"Acting CFO Michael Lenz has been discharged from his official capacity today, May 13, 2003, based on the outcome of an internal investigation supervised by the corporation counsel with the assistance of the city's independent auditors," read a statement released by Bill Campbell, the mayor's spokesperson. Corporation Council Joseph Sherman and auditors from Ernst & Young were charged with undertaking an investigation into the budget. They have recently presented the mayor with what Sherman described as an "interim report."
Sherman, citing attorney/client privilege, declined to comment on what is actually in the report he handed over to Mayor David Roberts.
It was recently reported in this paper that Lenz had become the center of an internal investigation over his handling of the city's budget. The investigation focuses on $1.8 million in emergency appropriations that were presented to the City Council over the past five weeks. But Lenz has said the investigation is political.
Mayor David Roberts said recently that he launched the investigation to get to the bottom of why cost overruns forced the city budget to increase from $62 million to more than $64 million.
Lenz said Tuesday that mayor's investigation is nothing more than a way for the mayor to distance himself from an increase in the city's budget. The mayor's opponents made a campaign issue out of the city's ever-increasing budget, and there are still four council seats in a runoff election this coming June 10.
"The mayor seems to be in denial when it comes to the condition of the city's finances," Lenz said in a telephone interview. "This is nothing more then a case of shooting the messenger."
Roberts had hired Lenz, who had served as Roberts' mayoral campaign manager in 2001, last year. Now, it is believed that Lenz was supporting the opposition to the mayor's council slate.
Roberts: How'd that happen?
On March 28, the council approved $500,000 in emergency appropriations for workers' compensation payments, and on April 10, after hours of debate, a divided council passed another $1.3 million in emergency appropriations for items including an unanticipated increase in group health insurance, the costs of potential council runoff elections in June, and the cost of repairing a water leak at the public library.
Instead of $62 million, the city should have anticipated spending more than $64 million when the budgetary team originally constructed the budget. The budget is a document that is prepared by the city's CFO and business administrator (currently Robert Drasheff), and presented to the City Council by the mayor. The council studies the budget and votes on it. Roberts' allies on the council voted to pass the budget.
Lenz said that he is being made a scapegoat for the city's increased spending.
"All I can do is advise," said Lenz. "It is the council and mayor that are ultimately responsible for the budget."
He added that in the past, overspending the budget was "an acceptable tool" and was commonplace even though it is against state budgeting guidelines. Now, he said, the city is being forthright with its budget and actually approving emergency appropriations when needed, and not sweeping it under the carpet, so, he is taking the fall.
Roberts has stated that he was concerned that that there was a need for new appropriations too soon after the budget passed. He added that this alone was justification for launching an investigation. In April he added that there was a "deliberate attempt to undermine the fiscal integrity of the city." At the time he declined to reveal who was the focus of the investigation, but it was later learned by the Reporter through official sources that Lenz was indeed the person being investigated.
While he did not mention Lenz by name, Roberts said recently that there were "substantial differences" between the "actual" budget numbers and those presented to the City Council.
Now it has been announced that the investigation has progressed to the point where Roberts allegedly has enough evidence to warrant the immediate firing of Lenz. When asked for a copy of the investigation report or details about the investigation's findings, Campbell said he cannot comment.
"In anticipation of potential litigation, I have been instructed not to comment," said Campbell.
All he would say is that Assistant Comptroller Matthew Cannarozzi will be serving as interim CFO until a replacement for Lenz can be found. He added that it is too early to speculate who might be hired for the position, or the process by which the city will go about hiring Lenz's replacement. When Roberts campaigned for office in 2001, he and his allies pledged to have open hiring processes for important city positions, rather than hiring political cronies.
Lenz said that even though he knew he was being investigated, his firing came as a surprise. He said that he came into the office on Tuesday morning after a week's vacation only to find his name plate removed from his desk. He added that he arrived home late Monday night and did not check his mail. In his mail there was letter from the city informing him that he had been terminated, according to city officials.
"I was hired with the understanding that I would do the job to the best of my ability and in full compliance of the law," he said. "That is what I did, but I was fired anyway."
Lenz added, "It was obvious that they would have preferred me to be out actively like their other directors, stumping for the mayor's candidates."
Instead, the team that ran against the mayor's candidates used the budget as an issue.
At the Monday, April 7 council meeting, Lenz and Councilman Michael Cricco had gotten into a face-to-face arguing match. He alleged that Lenz is working as the city's CFO but at the same time is undermining the administration by presenting inflated appropriations in order to give the opposition an issue during the election season.
Lenz emphatically denied all charges that he was working inside City Hall as a political operative for an opposition ticket.
"I did my best to provide as accurate financial information as possible to the administration," he said. "If I explained something in more detail to Tony [Soares] it was only because he asked, and Michael [Cricco] didn't. All he had to do was ask and I would have been happy to answer his questions as truthfully as I possibly can." Lenz said Tuesday that he has retained a lawyer and is currently weighing his legal options.
Revolving door in budget office
This is not the first time that Roberts has lost or fired a high-ranking official from the city's finance or administration department.
In July of 2002, former city Business Administrator Laurie Cotter left Hoboken to get a job elsewhere in the county. Cotter was appointed to the position of business administrator shortly after Roberts took office as mayor in July 2001.
While the break was officially deemed by both Roberts and Cotter to be "mutual," several well-placed sources said off the record at the time that Cotter was forced out, or at least nudged out, to make room for current Business Administrator Robert Drasheff, who is a familiar face to almost anyone who even has a cursory interest in local government. Drasheff has worked for the city off and on for over 24 years. In 1984 he was appointed as director of the city's Health and Welfare Department. He was also Director of Human Services under former Mayor Anthony Russo. He has also served as a Hudson County freeholder and as the assistant city clerk in Hoboken. Many insiders at the time speculated that Roberts never obtained the kind of comfort level with Cotter that is needed between a mayor and the city's highest paid employee.
In late August, 2002, Katia "Kathy" Stack, the wife of Union City Mayor Brian Stack, resigned as the city's director of finance. Her departure also was not without some controversy either. In fact, the city officials announced that Stack was resigning before she even submitted her resignation. Drasheff, who was the newly appointed business administrator, said the awkward incident was due to a breakdown in communication between city officials and Stack. Stack concluded that the mayor and Drasheff may have jumped to conclusions about her intentions.
In September, city officials announced that they had suspended Chief Financial Officer George DeStefano, and charged that he mishandled city funds over the past three years. The suspension came after a state investigation.
DeStefano has responded by saying that he has been harassed ever since the new administration took office in July of 2001. DeStefano is the brother-in-law of former Mayor Anthony Russo. DeStefano has retained a lawyer and is still waiting to present his case before the state Department of Community affairs.
It was then that Roberts hired Lenz to become the city's acting Chief Financial Officer, even though Lenz was not state certified to be a CFO. He is currently taking courses to become a certified municipal CFO. Lenz's firing makes him the fourth member of the department that is responsible for the budget to leave or be shown the door in the past 12 months.