that have happened, because it's not -- it's not the right thing to do.
Mr. Martin, I appreciate that and before Mr. Hallyar speaks, just let me finish with this, if you don't mind, Madame Chairwoman, but leadership starts at the top. You know, there's that painting with the horses running out of the corral. Well, everyone I know that has gotten to a certain office has that in their room. That's leadership.
Excuse me just a minute. (Unidentified PGW worker responds off-mike).
Mr. Givens (ph.), I'll address that issue. Thank you.
Excuse me, just a moment, please. The stenographer has been sitting here since 9 o'clock this morning. She is asking for a ten-minute break, and I think we ought to do that so we're going to recess for ten minutes. 110 11/18/98 FINANCE COMMITTEE - Resolution No. 980731
I didn't mean to interrupt you but. . . (Short recess taken.) (Proceedings resume.) - - -
We are now back in session. Councilman Mariano, you can continue your line of questioning.
Thank you, Madame Chairwoman. Mr. Martin, I'm really -- I'm really, really, really, you know, offended and I'm sort of amazed. You're lucky that they took this break. You know, I can't believe that somehow, you would work into this whole mismatch of bad funding and people using credit cards that the union guys on the street are drinking coffee. I mean, that's like comparing apples to oranges. 111 11/18/98 FINANCE COMMITTEE - Resolution No. 980731 They can drink coffee all day, and it wouldn't have anything to do -- it wouldn't even come close to you comparing it to the money that's been wasted and -- I'll say it, it was stolen, stolen. You know, and I'm offended, and I think you owe an apology to the gas workers and I think you owe an apology to every working man and woman in the City of Philadelphia. I really mean that. I mean, don't really know you that well, and I'm sure you have some noble intentions. But what happens here is, there's crew chiefs out there that aren't members of the union. So if the guys are around drinking coffee and doing what they're not supposed to be doing at 7 o'clock in the morning, you know, where's the crew chiefs or where's the supervisor? I don't know if there's one for every crew, but isn't there a supervisor that rotates between to say, Come on, guys, let's go. I mean, I was a construction worker. I had job where there was 250 men under me. Everybody has problems, but the thing is, you got to work, fellas, or you're not going to be here 'case we got to make money and we got to do the 112 11/18/98 FINANCE COMMITTEE - Resolution No. 980731 job. I just don't get it. How can we turn this around somehow and blame it on drinking coffee and eating muffins on the workers on the street crews. I mean, can you answer me that?
First off, I don't know -- I have no firsthand knowledge or any knowledge whatsoever that any money has been stolen from PGW, PFMC, or anything related to the Gas Works.
If I knew that, Councilman, I have an obligation, a legal obligation to report that and to do something about it. And I would.
Well, it's a misappropriation of funds, funding? I mean, if The Daily News didn't do the article, we wouldn't know. People are paying stuff back now. 113 11/18/98 FINANCE COMMITTEE - Resolution No. 980731 Mr. Martin, I mean, is this distasteful to you? Is it a problem? Because it's a problem every day to me when I see people out on the streets that are having problems because they're trying to get to work. This is -- is this a big joke, is it fun? Because it's not to us; it's painful to me, it's painful to Joe Givens. You should -- personally, you should apologize to him, you should apologize to every person in the City of Philadelphia that actually goes out and gets their hands dirty. I mean, you know -- oh, yeah, they didn't steal anything, but would they have turned the money back? If the guy on the crew steals a $200 tool, what happens to him? He gets prosecuted like he stole it out of a store. But this won't happen here because it's a white-collar deal. You know, I mean, I -- sometimes I wonder. I've been here three years, and I go, You know what? What happens here? We bring people in and we talk about different things that are going on and everybody looks up in the air and people 114 11/18/98 FINANCE COMMITTEE - Resolution No. 980731 get in and testify this and people say that but nothing ever happens. We go back tomorrow and them guys are still on Kensington Avenue, or whatever street that is, or out in Councilwoman Blackwell's district trying to do their job, and management again is blaming the worker on things that happen. And then we're going to talk about going and recruiting people from somewhere else to bring 'em in here. If it was up to me, if you don't live in Philadelphia, you're not from Philadelphia, you shouldn't have the job. We certainly have talent here. I mean, can you help me with that?
I want you to start with why you would blame everything on the guys drinking coffee in the morning?
No, I didn't. Now, see, I'll tell you when I heard what I want to hear, okay? Give me a break here. 115 11/18/98 FINANCE COMMITTEE - Resolution No. 980731
I'll say to you, as I've said to our employees, 95 percent of the employees in our company are honest, hard-working people. They want to do their job and they want to do it effectively. But 5 percent are not, and it's the 5 percent that make it look bad for everybody else. And among that 5 percent are those gentlemen that I talked about that started work at 7 o'clock and didn't even get to the job site by 8 o'clock. And I make no apology on that because that's a fact. And I not indict all of the union workers, all of the laborers.
