Dearborn News

    Council chairwoman compares Dearborn Heights’ audit issue to Taylor mayor’s corruption case

    After nearly a year of back-and-forth legal battles involving city officials, Dearborn Heights Council Chairwoman Denise Malinowski Maxwell is equating the situation in her city to a corruption case rocking a nearby community.

    In a Jan. 16 written statement provided by Malinowski-Maxwell, she questioned why Mayor Daniel Paletko is objecting to an audit being done on their city’s finances.

    “The $1.4 million dollar question is why is the mayor so afraid of a forensic audit,” her statement said. “Is it because he is afraid that, like the Taylor mayor, he, too, will be indicted on federal corruption charges? If not, then why spend more money on attorneys to block the audit than the actual audit itself will cost? The taxpayers deserve an answer to this important question.”

    Taylor Mayor Rick Sollars, along with two other men, are charged with multiple counts of bribery and wire fraud in a scheme the federal government said spanned from 2015 to 2019.

    0114201803_HDR_2.jpg
    Dearborn Heights Mayor Daniel Paletko at a recent Council meeting.

    Briana Gasorski — For MediaNews Group
    Paletko said equating that city’s issues to what is going on in Dearborn Heights is a low blow.

    “If they know something is wrong, they should go to the FBI and State Police and they’ll investigate it for free,” he said. “I’m not afraid of anything. I’m very confident they will find nothing wrong at all. This is such a low blow and the council chair needs to apologize to myself and to the employees and residents of the city of Dearborn Heights and Taylor. What they should really be investigating is the constant Open Meetings Act violations.”

    Malinowski-Maxwell said that the case, which is in the appeals process, will settle the matter.

    “Everything in my press release is facts and can be supported with proof,” she said before declining to answer any follow-up questions.

    Earlier this month, Paletko referred to the proposed audit as a “reaudit” of the city’s books. Malinowski-Maxwell disagreed.

    “A forensic audit is not a reaudit,” her statement said. “It is a review of financial records to ferret out possible fraud and embezzlement which is an issue because the mayor cannot explain where $1.4 million went that was earmarked for the PEG fund.”

    During a City Council study session in February 2019, Councilman Ray Muscat mentioned that over the past several years, there is nearly $1.4 million missing from the city’s PEG fund that is set up specifically for special television channels. That sparked a legal battle on whether the city should have a forensic audit completed on all financial records.

    Paletko said he has always been willing to compromise, but he was forced to take a defensive approach.

    “What council should have done was call Plante Moran in and ask their questions,” he said. “Why hire an attorney to then hire an auditing firm? It’s my contention that this is going to cost millions of dollars. I have always been more than willing to compromise, but I had received a subpoena and had to defend myself and I have been in defensive mode since.”

    Malinowski-Maxwell said there is no point in contacting Plante Moran as they perform an entirely different function.

    “It would be like contacting a plumber when you know the problem is electrical,” her statement said. “The forensic audit will only cost millions if the mayor continues his efforts to block the audit. Ironically, while he argues that the City Council’s investigation into the fiscal affairs of the city administration is a waste of financial resources, it is the mayor who has hired two law firms to represent him, with one of the firm’s charging $600/hr for an attorney.”

    At a recent council meeting, it was announced that the current fees paid to the council’s attorneys is $47,680 and the mayor’s attorney fees are $31,489 and that’s not including fees paid to City Attorney Gary Miotke.

    Malinowski-Maxwell said that while Paletko’s attorney contract was never presented to council for approval, the retention of attorneys was necessary.

    “Council knew that Mayor Paletko would make every effort to block the audit and he has,” her statement said. “Retention of counsel in connection with a forensic audit is the usual practice. For instance, the city of Taylor has undertaken a similar approach in reviewing the city’s finances in the wake of the investigation into the mayor in that city.”

    Councilman Dave Abdallah said that everyone needs to wake up.

    “We need to compromise and move forward,” he said. “I’ve said it from the beginning, I do not believe that a forensic audit is the first place to go, but it was voted on and that’s the direction we’re going. But suing each other, back and forth, is not helping. This is the taxpayer’s money. We need to wake up.”

    Councilman Bill Bazzi said that there is no compromising to be had.

    “We have fought very hard on this,” he said. “We are where we are because of decisions that were made and the mayor isn’t specific on what he wants to settle on. You can’t just settle; this isn’t a game. At this point, he is messing with people’s lives. We speak for the residents and the mayor is fighting that.”

    History of the dispute
    A resolution for a forensic audit was voted on in February 2019 in a 5-2 vote which was then vetoed by Paletko. The City Council voted to override the mayor’s veto, and Paletko still refused to sign off on the ordinance.

