Austin police seized six computers and 14 boxes of documents from the offices of the Austin Association of Professional Firefighters on July 21 as part of an ongoing investigation into whether a union official misappropriated union insurance money for his personal use – and what, if anything, other union officials knew about the diversion and what, if anything, they did about it.
According to an affidavit, accompanying a search warrant, sworn by APD Detective Angela Hernandez (and placed into public record July 29), officers with the department’s Public Integrity Unit were “made aware” of “alleged criminal activity” within the union sometime last month. Hitting the pavement, PIU Lt. Troy Gay and Sgt. Mark Spangler went to the union’s South Austin office to talk to AAPFF President Mike Martinez. Martinez took the union’s reins from former president, now vice-president, Scott Toupin in January; according to the warrant affidavit, Toupin approached Martinez in February with some “important information.”
Specifically, sometime last year Robert Jeffrey Pike, the AAPFF’s secretary/treasurer for the last eight years, told Toupin that between December 2002 and June 2003 he hadn’t made any premium payments to Anthem Insurance, the company that provides additional death benefits for about 315 Austin firefighters. “According to [Martinez], Toupin advised that the payments merely had not been made, and he was under the impression that the money for the premiums still resided in the AAPFF bank account,” Hernandez wrote in her affidavit. Further, she wrote, Toupin told Martinez that Pike was notified that the policy was canceled and had tried to appeal it without success; meanwhile, three union members, unaware that the policy was canceled, filed claims with the company, which were subsequently denied.
According to Martinez, Toupin later told him that he and Pike had made a “verbal agreement” to pay those claims straight out of the union’s “Members Benefits Fund,” which members pay into via direct deposit to cover elected “member services,” like supplemental health and death insurance, prepaid legal services, and pager and cell phone accounts. Pike then sent a generic letter to AAPFF members and the city of Austin, explaining that the supplemental policy had been canceled but not indicating why, presumably to avoid having to tell the membership about the screwup. “According to [Martinez], this was done in an effort to cover up this mismanagement of funds,” Hernandez wrote in her affidavit.
Martinez said that after Toupin explained the situation, he contacted union counsel Craig Deats and that during a June 29 union board meeting the members voted to conduct a full audit of the union’s bank accounts. According to the APD affidavit, at the same meeting Toupin told the board that the benefits money “was not spent on the [insurance] premiums” and that the board is determined to “make restitution as necessary to the member bank accounts.” (Hernandez noted that she “is in possession of the minutes from this meeting, although any and all conversations relating to this topic are not documented. [Pike] is responsible for recording the minutes.”) To make matters worse, Pike had also not paid premiums for the union’s bonding insurance in several years, which Martinez said should have been maintained at $50,000 for each of the union’s board members.
Interestingly, Martinez says, shortly after the Anthem policy was canceled Pike attempted to assuage members by offering to sign them up for supplemental work-injury insurance through a police and firefighters insurance group, for which he was a certified agent. The APD affidavit goes on to state that Pike subsequently admitted to Deats that he had misappropriated the funds and that through his attorney Jamie Balagia, Pike had “expressed an interest in entering into an agreement” with the union, to “repay the missing money.”
Exactly how much restitution Pike would have to make – should he somehow be afforded an opportunity to steer clear of the courthouse – is not yet known. Reportedly, Pike moved approximately $20,000 from the union account to his own. Why he did it, or what he might have done with that money, is also unclear. By way of enigmatic explanation, Balagia told reporters that Pike had “recently” been suffering with depression, but that he is now seeking treatment: “I think one of the manifestations we had was that there was a mismanagement of money,” Balagia told the Statesman. But, Hernandez wrote in her affidavit, until a thorough audit and investigation can be completed, it will remain “unknown” how much money Pike might have moved and why.
Indeed, although Pike has apparently admitted to misappropriating funds from winter 2002 through summer 2003, police notations on the logs of evidence seized from the AAPFF offices suggest there may be a bit more to investigate. Among the bank records, budget reports, check books, mail, and pager and phone logs seized by police, meticulously documented along with the warrant filed with the Travis Co. District Clerk, is a notation regarding an October 2001 letter seized from AAAPF offices. “Great West Ins[urance] letter to Pike – No [payment] activity in several [months],” Officer Fred Trejo wrote in a starred entry, “trying to determine if delinquent or if policies were canceled” – an item seemingly similar to what allegedly occurred with the union’s Anthem policy. Martinez says that Pike has admitted that he had missed making payments on other policies in the past, but not that he took any of the money.
Martinez said the union has hired a fraud investigator to examine all of its accounts and that part of the work will be to reconcile members’ direct deposits to the benefits account with all withdrawals and checks written against the funds. The union has been “cooperating completely” with the APD investigation and hopes that Pike will also cooperate with the investigation. “One of the messages that I ran [for union president] on was accountability,” Martinez said. “We’d never had an extensive audit, and I’ve been adamant that we needed to do it.”
Pike, a 30-year veteran, retired from the fire department (and his union post) last month. Meanwhile, police continue to investigate. Criminal charges for “misapplication of fiduciary property or property of a financial institution” could result in a state-jail felony conviction, punishable by up to two years in jail. Still, Balagia, himself a former APD officer, told the daily that there’s really no need for a criminal prosecution – or, seemingly, any investigation outside the union: “They don’t have to do that to get resolution,” he said. “We’ve got things under control now. [Pike] is being fully and totally cooperative with the union officials.”
But whether things are actually “under control” may be a matter of opinion. Martinez said that the insurance cancellation is a major problem for some of the 315 firefighters who were paying for the supplemental coverage – especially the older and more veteran members. It is unlikely that they will be able to get comparable coverage for anywhere near the relatively low premiums they had locked in with the now-canceled policy. “This has irreversibly harmed those firefighters,” Martinez said.
This article appears in August 13 • 2004.