It's a broad brush when you say a statement like that, but let me tell you, as someone who came from a blue-collar background, most people want to work. But when I had people working for me, you make it like a game, you make it a challenge. You got to have them people going at 8 o'clock or 116 11/18/98 FINANCE COMMITTEE - Resolution No. 980731 whatever time it starts. It's up to supervision to make sure them people are up the ladders or down in the ditches or on the street jackhammering. And if not, you say, Guys, look, here's the time, one time. You know, if we know there's bad employees, why don't we get rid of 'em?
But what does that have to do with when you started that statement to my original question to Mr. Hallyar and you?
Councilman, you're right. This is not about the workforce. These are issues about fiscal control, that we did not receive -- the board has never received any tips, any information concerning the workforce; they concern fiscal matters, that's the subject of Councilwoman Verna's questions, and that's what we're here to discuss. Overtime has been a problem; it's being racheted down. That's not an indictment of anybody. You know, I don't think Mr. Martin needs to be anything but proud of being a part of trying to get that overtime down to a more reasonable 117 11/18/98 FINANCE COMMITTEE - Resolution No. 980731 number. And, you know, this is not about -- nobody said anything derogatory about the workforce. This is about a fiscal control problem that we all want to correct.
If I can say just one last thing, please. Sometimes there has to be overtime. It's not about fat guys with their (unintelligible) hats on backwards and The Daily News in their back pocket and a cigar and their coffee.
It's about getting things done, okay, because the pendulum has swung, and people are seeing it. It's just hard for us as public officials swung go out there and keep selling this company and keep selling it. It's okay, it's okay. Guess what? I'm not sure it's okay. I'm glad you're involved 'cause I personally like you 'cause we had some kind of thing back and forth. I've known you since I been here and you seem to be a no-nonsense guy. And, Mr. Martin, maybe you're like that. I don't know 118 11/18/98 FINANCE COMMITTEE - Resolution No. 980731 him well, but it's about sending the right messages to the people, and that's not happening. How do we do that? You know, don't just cut out overtime unless it's necessary.
Well, we've budgeted -- I think it's $5.8 million. There's a lot of overtime, but it has to be done when it's necessary.
You're welcome. Are there any other questions? I have a couple. Mr. Hallyar, we have been made aware of an employee who used her credit card to pay for a $320 limousine ride from her home to an opening at the Academy of Music. Under the original guidelines on the cards, was this an appropriate use of the credit card? When was this expense made? And how long did it take the employee to reimburse PGW?
I can answer only some of that. The answer is no, it is not an appropriate use of a corporate credit card. It's not 119 11/18/98 FINANCE COMMITTEE - Resolution No. 980731 condoned. The individual has reimbursed the company for it and will reimburse the company for any other inappropriate expenditures that may have been made. That person as well as every other person who has a credit card, including the people sitting at this table, who may have made an inappropriate nonbusiness-related expense. The internal auditing department, assisted by Deloitte Touche and the City Controller, has reviewed all the expenses for the past three years, all the credit cards and all the expense accounts. We have sent everyone a letter requesting justification for any expenditure that does not, on its face, prove to be business- related. And if those justifications can't be made, that person will be asked to reimburse the company for the amount. Generally -- and this is not to condone anything that happened -- but generally in PGW, there was a very permissive attitude about the use of expenditures. And if a person files -- gets reimbursed for an expenditure and nobody says anything about it, it's not criticized, it's not questioned, you're pretty certain happen that's 120 11/18/98 FINANCE COMMITTEE - Resolution No. 980731 going to again next month because the company has, in its way, condoned that. It tended continued to be in non-operations areas, it tended to be in generally one area -- a lot of it was in one area of the company where there was a proliferation of cards. Those costs will be reimbursed to the company. But there was a permissive attitude. And while I don't condone it, I can understand how some of those things happened. Nobody said no. 12
Well, I don't want to go into -- I'm sure you read the newspaper as I did yesterday.
Can you tell me, has this individual been told how much she has to pay back to PGW?
She's, I believe, paid back approximately $4,000. We are questioning another 37 or 4,000 from the expenses that we've seen. If there's a legitimate business excuse -- or excuse me, business expense we, will do it, we will permit it, but if there's not, if it's a personal matter or if it's not a good business 121 11/18/98 FINANCE COMMITTEE - Resolution No. 980731 expense, we will not permit it, and the person will have to reimburse the company.
