LANSING, Mich. (WLNS) – For months, a top Lansing Board of Water and Light official racked up thousands of dollars in what the utility considered improper expenses with no apparent oversight.
A 6 News investigation into the spending of former BWL Internal Auditor Frank Macciocca began in July. It included reviewing hundreds of internal and publicly available documents to determine how one man could ring up over $30,000 in expenses on his company-issued credit card in just over 8 months.
BWL spent another $29,390 on an outside legal review conducted by Miller Canfield. The results of that investigation were withheld by the BWL under the Freedom of Information Act citing an attorney-client privilege exemption.
The utility’s P-card, or procurement card, manual claims the cards have “internal controls and extensive reports to manage and audit the P-Card use process to ensure that procedures are followed.”
The manual explains that for almost all employees, P-Card spending has to be reconciled monthly, with receipts for each expense uploaded to a data program. Employees with a card, other than direct employees of the Board of Commissioners, have to have their spending reports reviewed and approved monthly by their supervisors.
The BWL policy for P-Card spending review for the employees who report directly to the Board – adopted in the wake of another misuse of credit cards by former general manager Joe Pandy in 2002 – provides the spending will be reviewed “at the end of each cycle.” The cycle is not defined in the policy.
Macciocca, who as the internal auditor was charged with making sure the BWL spent its money wisely, was issued a P-Card on May 26, 2022, just a few weeks after his hiring. The P-Card was authorized by then-Chair David Price.
Internal documents reveal spending by Macciocca – who is one of three direct employees of the Board of Commissioners – did not come to the attention of the board until February of 2023. That’s when he, Corporate Secretary LaVella Todd and General Manager Dick Peffley were required to file the previous year’s receipts and P-Card expenses to the BWL Board of Commissioners Finance Committee Chair Dusty Horwitt. Within days of his submission, records show Macciocca’s P-Card was canceled and an investigation and review was launched.
Weeks later, the Board of Commissioners hired Miller Canfield, a local law firm, to review the spending and policies. The BWL would not release the findings, but a memo written by Horwitt suggests they came to the same conclusions: that Macciocca had violated board policies and procedures in spending including thousands of dollars on food, unauthorized travel to Chicago and Walt Disney World Resort in Orlando for a conference; and educational expenses.
“Macciocca charged multiple meals to his P-Card when he dined alone and with his assistant,” Horwitt wrote in preparation for an April 20 meeting of the Commissioners. “These expenditures were unnecessary to conduct BWL business and appear to be little more than personal expenditures. He suggested on P-Card receipts that some meals were with Commissioners when no Commissioners were present. He charged travel expenses to his P-Card multiple times without prior authorization of travel that is required by BWL rules.”
6 News got in contact with Macciocca, who moved back to Pennsylvania after his firing. He chose not to comment on this story.
Daily food expenses were supposed to be capped under this to $70 a day per person at the meals, with 25% prorated for breakfast, 25% for lunch and 50% for dinner.
For example, on Feb. 1, 2023, Macciocca and two others had lunch at Bravo. The total bill before tip: $92.68. There was also a total $20 tip, for a total charge of $112.68. Under the pro-rated levels, each person had a budget of $17.50 to spend for lunch. This lunch overspent this limit by $40.18 without the tip, $60.18 with the tip.
Another example, on Feb. 20, 2023, he went to Rusty Mug for lunch. His bill without tip was $20.67. He tipped for $4.00. Before the tip, the bill exceeded the lunch amount by $3.17, with the tip it was $7.17 over the limit.
And on September 19, 2022; Macciocca had lunch with a colleague at the Rusty Mug. The total lunch bill, before tip: $36.57. He added a $7 tip to bring a total of $43.57. That’s $1.57 over the limit before the tip and $8.57 over with the tip.
“Using this P-Card for personal purchases is strictly prohibited,” the BWL P-Card Manual says. Food expenses are required to meet the IRS definitions of business-related meals – “provided they are ordinary and necessary, not lavish and/or extravagant, and must be directly related to or associated with the BWL’s core business function.”
