Pittsburgh oversight agency found to have destroyed financial records
Since it was formed in 2004, the Pittsburgh Intergovernmental Cooperation Authority has relentlessly forced city officials to surrender financial documents as part of a state mandate to save the city from bankruptcy.
Yet for the past 11 years, the ICA destroyed or lost nearly all financial records that tracked its spending, according to a Tribune-Review investigation. The agency's executive director and only employee, Henry Sciortino, acknowledges the lack of financial records in a sworn affidavit.
Sciortino, 67, a West Chester Democrat appointed by then-Gov. Ed Rendell, has been the ICA's only employee. The agency was created by emergency legislation pressed by Republicans and sponsored by now-House Speaker Mike Turzai, R-Marshall, who wanted the ICA to serve as a financial watchdog over Pittsburgh as the city struggled to cope with $1 billion in debt. It works alongside a similar body created under Act 47, which reports to the governor's office.
The Trib investigation found that a bare-bones register of checks issued by the ICA between 2010 and early 2016 survives, but gone are:
• 92 percent of all receipts detailing ICA expenditures over those years.
• All ICA bank records and all but two invoices showing the agency's spending between 2004 and 2009.
• Minutes and transcripts of public meetings held by the ICA's appointed five-member oversight board from 2005 through 2009.
• An unknown number of ICA contracts, many of them no-bid deals with unnamed vendors.
Sciortino acknowledged that check registers before 2010 “have been destroyed” in a signed affidavit submitted with the state Office of Open Records in an effort to block Trib access to many of ICA's surviving documents.
“I have followed the laws of the Commonwealth at every level, and followed the rules and directives of the Board,” Sciortino wrote in an email statement to the Trib.
“If any other public entity had done the same thing (with its records and operation), there would be people in prison,” said Pittsburgh Mayor Bill Peduto, who supported state oversight as a councilman but challenged ICA withholding city revenues after becoming mayor.
“If I destroyed 92 percent of the records of the city, handed out no-bid contracts, and then told the public that they do not have any right to know how I spent their money, I'd be serving time,” Peduto said.
In email messages declining multiple Trib requests for an interview, Sciortino repeatedly insisted an unwritten ICA policy barred him from speaking to the media. In the board's first 2016 quarterly meeting last week, ICA legal counsel Joshua Voss responded to a Trib inquiry by stating for the official board record: “Mr. Sciortino has been advised that he can speak with you about matters personal to him as well as ICA policies on record retention and his record retention practices.”
After the meeting, Sciortino declined to be interviewed. He later emailed that he believes the Trib's ongoing legal dispute with the ICA before the state Open Records Office restricted him from communicating with the newspaper.
“It was also clear to me (from the board meeting) that if I somehow talked about legal matters, directly or indirectly or inadvertently, that I would be acting contrary to the Board directive,” Sciortino wrote.
“No threat of intimidation, political retribution, or effort to purposely vilify me will cause me to act differently,” he said.
An ICA board member since 2012 and the panel's chairman from 2013 until a reorganization at Monday's meeting, Nicholas Varischetti told the Trib that Sciortino never notified him about the destruction or loss of financial records at the agency.
“I'm surprised and shocked to hear that. It's very disturbing,” said Varischetti, a Republican appointee and a Downtown attorney. “Quite frankly, it's confusing why the invoices aren't there. … I assumed that our executive director was keeping records in files.”
State funding to the ICA has ebbed and flowed, depending on the budget woes in Harrisburg. In some years, the state increased funding to the agency to catch up for the lean times or to cover expenses. According to the state auditor general, the average annual state appropriation for the ICA over the past three years was about $235,000, roughly 80 percent of which went to Sciortino's salary.
Between 2005 and 2014, Sciortino earned an average of $231,806.30 annually in wages and benefits while leading his one-man agency, audits indicate.
Issues and blame abound
ICA controls $20 million in annual Rivers Casino revenues earmarked for Pittsburgh city government, which often triggers squabbles with city leaders. In July, Peduto's administration filed a lawsuit seeking ICA records similar to those requested by the Trib, plus the release of the gambling funds, which the mayor claims was used as a “slush fund” for political chums of the ICA.
ICA board treasurer Michael Danovitz said concern about ICA mismanagement is an important issue. However, he said, it shouldn't detract from a looming fiscal crisis linked to the city's mostly unfunded pension and health care plans for municipal retirees.
Pittsburgh's overall financial position has improved under the ICA and Act 47 watch, said the state Auditor General's Office. But in the auditor general's mid-2015 report on municipal debt, the city was estimated to have nearly $485 million in unfunded liabilities after the value of the city's assets are subtracted.
“Going forward, the allegations about Henry (Sciortino) will not deter us from asking the tough questions of the city: ‘How are you going to fund the pension? How are you going to make sure that we're running the business of government in the most cost-effective manner and providing the best services that we possibly can?' Those are the real issues,” said Danovitz, a Shadyside Democrat who works as an accountant and lawyer Downtown.
The five-member ICA oversight board is composed of two appointees from Republican lawmakers, two from Democratic legislators and one from the governor. Three of the seats were filled just prior to Monday's meeting. Two non-voting board members attend the ICA meetings: representatives of the state Secretary of the Budget and the city's Director of Finance.