So in other words, I think, from what I understand, this employee probably had no intentions of reimbursing PGW for any of the personal expenditures until, you know, many of these articles started appearing in the paper and then was almost forced to pay back PGW.
Okay. As I've described, Mr. McDonald is our as ex-officio auditor, but in reality, we have a real auditor, Mr. Flamm (ph.), and others who have been looking into this. So I don't know at what point the matter was brought to the person's attention, but I can't read another person's heart and say they did not intend to pay it back. I know that checks have been written to reimburse the company. I assume more will be written by a number of people before we are through.
Number one, essentially every expense account for three years has been 122 11/18/98 FINANCE COMMITTEE - Resolution No. 980731 reviewed. Every single unsupported or inappropriate expense has been targeted and we are asking people to either explain or repay inappropriate expenses. The third thing is, we are now in the process of implementing an entirely different card management system so that the individuals will be directly responsible for payment of the bill, and they won't be then allowing the company to pay the bill and then have to reimburse the company, but indeed, they will have to file to the company for reimbursement in the future. So that's another one of the steps that's been taken to change this and to put more accountability on the individual who accrues any expense on a credit card.
Well, with this one particular individual -- I'm sorry, I didn't understand what you had said. How much was paid back? Because it's my understanding that many of these expenses go back to 1996.
And when were the checks written? 123 11/18/98 FINANCE COMMITTEE - Resolution No. 980731
I do not know. I have not seen them. My understanding is it's fairly recently, but I have not seen them.
Okay. Are there any other questions from members of the committee? I think that Councilman Nutter had some questions that he wanted to ask.
Thank you, Madame Chair. Either Mr. Hallyar or Mr. Driscoll, and I actually see in the back Miss Estrin, can you shed any light on the story that was literally in the paper yesterday about limousines and dinners and tickets and what appears to be a wide variety of personal purchases that, apparently, some are under the process of being reimbursed, some may already have been reimbursed, some may not be reimbursed at all. We had some discussion about credit cards with Mr. Martin and what we he understood the policy to be in conjunction, I guess, with his own personal policy. How is it possible that something like that could happen?
There were not 124 11/18/98 FINANCE COMMITTEE - Resolution No. 980731 appropriate fiscal controls and, in fact, the system of using the corporate credit cards was just poorly designed. The cards were issued in the name of the company, the company would receive the bill 7 from the 40 or so cardholders and would pay it. It was then the responsibility of the employee to accepted in a justification for the expenditures. In a system like that, it is very easy for that card to be used either mixed with personal expenses and there's no incentive to report to the company what the business person was. And in fact, it --
How was it easy for a person to use the card for personal expenses if is given to them and, apparently, there is a policy, as designated at least by Mr. Martin, who either has excellent notes or an incredible, 'cause he seemed to cite the chapter and verse of the particular policy and what it states. If the credit card is for business purposes only, and that is the policy, how is it possible for it to be used for anything else?
There is no incentive. 125 11/18/98 FINANCE COMMITTEE - Resolution No. 980731 The best I can answer is, there's no incentive.
There is no incentive to restrict yourself to business purposes because the company paid the bill. The system that should have been in place and is now --
If you're a senior executive, you are given a policy as to what to do and how to conduct yourself with regard to a credit card. Is it the incentive that I'm a senior executive and I'm supposed to follow the policy, if not the law?
I would agree with you. But in other cases with these cards, you saw an expansion of what people thought a business purpose was that I think is wholly unacceptable. 126 11/18/98 FINANCE COMMITTEE - Resolution No. 980731 They've tried to rationalize a luncheon between colleagues that is rationalized as, you know, we're discussing business, and I think that's a completely inappropriate expense, and those are the expenses that have to be questioned. And that's what happens when you have a very permissive system. That system has ended, and have one that has accountability attached to it.
Well, I'm going to ask you the same question I asked at the last hearing. When did you become aware of these impermissible expenses?
I think they were first brought to our attention there -- was one case that was brought to our attention probably in May, and others were --
Some of them go back to '96 '97. 127 11/18/98 FINANCE COMMITTEE - Resolution No. 980731
So your testimony is that until May of '98, you had no idea that the card or cards were being used in this fashion.
AND how is it possible that the board or the senior executives would not know about this?
The board didn't. I think everybody was focussed on other serious matters. The company just -- the board would not have considered this a board matter; this is an internal matter that's the responsibility of management.
But you don't mean to inarticulately even infer for a second that this is not an important matter.
It is an important matter, but there were other matters that the board was focussing on.
And this is not -- normally would not be a board -- this would not be something that the board would deal with. The board is -- 128 11/18/98 FINANCE COMMITTEE - Resolution No. 980731
That would be the responsibility of management and the management fiscal controls that were not in place at that time.