By Ken de la Bastide
For The Herald Bulletin
ANDERSON, Ind. — A letter received by Anderson city officials from the U.S. Department of Housing and Urban Development said corrective actions taken to resolve a conflict of interest has brought the city back into compliance and kept it eligible for federal funds.
The issue involves the termination of three city employees who oversaw HUD programs.
The letter was received Thursday and signed by John Dorgan, director of the Indianapolis HUD office. It stated that the three former employees did not publicly disclose their conflicts of interest and they failed to request and secure exemptions to the federal prohibition on conflicts of interest.
Lacking exceptions from HUD, the prohibited conflicts of interest remained active and put the city in a condition of noncompliance with the possible withholding of federal funds in the amount equal to the federal participation in projects that were not compliant, Dorgan wrote.
“The city self-reported the noncompliance, addressed the circumstances through internal administrative action, and prevented recurrence by implementing new internal controls,” Dorgan wrote.
The letter said that based on the city’s action, the finding of noncompliance was resolved and no further sanctions will be enforced by HUD.
The three employees Kim Townsend, Debra King and Beth McKenzie were terminated by the administration of Mayor Kevin Smith. The employees were let go when it was learned that family members were placed in HUD-subsidized housing. Townsend is fighting to collect unemployment benefits and to be returned to her job.
Attorney Montague Oliver, representing Townsend, said he wasn’t aware of the HUD letter on Thursday.
“It doesn’t change our position,” he said.
Oliver said Townsend disclosed the conflict of interest to her two superiors, Linda Dawson and King. He said an investigation was performed in 2011 by the administration of former Mayor Kris Ockomon.
“The conflict was disclosed to the Ockomon administration,” he said. “This is a travesty of justice.”
Oliver said Steve Priser, former director of personal and insurance during the Ockomon administration, conducted the investigation and that Townsend was told by a city attorney not to sign any forms.
Thursday, Smith said his administration made a promise to restore faith and confidence in Anderson government.
“Sometimes it’s uncomfortable to confront inappropriate conduct,” he said.
“But it’s necessary to assure the actions we take actually benefit all people of our city.”
Oliver appeared before the Anderson Common Council Thursday asking for the council to pass a resolution for Townsend to be rehired immediately, be given back wages for two years and all the employee benefits she was entitled to for 18 years of employment.
Oliver said the city administration provided the council with information that was not accurate, misrepresented the facts and was not completely truthful.
“It’s the council’s duty to find out the truth,” he said. “There is new information that has come to light.”
Council President David Eicks said the council is a legislative body and not involved in disciplinary measures.
“This council is not going to take any action or pass a resolution,” he said.
Council attorney Tim Lanane said the hiring and firing of employees and any claims against the city is a responsibility of the executive branch not its legislative branch.
Councilman Rodney Chamberlain said the council should conduct another executive session.
“We have been brought into this by the administration,” Chamberlain said. Assistant City Attorney Richard Walker said the city had two options removing the family members or terminating the employees. He said the city decided to terminate the employees.
Oliver requested the council conduct an executive session and that he be allowed to attend.