Realtor sues Palmer for millions

PALMER — A local Realtor has sued the city of Palmer for $4.4 million on behalf of the United States government, claiming the city misspent federal grant money.

“Palmer failed to place the vast majority of its public works construction projects out for competitive bids by the private sector, instead paying Palmer’s existing public works force at a sharply enhanced pay rate to largely perform the federally-financed projects,” according to the complaint Realtor Arlene Cohen filed in federal court.

The lawsuit was first filed in October 2011, but it was under seal until August of this year when the U.S. Department of Justice declined to jump on board. However, they are still monitoring the lawsuit, and the judge in the case will have to get approval from DOJ before dismissing it or letting the parties settle out of court.

Cohen elected to continue, operating under the federal whistleblower laws that allow citizens to sue on behalf of the government and win a percentage of the resulting award — usually between 10 percent and 30 percent.

The complaint dates back to summer 2009, and though the lawsuit doesn’t mention it, that was the summer one of the city’s ailing water mains failed in downtown, flooding city streets.

At the time, the city was up-front about doing the work in-house. In a Frontiersman article then-director of public works Carter Cole said the city decided to replace water mains with its own crews mostly to save time. Though the burst water main was an emergency, it also was tops on the city’s capital project list for 2009.

“We can’t get construction documents done quick enough,” Cole said then.

He also said the city was using grant money it had received to replace its water system. The city just used that money ahead of when it was scheduled to and didn’t put the projects out to bid.

Later stories recount how, having examined the state of the water mains, Cole and the city decided to continue doing the work ahead of schedule, replacing water mains downtown. Carter said he was proud at the time to have gotten the water mains replaced years ahead of schedule.

The problem with that, Cohen’s complaint alleges, is that quite a bit of that money came from American Recovery and Reinvestment Act grants that specifically require the use of a competitive bidding process.

“To the maximum extent possible, contracts funded under this act shall be awarded as fixed-price contracts through the use of competitive procedures,” the lawsuit quotes in a line from the ARRA legislation.

Cohen also alleges that city workers were paid Davis-Bacon union wages, which is prohibited by federal law.

“Such wages have never been formally allowed for city employees in any context of federal contracting at any time until Palmer managed (to) somehow,” Cohen writes.

The lawsuit estimates that some employees got as much as a 40 percent pay increase as a result.

ARRA, Cohen notes, was meant to save or create jobs as the national economy plunged into recession.

“In fact, no jobs are known to have been created or saved in Palmer with the ARRA grant funds,” she alleges. “Palmer excused itself from paying most of its public works payroll instead of creating private sector jobs as intended under ARRA.”

The lawsuit also alleges that the city still has on hand $127,000 in surplus material — pipes, tubing, valves — that should not have been purchased.

In the end, the lawsuit estimates $1.4 million in federal funds were misspent. It seeks triple that amount from the city — $4.2 million — plus $240,000 in fines.

Contact reporter Andrew Wellner at andrew.wellner@frontiersman.com or 352-2270.