According to testimony given earlier this month in a police whistle-blower lawsuit by an Austin Police Department detective, Austin city officials including APD Chief Stan Knee and City Manager Toby Futrell may have compromised an ongoing criminal investigation into the business dealings of a city contractor. According to his sworn deposition, APD Detective David New believes that in the fall of 2003, Knee and Futrell may have indirectly or even intentionally alerted Bonding and Technical Services Inc. (also known as BTS) that police investigators were planning to execute search warrants at company offices, several days before the warrants were carried out. Detective New was one of the lead investigators on the BTS inquiry, and he made the allegations during his deposition testimony taken in connection with the ongoing whistle-blower lawsuit brought against the city by Detective Jeff White.
In response, Futrell told the Chronicle she is "astonished" by New's testimony, which she referred to as a "character assassination," and she denied each allegation of wrongdoing. Knee did not respond to numerous calls requesting an official comment. Two other city officials mentioned by New in connection with the episode no longer work for the city and could not be reached for comment.
Detective White has sued the city, claiming that he was retaliated against by former APD Assistant Chief Jimmy Chapman for reporting his suspicions that Chapman was involved in thwarting the now-defunct mid-Nineties drug trafficking investigation code-named Mala Sangre (Bad Blood). (For more on White's suit and the Mala Sangre investigation, see "Chapman Off the Job as Mala Sangre Probe Continues," Sept. 19, 2003.) Knee and Futrell were deposed in connection with White's case in 2003; whether they provided candid and credible testimony has become an ongoing matter of interest in subsequent depositions. During New's April 13 deposition, White's attorney, Donald Feare, asked New, White's former partner (who also worked on the Mala Sangre case), his opinion of Knee and Futrell's credibility. New told Feare that he does not consider either one of them credible.
Concerning Chief Knee, New said that news reports recounting inconsistencies or lies that Knee has allegedly testified to in court in cases unrelated to White's lawsuit have colored his perception of the chief. "I don't feel too comfortable with him being truthful," New testified.
"You also said that City Manager Toby Futrell was a name in question for you," Feare asked New. "Why would you question her integrity or honesty?"
"I was involved in an investigation where her name came up in the investigation," New replied.
"And it came up as an actor in the conduct or just by way of the fact she's city manager?" Feare asked.
"No, she ... was an actor in it," he said.
According to New, his unfavorable opinion of Futrell was formed by his dealings with her during the BTS investigation. By early September 2003, New testified, police had been investigating BTS for nearly two years. According to published reports, the inquiry began with a federal probe into the conduct of Lino Rivera, the former head of the city's Department of Small and Minority Business Resources, who was suspected of pressuring contractors to hire particular companies and of threatening to withhold city business if they did not comply. That investigation eventually led to an expanded probe of BTS, the Omaha, Neb.-based company that held a nearly $5 million city contract to serve as a contract facilitator, helping minority- and women-owned businesses secure jobs on city projects, New said.
According to published accounts, in July 2003, a former BTS employee reportedly told police that the company had falsified certain reports, overstating its work under the contract in an attempt to defraud the city. In the course of investigating that charge, police also discovered multiple, apparently corporate-funded campaign donations at least 68 donations, according to New made to each of the current council members and to former mayors Gus Garcia and Kirk Watson. According to investigators, many BTS employees wrote $100 checks the maximum single donation allowed by law and they were later reimbursed with company funds. Texas campaign finance laws prohibit corporate donations to candidates; each violation is a third-degree felony, punishable by up to 10 years in prison and/or a $10,000 fine. According to reports in the Austin American-Statesman and the Omaha World-Herald, BTS officials have denied any wrongdoing and have claimed ignorance of state campaign finance law as a defense against the donation allegations.
The campaign contributions remain under the review of the Travis Co. District Attorney's office. Asked about the status of that investigation, Assistant District Attorney Patty Robertson said that the investigation remains "open and ongoing."
