By Debra Jasper and Spencer Hunt
Enquirer Columbus Bureau
In Toledo, a company that's supposed to care for foster children spent $750,000 in tax money on a Mercedes-Benz, plastic surgery, health club dues and loser stocks.
In Cleveland, a Head Start agency collected more than $2.2 million in tax money for 600 poor children who didn't exist.
And in Cincinnati, a Medicaid firm charged taxpayers nearly $6,000 to care for 22 people who already had died.
All told, state audits since 2000 say that government contractors and public agencies misspent more than $346.5 million in tax dollars, a Cincinnati Enquirer analysis shows.
Worse, government officials rarely chase after that money, the Enquirer found. Foster-care companies alone misspent nearly $16 million, but repaid $117,000 - less than a penny on the dollar.
"It's outrageous for the government to pay out tax money and then never worry about getting it back when it's misused," says state Sen. Jeff Jacobson of Dayton, who is calling for reforms. "It's a real betrayal of the taxpayers."
The Enquirer reviewed 428 audits and Inspector General reports since 2000 that question spending. They show that state departments, local governments and private companies repeatedly used bad contracts and spent money illegally or improperly outside state or federal rules.
Yet interviews and documents also reveal that, despite severe state budget problems, officials continue to bungle enforcement and blame each other while tax dollars slip away.
Not even the main state official in charge of going after misspent funds during the past eight years - former Attorney General Betty Montgomery - pushed hard to recover tax money, according to an April 18 internal memo.
"It does not appear to me that aggressively following up on (audits) was a high priority for the leadership in the previous administration," Senior Deputy Attorney General O'Neal Saunders wrote to his boss, current Attorney General Jim Petro.
Saunders' memo said Montgomery took little action when county prosecutors failed to recover illegally spent money. Vital information for 276 audits dating back to 1994 was "out of date." Important documents could not be found or were "scattered among filing cabinets, different attorneys' offices and the office of an intern."
Montgomery's office allowed the statute of limitations to expire in four cases, the memo said. The office tried many times to communicate with the wrong lawyers and follow-up sometimes took a year.
Kim Norris, Petro's spokeswoman, says the poor record-keeping makes it impossible to determine how much has been recovered because those documents are still being assembled.
"We just don't know," she says. "We've been working very hard to find out what's been done."
Montgomery, now state auditor, defends her record as attorney general. She says her office collected $1 billion by focusing on people who owed the state the most in taxes, workers compensation or other debts.
"Our files may not be as centralized or as pretty as you might want, but we set priorities," she says. "The system didn't have to be gold-plated to work."
Montgomery says she trusted county prosecutors to make good decisions, and they settled many cases without her involvement. Often, state agency officials didn't want her office to step in because they didn't want to send federal dollars back to Washington.
"Sometimes we have to sue to get a judgment, and that's expensive," Montgomery says. "And sometimes these (companies) go out of business so there's no money to be had. We were enormously understaffed, so we tried to collect the easiest judgments first."
Montgomery, who swapped jobs with Petro four months ago, accuses him of failing to consistently track misspending or to notify prosecutors when he was state auditor. Petro disputes that, but Montgomery spokesman Joe Case insists, "If there was a tracking system here, we can't find it."
As Petro and Montgomery, who both want to run for governor in 2006, struggle to piece together information, lawmakers this week are debating raising billions in new taxes and slashing health care and other programs to plug a $4 billion hole in the state budget.
Many are furious about the state's inability to account for itself.
"Right now, the rich are getting richer, and the taxpayers are left holding the bag," says House Democratic leader Chris Redfern of Catawba Island.
'A small, small amount'
To Petro, the state foster-care system offers a prime example of what happens when government officials don't properly watch over tax money and then fail to get it back when it's misspent.
As state auditor for eight years before Montgomery, Petro and his staff examined 26 private foster-care companies paid with tax dollars and found $15.7 million in questionable spending.
Auditors found company executives who were supposed to spend money on food, clothing, housing and other items for foster kids instead squandered it on improper management fees, flowers, tobacco, vet bills, luxury cars - even a trip to Peru.
The state spent three years and $1.2 million doing the audits. To date, $117,000 - less than 1 cent on the dollar - has been repaid.
"It's a small, small amount," concedes Barbara Riley, a deputy director in the Ohio Department of Job and Family Services, which paid for the state audits, doles out state and federal money to counties and oversees the foster-care system that counties administer.
She blames the department's failure to get money back on a complex bureaucracy that doesn't let the state go after private companies that care for foster children. Instead, prosecution is left to the counties.
"We don't have a lot of county prosecutors willing to take this on," Riley says. "They just aren't that interested."