House Minority Leader Frank Dermody, D-Oakmont, told the Trib that he had never heard from previous appointees or during a direct meeting with Sciortino about the ICA's policy of destroying financial records. Dermody, who recently appointed Democrat and retiring Chatham University President Esther Barazzone to the ICA board, said that “disturbing” practice could hurt the authority's credibility when it tries to hold Pittsburgh accountable for its fiscal decisions.
State Auditor General Eugene DePasquale, D-York, and Doug Shields, another Democrat, a former city councilman and a former non-voting ICA board member, said part of the problem with the ICA's record keeping stems from the 2004 legislation creating it. The bill by Republicans Turzai and Jane Orie, former Senate whip who was convicted of unrelated public corruption charges, failed to include state auditing requirements and other safeguards protecting taxpayers from mismanagement.
“So where's the public accountability here? How can you have an entity that's separate from all the rest of government, without policies or laws addressing the retention of records? Mike Turzai and Jane Orie wanted this bad statute, and now Pittsburgh is stuck with it and the ICA,” said Shields.
Turzai and Orie did not return messages from the Trib seeking comment.
State agencies are required to retain most public documents for four to 10 years based on a 1929 law. Many financial records are kept for seven years, but some paperwork for far longer. Typically, details of important financial transactions, property deeds and board minutes are stored permanently.
State agencies circulate policies that guide what they keep, what goes to government archives, what's converted to electronic files and what's destroyed. The Trib found no written ICA guidelines on the subject. Sciortino states in his signed affidavit that he is also the ICA's Open Records officer responsible for agency documents.
“Good government must begin with transparency. Citizens can't track government spending on their own if there are few or no financial records,” said David Thornburgh, son of former Republican Gov. Dick Thornburgh and director of the non-partisan Committee of Seventy charity in Philadelphia, which for more than a century has battled public corruption while striving to create ethical government leaders.
In his affidavit seeking to bar Trib access to the remaining documents, Sciortino partly blamed the lack of records on an unwritten ICA rule that lets the agency discard invoices after annual outside audits of his office were completed. The Trib has reviewed the available audits.
The Trib filed its request for ICA documents in January, more than a month before an outside accounting firm released its audit for the agency's fiscal year running from July 1, 2013, to July 30, 2014. Following ICA's own guidelines, Sciortino's agency should have retained receipts detailing spending in 2015 and 2016 for future audits.
The ICA issued 173 checks to vendors between July 2, 2013, and Jan. 27, 2016, but it lost or destroyed all but 34 invoices — less than one out of every five bills it paid.
Early warning signs
During an October 2013 quarterly oversight meeting, former ICA board treasurer Ann Dugan — then the director of the University of Pittsburgh's Institute for Entrepreneurial Excellence and a GOP appointee of Republican Gov. Tom Corbett — warned that the agency's finances appeared to be in “disarray,” that it was spending more money than it brought in, and that it bounced two checks owed to the city from casino revenues held by ICA.
Sciortino and then-board secretary Matthew Simon, a former Point Park University president appointed in 2005 by state Senate Minority Leader Jay Costa, D-Forest Hills, told Dugan she was wrong. The stalemated board agreed only to mild reforms: requiring Sciortino to file a monthly spending report and buying computer software to help him perform basic financial functions for the authority.
Dugan declined to comment to the Trib. Simon died May 20, 2015.
The lone surviving check register and work contract for Sciortino reveal that Varischetti and previous board president Dana Yealy — a Republican and a Marshall attorney who resigned from the board shortly before Dugan's warning — monitored Sciortino's work, current board members said.
Yealy asked Sciortino to submit weekly reports on agency duties he accomplished. He structured Sciortino's work contract so that he remained at ICA on a month-to-month basis rather than under a multi-year contract, Varischetti said. Between October 2013 and December 2014, under Varischetti's orders, the ICA also hired Pitt graduate students to help run the agency part time, but there's little indication the initiative worked.
With the students on hand, Sciortino wrote 81 checks to vendors but only four bills supporting the expenses apparently survived — a revelation Varischetti said left him “flabbergasted.”
In November, the auditor general issued a partial review of the ICA's operations from mid-2011 to late 2015. With his investigators unable to definitively name all ICA vendors or even number the contracts the agency inked with the firms, DePasquale urged the ICA to quit tossing financial records.
In the legal filing to block the Trib from seeing documents, ICA conceded it “has, unfortunately, experienced some record keeping and organizational issues.” However, the agency said it took the auditor general's November report “seriously” and hired a part-time secretary to help Sciortino.
Yet, during the two months following the audit's release, ICA issued 11 checks but preserved only one invoice — a worse retention record than before the report, according to a Trib analysis of the agency's surviving bank records.
“I thought Mr. Sciortino addressed that issue and we were moving forward,” Varischetti told the Trib.
DePasquale said that he's concerned about the apparently ongoing problems at ICA, but noted that there was little he or any other state agency could do. By law, he said, he has no “authority over authorities” like ICA.
Editor's note: First of a series. Coming Monday: ICA's executive director has his own financial issues.
Carl Prine is a Tribune-Review investigative reporter. Reach him at [email protected] or 412-320-7826.