According to New's testimony, on Monday, Sept. 8, 2003, APD investigators were ready to serve three search warrants on BTS, related to both areas of the expanded police investigation. They would be seeking records kept at the company's Austin office, at the home office of Sheri Aaron, head of the company's Austin operations, and at the office in the Onion Creek condo owned by Dick Davis, BTS' majority owner. Since the investigation into BTS involved some "substantial names" among them city officials, like Futrell and members of the City Council, New said Chief Knee was kept up-to-date on the investigators' activities. "The Chief wasn't really involved with the operation day to day as far as the police work of it," New testified. "He just wanted to be advised of what was going on." With that understanding, New's supervisor in the Integrity Crimes Unit (which investigates criminal allegations against police officers and public officials) "told the Chief about the search warrants" several days before police planned to serve them, New said. But when the investigators executed the warrants at Davis' condo, they found at least one empty file cabinet. "[W]hen we did the search warrant on his condominium, there were empty file cabinets in the upstairs office, his home office," New testified. "[A]nd what was odd about that was there were documents everywhere, and why in that one place were there not documents? So it really raised our suspicions."
In trying to determine whether the investigation had been compromised, New said, investigators reviewed both the chain of knowledge and related telephone records, and he came to believe that city officials perhaps intentionally, perhaps inadvertently, or, as New put it, "recklessly" had tipped off BTS officials about the impending warrants. The suspected leak, New testified, began with Knee. "[W]e found that the Chief had told Toby Futrell about the search warrants," he said. "Well, [Futrell] turned around and told her people that these search warrants were coming and to be ready and to get some stuff together. And those people wound up calling the business about seven times on the ... Thursday and Friday before the Monday search warrants."
Futrell not only denies leaking any information regarding the impending warrants to any city employee or to anyone at BTS, she says that she herself reported to police the original allegations regarding BTS' handling of the city contract.*
New said that investigators pulled city phone records and found record of a call apparently from Futrell, or Futrell's office, to city employees Sue Brubaker, then the city's purchasing director, and Barbara Nickle, then the city's controller, followed by records of calls from Nickle to BTS. "[T]here was calls Wednesday, Thursday, Friday, and then there were calls to Toby on Saturday, and then we found out later that [there was a meeting] on Saturday," at which city officials prepared for questions from the media that they imagined would come on Monday.
Investigators then questioned Futrell, Brubaker, and Nickle, but at first none were particularly forthcoming, New said. When asked directly about whether she'd talked to Knee about the warrants, Futrell said "she couldn't remember," New said. "And I said, "Did [Knee] call you, or did you talk in person about these search warrants? ... She said something to the effect she didn't really know how that came about, but I did ask her about compromising an investigation, that ... we suspected that had been the case." Futrell, New said, was "very offended that someone in her chain of command might have done that [compromised an investigation] or [that] someone beneath her," might have compromised the APD's criminal investigation. "So she asked me point blank, 'Are you saying someone compromised your investigation?' Because she wasn't going to have it," New recalled Futrell saying.
Sam Bassett, the Austin attorney for BTS, told the Chronicle that he is aware of the allegations contained in New's deposition testimony, but that he knows of "nothing from Sheri Aaron or Dick Davis that is consistent with their knowing about the search warrants ahead of time." Bassett said that he spoke with Aaron the day that the warrants were served and that she was "shocked and surprised" when the police arrived at her home. Attorney Roy Minton, who also represents BTS, said that Davis did not keep files at his Austin condo. Aaron was the one in charge of BTS' Austin operations, he said. "Davis wouldn't have any records at all," Minton said. "I don't know what the hell the man would be doing with file cabinets."
Moreover, Bassett said that there is nothing inherently suspicious about phone calls allegedly made to BTS in the days leading up to the warrant service. Bassett notes that since BTS was working under a city contract at the time, the company was in regular contact with city officials. As a consequence, he said, there were "a lot of reasons for the city to be calling."
Nonetheless, when questioned by police about contacts with BTS, Brubaker was even less forthcoming than Futrell, New said. "She was completely dishonest with us," he said. "She was dishonest about meeting with [Nickle]. She was dishonest about meeting with Toby. She was dishonest about the whole thing." When questioned further by police, New said, Nickle eventually gave the clearest account of what happened in the days leading up to the BTS warrant service.