John Saros, executive director of Franklin County Children Services, was interested. Last year, he was the only children's services official in the state to wring money out of a foster-care company called Symbiont after state auditors blasted the firm.
The audit said the Newark, Ohio, company misspent money on country club memberships, Rolling Stones tickets, Ohio State football tickets, fuel for the owner's private plane and two BMWs the owner leased for his wife, also a Symbiont executive.
Saros threatened to stop sending Symbiont any more foster children until it paid the county $47,000 - the county's share of money auditors said was misspent.
"When I found out (foster-care firms) had spent money on things like horse shows, a Mercedes and God knows what else, I said, 'You are taking away money and resources from kids, so you've got a problem with me,' " Saros says. "I made it clear that if they didn't do what I needed them to do, they wouldn't get my business."
Manuel Vela, who runs Symbiont, says Saros' strategy works.
Vela says he didn't misspend tax money but couldn't prove it to state auditors because a flood in his basement destroyed key documents. He says he used foster-care money on fuel for his private plane only when he flew to check on whether his employees were showing up to work.
"We didn't feel we owed anybody any money, but we repaid it to maintain good relations," he says. "I can't say any more because I don't want to get in hot water with the new attorney general."
Saros now wants to go after another $100,000 from V. Beacon Inc., a Toledo foster-care firm that spent $670,000 on poor-performing stocks, $70,800 on a Mercedes-Benz and $8,000 on plastic surgery, health club dues and a home security system for the owner.
Joanie Doneo, Beacon's executive director, won't say if her firm will repay any money. "I don't feel like I should tell you," she says.
Misspent foster-care funds aren't the only tax dollars that state officials haven't pursued. Since 1995, the Ohio Department of Job and Family Services, which oversees the spending of state and federal Medicaid money, has recovered only 10 percent of the $135 million that state auditors said private Medicaid firms misspent.
In case after case, the state took no action against companies that overbilled the state for driving elderly or disabled residents to workshops, hospitals and clinics.
For example, auditors said Crest Transportation Inc., a Cleveland company, overcharged the state's Medicaid program by more than $1 million. A June 2000 audit revealed that $590,000 also went to the owner, who listed himself as an eligible Medicaid recipient.
Crest declared bankruptcy in 1998, but the state continued doing business with the company until November 2002. Three years after the audit, the state still hasn't recovered a dime.
Dennis Evans, spokesman for the Department of Job and Family Services, says officials are starting settlement negotiations with Crest and other transportation firms. But he acknowledges that talks didn't begin until after Petro's office requested them.
"They got with us very recently," Evans says.
The department now plans to pursue recovery of money from other kinds of Medicaid firms, too.
A Cincinnati company, We Care Medical, overbilled the state's Medicaid program $681,244 for oxygen services for the elderly, an August 2002 audit report showed. Among other things, auditors found the company charged the state for providing 33 services to 22 people who were dead.
We Care officials are disputing the audit findings. They did not return phone calls.
Evans says the state needs to do a better job. "That's the next thing we'll be focusing on," he says.
Sometimes, officials say, money may have been spent improperly but not wasted. If a company doesn't take bids to buy a car, for example, the purchase might be valid even if proper procedures weren't followed.
"In that case, we wouldn't try to get that money back," Evans says.
When settlement talks are pursued, the state and other agencies often agree to take far less than the amount cited by state auditors.
Officials working for the Cuyahoga Metropolitan Housing Authority spent $6.6 million on excessive fringe benefits and bonuses, consulting contracts and payments that didn't follow federal guidelines, a 2001 audit showed.
The Housing Authority tried to get the workers to repay the money but have collected only $160,194 - less than 3 cents on the dollar.
"We don't believe we can recover any more," says Dorothy Noga, an authority spokesperson.
Cases that are pursued move slowly.
The attorney general sued Ministerial Day Care Association, one of Cleveland's largest Head Start programs, after auditors found the group charged $2.2 million for more than 600 children who didn't exist. Auditors said the group misspent nearly $4.5 million.
Larry W. Zukerman, Ministerial's lawyer, says the allegations aren't true and that Petro used the case to help fuel his campaign for attorney general. "They do whatever it takes to achieve their predetermined goal," he says.
Saros, the Franklin County Children Services executive director, isn't counting on state and county officials becoming more aggressive in recovering lost funds. He notes that officials spend months just waiting for state and federal officials to review the audits and determine what is actually owed.
"Do I get frustrated with the bureaucracy? All of us do," he says.
"A lot of these companies are isolated, they have small boards, no accountability and executives who think they can do whatever they want."
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