Houston Deputy Mayor sets record straight on former treasurer, alleged crimes, and timeline of events leading to indictments.

In another packed meeting on Thursday, the Houston City Council and Mayor addressed the multiple federal indictments of a former city treasurer and set up the timeline of events surrounding a former treasurer, while making residents aware that a federal grand jury subpoena was served, and that the city council was not made aware of it by the previous administration.

Last week, former City of Houston Treasurer, Jess George Adams, who served from 2015-2018, was arrested on multiple charges of embezzlement, wire fraud and tax evasion following a federal grand jury indictment. He is accused of absconding with over $250,000 from the city, as well as similar crimes for a local equipment company in Wasilla.

Deputy Mayor Mike Adams, who is not related to the indicted former treasurer, had been assigned to be the point of contact for Houston to work with IRS and federal investigators, read into record the available facts surrounding the federal indictment.

He told members and residents that following the abrupt departure of then-Mayor Virgie Thompson, former Deputy Mayor Lance Wilson, and former treasurer Sally Schug, he found a subpoena issued to the city, unbeknownst to him or then-councilman Carter Cole.

“Mr. Cole and I were, in fact, sitting council members when a very important part of the ongoing federal investigation occurred, specifically the service of a federal grand jury subpoena for city records, and specific information regarding a former treasurer and alleged crimes.” Deputy Mayor Adams said that he is currently aware of just the one subpoena and has no direct knowledge that the city council was notified about the subpoena that had been served on the city, or that the city records were compiled and submitted in compliance with the subpoena.

“I know that neither Mr. Cole or myself were notified or appraised of the situation,” he said.

“I became aware of the federal grand jury subpoena that was served to the City of Houston. The subpoena was dated November 8, 2021, and an affidavit of compliance was signed by Sally Schug, and notarized on December 15, 2021. The federal grand jury subpoena was located in a box in a locked drawer in the (former) treasurer’s office.”

To be clear, then-councilmen Cole and Adams had no knowledge of an active grand jury subpoena issued to the city or if there had been any compliance with it, although it appears that requested documents were submitted to investigators at the time the subpoena was issued.

Deputy Mayor Adams states after securing the documents, he immediately contacted the assistant U.S. Attorney’s Office regarding the subpoena and was put in touch with the case agent, and from then on served as a point of contact regarding the matter.

Deputy Mayor Adams then laid out the timeline of the incident based on public records, publicly available documents, and discussion with city staff. He told members present that because this is an ongoing investigation, he could only speak to his involvement, and information pieced together on behalf of the city, and only after finding the subpoena.

“In October, 2015 Jess George Adams was hired as the treasurer. Approximately 3 years later, October 2018 he was placed on administrative leave for alleged mistakes involving payroll. Also, in October 2018, Sally Schug became the temporary treasurer for the City of Houston. In November 2018, Jess George Adams resigned.

“At the recommendation of Jess George Adams, the City funds and accounts were not audited during the years of 2015, 2016, 2017, and 2018. Approximately 5 months later, in May 2019, the Alaska State Troopers were notified of alleged criminal activity, tentatively identifying the theft at City Hall as approximately $100,000.”

Deputy Mayor Adams went on to say that in June 2019 city officials inquired about initiating an insurance claim for the alleged crimes with Alaska Public Entity Insurance, which is the city’s insurance carrier.

Ten months later, in April 2020, and with the assistance of auditors contracted by the city, insurance claims were filed for the loss of $279, 473.25.

Deputy Mayor Adams read into record that in June that same year, the American International Group (AIG) paid $250,001.46, less the required deductible of $25,000 to the City of Houston for the loss.

“Later that same month, June 25, 2020, Alaska Public Entity, the main carrier for the City of Houston insurance, paid a claim of $22,500, minus the City of Houston deductible of $2500.”

Deputy Mayor Adams explained that AIG was the main insurance carrier, and that for the purpose of theft and criminal activity, the underwriter for the Alaska Public Entity.

“You have 2 checks issued for the same crime. Ultimately, the city paid a deductible of $2,500,” he explained.

In November 2021, a federal grand jury subpoena was issued to the City of Houston. In December that year, an affidavit of compliance for the subpoena was signed and the requested documents submitted to the federal grand jury.

Deputy Mayor Adams had served a 1-year term on the council in 2021, then ran and won re-election to the council on October 2022, and along with new council members Sandy MacDonald and David Childs, after which then-Mayor Virgie Thompson, then-Deputy Mayor Lance Wilson, and then-City Treasurer Schug immediately resigned.

On October 10, the council members were sworn in. On October 11, the subpoena was located in the Treasurer’s office.

At that time, without a leader, Deputy Mayor Adams was selected to be the presiding officer and chairman of the city council until a full council could be sworn in and a new Mayor elected. On October 17, the vacated seats were filled during a special election and a new Mayor and Deputy Mayor were elected.

“On November of 2022, I notified the full city council of the federal grand jury subpoena served on the City of Houston and provided full details of the allegations. But only after notifying the case agent of my intent to brief the city council and receiving concurrence from the IRS Criminal Investigator.”

Deputy Mayor Adams said that during the next 6 months, he responded as needed to information requests on behalf of the IRS investigators. On March 21, the federal grand jury for the U.S. District Court in Alaska returned a true bill on Jess George Adams, and the indictment sealed. The defendant was later arrested and arraigned.

Typically, in grand jury cases like this, secrecy rules prohibit most people present for the proceedings from disclosing information. However, that does not apply to witnesses, leaving Houston with an important distinction.

“The City of Houston is both a victim of this crime, and also a witness.”

To preserve investigative integrity and avoid possibly impeach any potential witnesses, the normal course of the investigation is to counsel potential witnesses not to discuss the matter, or the facts of the alleged criminal activity. The subpoena was issued to the city of Houston, not any specific person.

“The expectation is that executive directors, or in this case City Council be appraised of the investigation, so that requested information can be compiled and provided, and business decisions can be made accordingly.”

Mayor Cole thanked Deputy Mayor Adams for his thorough work and for taking on the load while the city worked to right itself after weeks of uncertainty.

“I think it’s important that the city realized it’s the victim in this. I’m not here to blame-shame anybody. What I want to do is set the record straight,” said Mayor Cole. He acknowledged that numerous items have been put on via social media and comments made.

“I’m just glad we found it before the headlines,” said Deputy Mayor Adams.