Comptroller report finds abuse, waste, mismanagement at DRPA

TRENTON – A new report issued today by the state Comptroller found a pattern of waste, questionable spending and mismanagement at the Delaware River Port Authority totaling hundreds of millions of dollars.

Among other things, the report found that the agency ignored procedures that were in place to prevent the waste of taxpayer dollars, spending money on projects that had nothing to do with running a port authority.

“In nearly every area we looked at, we found people who treated the DRPA like a personal ATM, from DRPA commissioners to private vendors to community organizations,” State Comptroller Matthew Boxer said in a release accompanying the report.

“People with connections at the DRPA were quick to put their hand out when dealing with the agency, and they generally were not disappointed when they did.”

The Comptroller did point out, though, that in the wake of the investigation, the DRPA has begun to correct the problems.

Among other things, the Comptroller’s office found the following:

Over the past 10 years, more than $1.5 million in commissions derived from the placement of DRPA insurance policies was shared among disclosed and undisclosed insurance brokers in a series of “ambiguous and non-transparent dealings. The commissions were shared regardless of whether the brokers actually performed any corresponding services for the DRPA.”

Although the practice is legal in New Jersey, the Comptroller report points out that investigative agencies in other states have questioned political motivations behind such practices.

In 2004, the DRPA established a fund that donated toll money to social and civic causes. The investigation found that the vast majority of this funding — for example, 79 percent in  2009 — went to organizations linked to DRPA officials or to organizations that provided a personal benefit to DRPA officials in exchange for the contribution.

In addition, the Comptroller’s office reported that DRPA did not follow its own policies in determining whether a particular contribution would be an appropriate use of tollpayer funds. These expenditures were approved in an informal manner and little, if any, information was actually provided by beneficiaries to support funding requests, the report found.

Moreover, DRPA expended more than $440 million on economic development in contravention of stated DRPA policies, according to the Comptroller’s Office.

The Comptroller report lists the following expenditures that raised questions:

$15,000 for three separate galas that were co-chaired by a DRPA commissioner who requested and secured the DRPA funding for the events. The commissioner also sat on the board of directors of two of the organizations that received the funding. The galas, titled, for example, “Argentina-Night of Tango and Wine” and “A Night in Acapulco,” were held at posh locations in Philadelphia, the report stated.

$5,000 for the University of Pennsylvania in connection with the school’s hosting of the 2005 NCAA lacrosse championships, in exchange for VIP passes and 12 game tickets.

Two $5,000 payments for annual “Get to Know Us” legislative weekends, at which toll funds were used to provide DRPA officials with access to Pennsylvania state legislators while attending Phillies games, a cocktail hour at the Penn’s Landing Festival Pier and a carriage ride historical tour, according to the report.

“To state the obvious, commuters who pay to cross the Delaware River every day should not have their toll money used for DRPA officials to enjoy a carriage ride through Philadelphia or a ‘night of tango and wine,’” Boxer said.

The investigation – which led to today’s 77-page report – was initiated in 2010 at the request of the governors of New Jersey and Pennsylvania.

Insurance ‘true-up’ arrangements

The investigation showed that more than $500,000 of commissions derived from the placement of DRPA insurance was redistributed at DRPA’s direction among its insurance brokers as the result of what has been referred to as the “true-up.”

For example, according to the report, in 2003 the DRPA – after finding that Pennsylvania-based brokers received most of the commissions – moved to create parity between a Pennsylvania broker, The Graham Co., and a N.J. broker, Willis.

The investigation showed that this led to Graham paying Willis more than $500,000 over six years for reasons unrelated to the actual placement of insurance, the Comptroller’s report said.

Further, the report raised questions about how Willis was selected in the first place. “The only contemporaneous document regarding the selection of Willis reveals that Willis was first notified of its appointment by an independent party with no formal affiliation with DRPA, specifically, the chief executive officer of Commerce Insurance Services, which is now known as Conner Strong & Buckelew,” the report stated.

In addition, Willis paid $455,000 of its DRPA-originated commissions to Conner Strong and a related insurance broker between 2003 and 2009, the Comptroller stated.

Willis and Conner Strong provided contradictory reasons for these payments, which never were formally disclosed to DRPA, according to the report. Willis said it paid the money to Conner Strong as a referral fee as instructed by Conner Strong, while Conner Strong said the payments had nothing to do with Willis’ work for DRPA, but were related to other marketing efforts it carried out for Willis.

George Norcross is executive chairman of Conner Strong & Buckelew.

The Comptroller reported that Norcross told its office that it turned down an offer by someone in the McGreevey administration to be the DRPA N.J. insurance broker for various reasons, including scandals related to the DRPA in the 1980s.

“Norcross stated that working for DRPA would be too much of a ‘reputational risk,’” the report stated.

According to the Comptroller report, Norcross said he probably would have recommended Willis as well as other brokers, but he did not specifically recall.

Economic development

“Over the past two decades, the DRPA engaged in a massive economic development campaign with borrowed money and to the detriment of its other projects,” the report said.

The Comptroller reported DRPA took on significant additional debt through the issuance of bonds to fund more than $440 million of economic development projects unrelated to DRPA bridges and other capital assets.

Many of these projects were done deals when presented before DRPA, the report found. Even though DRPA has a division to assess merits of projects, “projects arrived before that division with all key decisions already having been made,” the report said.

In addition, DRPA violated its charter in not providing the public with an opportunity to pre-review and comment on $60 million worth of economic development projects, according to the report.

For example, the report states that although DRPA is to spend only surplus funds on the economic development projects, it incurred significant debt by issuing bonds for these projects, while at the same time “ignoring” a backlog of bridge-related projects.

E-ZPass abuse

DRPA lost more than $1 million over 10 years due to free E-ZPass use by top officials.

Fifty-three people with no DRPA affiliation were given unlimited free pa
ssage over DRPA bridges from 2003 to 2008 after an E-ZPass vendor inadvertently put them in a lifetime free passage plan, the report found.

DRPA make-up

DRPA owns and operates the Benjamin Franklin, Walt Whitman, Commodore Barry and Betsy Ross bridges. Through its subsidiary, the Port Authority Transit Corporation, DRPA also owns and operates a high-speed rail system between Philadelphia and Lindenwold.

DRPA has a 16-member Board of Commissioners, eight appointed by the N.J. governor, six by the Pennsylvania governor, and two more are Pennsylvania state officials.

The report can be accessed at the Comptroller web site: Comptroller report finds abuse, waste, mismanagement at DRPA