Horwitt reported to the board that Macciocca’s spending did not meet this standard for many of the more than $3,500 in food expenses. That included meals at Panera, parking at MSU, and meals where the former auditor claimed commissioners were present, while those commissioners say they were not.
The Horwitt memo findings show Macciocca’s use of the P-Card to pay for his MSU tuition was a violation of BWL tuition reimbursement policies. Those policies require an employee to pay for the tuition out of pocket and then submit the tuition bill for reimbursement.
Travel, even to conferences for continuing education for membership and professional organizations, required pre-approval by the Finance Chair according to the BWL’s policies. Horwitt’s memo, informed in part by his investigation and review as well as by the Miller Canfield investigation – which was not released – says Macciocca did not seek or receive approval to travel to Chicago to attend a conference, nor did he seek or receive approval to attend a conference hosted by his former employer at Walt Disney World Resorts in Feb. 2023.
The BWL P-card manual warns employees that misuse of the card could result in “revocation of the P-Card and/or possible criminal charges and disciplinary action, up to and including termination.” The document also says “The BWL will seek restitution for any inappropriate charges.”
Despite Horwitt’s findings and the secret report from attorneys from Miller in mid-April 20, 2023; the Board of Commissioners voted to “negotiate and execute a Severance Agreement and Release of Claims, by resignation, with Internal Auditor Frank Macciocca.”
The agreement proposed Macciocca walk away with a neutral job recommendation – the BWL would only confirm his hire date and departure date. The BWL would also drop the issue without the auditor reimbursing the utility for the money he had allegedly misspent or being referred for criminal investigation.
Macciocca did not sign the agreement, opting to be fired for cause. That happened on May 3 – days short of his first anniversary at the BWL.
But the BWL still did not turn their findings over for potential criminal wrongdoing – Ingham County Prosecutor John DeWane tells 6 News the agency is unaware of any criminal investigation into Macciocca. There is also no evidence he was asked for or paid the BWL back for any of the credit card charges.
Former commission chair, longtime commissioner, and member of the Finance Committee David Price declined to discuss the termination of Macciocca or the allegations of misuse of the card. He did however say that any policy issues that were identified “had been addressed.”
None of the other BWL Commissioners would respond to 6 News inquiries on this matter, including how often they were reviewing P-Card use by the three direct report employees, why they didn’t ask Macciocca to repay his expenses, or why they did not turn their findings over to law enforcement to review for potential criminal wrongdoing.
6 News has been trying to get commissioners to explain their decisions for months, but they have repeatedly declined to comment on what they consider a “personnel matter.”
Board Chair Semone James so far as to dodge our cameras and be escorted into a public building for a public meeting by BWL security.
“The board considers this matter closed,” a BWL spokesman told 6 News on Tuesday morning.
Horwitt, who as chair of the BWL’s Finance Committee was responsible for overseeing Macciocca’s expenses, resigned from the Board of Commissioners in July. 6 News reached out to him by email and stopped by at his last known address in the city – only to be greeted by a message that the number his apartment listing rang to was not working.
An expert on local governments and ethics reviewed the records at the request of 6 News. He says both the credit card charges by Macciocca and the failure of the board to recover the funds and explains the situation are troubling.
“This is a particularly egregious example of a public official abusing their position,” said John Peliserro, a senior scholar at Santa Clara University’s Markkula Center for Applied Ethics, said of Macciocca.
“I think one of the most important questions that comes up here is: Why the city and the utility board aren’t being more transparent about what happened, what’s being done, and why they’re not trying to collect the funds that were misappropriated,” Peliserro said about the board. “Transparency is a very important virtue. Ethical virtue that should be in place, especially in governments.”
Following Macciocca’s termination, the BWL Board adopted a new policy for oversight of P-Card expenses by the General Manager, the Corporate Secretary and the Internal Auditor. They will have to submit monthly reports and receipts, just like other BWL employees. The reports will go to the Chair of the Finance Committee for initial review and approval. A second member of the committee will have to sign off on approval of those expenses, and then the entire Board will receive a copy of the reports and spending.