    Council then presented a resolution to sign a contract with the Law Firm of Ottenwess, Taweel, & Schenk PLC in March that was vetoed by Paletko at the April 9 council meeting.

    “In accordance with charter Section 7.13, I, as mayor, am exercising my power to veto the motion that adopted this resolution,” the veto read. “I am vetoing it because it is a political witch hunt that will waste city money and violate the law. This action by the City Council majority is a political witch hunt, will waste city tax dollars and is likely to become a significant drain on the city’s budget, and will violate the city charter and other pertinent law.”

    Council voted to override that veto, which Paletko refused to sign off on.

    “If the City Council majority overrides my veto, I fully intend to exercise every legal option available to me,” he said. “I will refuse to give in to this misguided and illegal, political witch hunt. I will refuse to sign any agreement with the law firm of Ottenwess, Taweel & Schenk, PLC.

    “Further, I shall not authorize any payments to the law firm of Ottenwess, Taweel & Schenk, PLC or any of its agents. Consistent with the oath I took years ago, I will continue to protect the city, its citizens, and its future to the very best of my ability.”

    The council sued Paletko shortly afterward. However, in a ruling by Wayne County Circuit Judge Muriel Hughes on May 7, Malinowski-Maxwell did not have the authority to sue Paletko on behalf of the full council and the lawsuit was tossed out of court.

    More allegations of mayoral misspending were announced during a council meeting later that month when Paletko vetoed a motion authorizing the law firm of Ottenwess, Taweel, & Schenk PLC to file a complaint against him.

    “I looked at the last 10 years of audits and every year the same recommendations, nothing has been done,” Bazzi said. “There’s an issue with overcharging on retiree health care, the city was asked to have a formal process in place which never happened. There was a CSO (Combined Sewage Overflow) overcharge of $3.8 million. The city kept collecting even though the city was asked to adjust prior to set the following year’s CSO levies.”

    Bazzi also said at the time that city credit cards were being used incorrectly and a former employee was gifted a vehicle paid for by the city.

    “There’s excessive amounts of payments on credit cards that the city has,” he said. “We keep getting invoices for car repairs and I don’t even know who these cars belong to. There’s more cars in Dearborn Heights than in any city I’ve seen.”

    Council later made allegations in misspending in regards to senior trips during a June council meeting which led to Parks and Recreation Director Brian Haddad asking council to begin approving senior trips.

    The letter penned by Haddad was taken off the agenda at that time because Malinowski-Maxwell said that Paletko was trying to hold the senior trips hostage for his own personal agenda and that she had been told by seniors that if they came to council meetings to have council stop the audit, the trips wouldn’t be canceled.

    On July 17, Hughes agreed with Miotke’s opinion regarding the original retainer agreement for Ottenwess, Taweel, & Schenk PLC and determined that Paletko was not required to sign the resolution into effect and council had 21 days to file an appeal. Council voted 5-2 during a special meeting on July 24 to file the appeal.

    Council then voted to change their meeting schedule to meet on July 30 due to expectations of a veto from Paletko, so that they would be able to file the appeal by their deadline date of Aug. 7.

    At the beginning of September, Hughes issued an order which granted the council’s request and ordered that Paletko sign the engagement letter for the council’s selected law firm. While Paletko still refused to sign, council voted to pass a resolution to hold Paletko in contempt of court.

    Paletko requested an apology and stated that he had a stay in place that meant he didn’t have to sign while he was getting legal opinions from his legal counsel.

    On Oct. 25, Hughes denied the latest motions from Paletko in regards to not forcing him to move forward with the council-mandated audit.

    The first motion requested Hughes reconsider her Sept. 3 opinion that he must honor the resolution. The second motion asked for a stay in order that would allow Paletko time to file an appeal. The third motion requested Hughes to rule that the conduct of the council’s special meeting of July 30 be deemed illegal and nullified.

    While Hughes ruled all three motions were invalid and couldn’t be appealed, she also ruled against council when they requested Paletko be held in contempt of court.

    According to a press release provided by Paletko earlier this month, the issues raised were so alarming that the Michigan Court of Appeals stayed the circuit court’s ruling until after full briefing and argument.

    Courts will ultimately decide
    Paletko said he offered repeatedly to mediate and compromise the conflict, but his offers were simply rejected by a majority of the council.

    Malinowski-Maxwell said that any chance of negotiation is off the table.

    “This is in appeals court being handled by our attorneys,” she said. “We’re not in negotiations and it’s not going to happen. Our attorneys are handling it.”

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