According to New, Nickle said she was at lunch with Brubaker when they got a call from Futrell who told them that "something big was going to happen" with BTS. Nickle told police that Futrell asked her and Brubaker to "get all their stuff together" related to the BTS contract, so they could be ready for media questions, New said. In part, that meant calling BTS to get the company's "response" to the results of a 2000 audit of BTS commissioned by the city, New recalled Nickle telling the investigators. "So we found out that they were calling [BTS] the day before our search warrant," New testified. "[W]e couldn't prove that there was indeed someone [at the city] who said [that the police were coming], but, you know, when you have an empty file cabinet, and [city officials are] saying they called a day before the search warrant seven times, it's not hard to see," he continued. "I don't think they were talking just about an audit that occurred two years prior." And since the calls to BTS were made prior to the prewarrant execution Saturday meeting with Futrell, New said he concluded that Futrell would've had prior knowledge that the company had been alerted if only in a roundabout manner that something was about to go down.
In response, Futrell said that on Wedneday, Sept. 3, she made one phone call, to Brubaker, who was at lunch with Nickle, and asked that the two compile city records related to the BTS contract including the contract dates, dollar amounts, and an audit of BTS, along with the audit recommendations and follow-up and to create a timeline of the contract history. Futrell says that she told the employees she wanted the information because she was "going to need to speak publicly about the contract" in the coming week. Futrell said that she did not mention anything about the ongoing investigation or the impending warrants. "I did not share any information [with them] about [the] investigation," she said. "I did not ask for them to contact BTS." Futrell also said that she did not offer any "caution" against calling the company.
Futrell said that it wasn't until after the warrants had been served that she found out that Nickle had made one call to BTS, to inquire about the audit. She said that there were numerous calls to BTS that week, but that those were likely related to contract negotiations with the company, which were ongoing during that period of time, leading up to the submission of the city's new budget, which extended the BTS contract on a month-to-month basis, but slashed its funding by 55%. "My guess is that those are the calls New is referring to," she said.
Sue Brubaker and Barbara Nickle have since retired, and at press time, the Chronicle was unable to reach either of them for comment.
In the aftermath of the warrant episode, New said Knee backed off from the investigation and told the officers to move the entire inquiry under the authority of the Travis Co. District Attorney's Office. According to Assistant D.A. Robertson, her office has "reviewed whether any city employee, including the city manager, inappropriately used any information that they would've learned from the [BTS] investigation, and concluded that there was no information disclosed or leaked by any city employee," she said.
"Do you think you were snitched off?" Feare asked New.
"Personally, yes," New answered.
"Why?" Feare asked.
"To save face ... because they knew that they spent a lot of money on a company that didn't do what they were hired to do, a lot of money, millions," New testified. "And they did that to save face. If we can mess up one little aspect of it, guess what, it doesn't look so bad, I think; damage control, standard operating procedure."
Futrell rejects New's characterization altogether, and says that if city officials indeed wanted to cover something up, they would've conducted an "internal investigation" and not had the matter referred either to the police department or the Travis Co. district attorney.
The allegations concerning Knee, Futrell, and other city officials are the most striking in New's deposition, but there is additional material concerning alleged misconduct and favoritism within APD and city government that will generate more public scrutiny. And the potentially inflammatory nature of some of New's testimony not only about the BTS investigation but also about the alleged retaliatory behavior of former Assistant Chief Chapman was not lost on Detective New, who had apparently not been asked about these matters previously. Halfway through his nearly two hours of testimony, New stopped to wonder about his employment future.
"I'm going to get fired over this, ain't I?" New asked.
"No," replied Assistant City Attorney Lynn Carter.
"You better not," said Feare.
*Oops! The following correction ran in our May 6, 2005 issue: In "Did Knee and Futrell Leak APD Warrants?," April 29, Jordan Smith wrote that City Manager Toby Futrell said that "she herself reported to police the original allegations regarding BTS' handling of the city contract." City Manager Futrell offers a clarification as follows (emphasis hers): "The correct statement is that the original complaint of pressuring contractors to hire particular companies by the City's Department of Small and Minority Business Resources came to me and I made the decision to report these original allegations to APD to independently investigate and handle.
"The expanded probe of BTS came as an offshoot of that investigation through separate allegations by a former BTS employee to, I believe, our City Auditor's Office. Although they may have also gone to APD, I was briefed through the Auditor's Office because we agreed to stop a planned internal audit of BTS so that it would not interfere with the referral to and investigation of those separate BTS allegations by APD. That internal audit had been planned because the BTS contract was expiring in several months and we wanted to update the City's December 2000 KPMG audit of BTS before re-negotiating another contract."
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