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Covington Commissioner Implicates Fellow Leaders in Embezzlement, Auditor Watching Closely

"What was their involvement, if any, with Due's embezzlement?"

A scathing and accusatory petition credited to Covington City Commissioner Mildred Rains charged that the mayor, fellow commissioners, and city administrators were possibly closely involved with former Finance Director Bob Due's alleged embezzlement of roughly $300,000 in city funds.

Rains released the petition today announcing that a newly formed group, dubbed, Covington Citizens for Ethical and Transparent Government, would seek one hundred signatures to demand a full audit of the City of Covington by Kentucky Auditor Adam Edelen.

The same issue was raised by Rains and Commissioner Michelle Williams at Tuesday night's special city commission meeting. The city commission by a vote of 3-2 created a task force to analyze the structure of the finance department and to map out a plan to recoup as much of the stolen funds as possible, in addition to placing safeguards to prevent further abuse.

Rains and Williams opposed the task force with Rains calling for a state audit before any task force is created.

Edelen's office told The River City News on Wednesday that if his office comes to Covington it would not be for an "audit", but rather for an investigation or special examination. 

"Obviously this situation in Covington is concerning to us," said Edelen's Spokesperson Stephenie Hoelscher. "We'll look at the preliminary facts of the situation and determine whether to get involved." 

"In some instances where law enforcement has gotten involved we may make the decision to defer to them if they are so far along with their investigation."

The auditor's office has already been in contact with Covington City Hall, Hoelscher confirmed.

"Other times, law enforcement may request our assistance to untangle some of the web that these people weaved," Hoelscher said.

As for Rains' petition, it would carry no more weight than a simple phone call by one citizen to the auditor's office. The petition is also riddled with inaccuracies.

"The majority of the city commission, which is blindly supportive of the city manager, has refused to invite the state auditor to review the books, practices, and finances of the City of Covington, despite a call to do so by two commissioners - instead trying to whitewash the gross breach of trust with a "task force" made up of the city manager, assistant city manager, mayor, Commissioner (Steve) Frank, and others who failed to prevent, and possibly allowed, and condoned, the theft by Mr. Due," the petition reads.

City Manager Larry Klein said at Tuesday's meeting, in the presence of Rains and Williams, that he was in contact with the auditor's office, a fact confirmed by that office today.

"This raises a number of questions, including, without limitation, what they are (sic) trying to hide?," the petition continues. Rains, who was a fellow city employee alongside Due from 1999-2006 and an appointed city commissioner from 2009-2010 before being elected for the first time in 2012, has been an ardent critic, along with Williams, of Klein.

The petition seeks one hundred signatures and an event will reportedly be held at Goebel Park in Mainstrasse Village at 6 p.m. on Wednesday to gather those signatures.

The petition calls for a thorough review of the books by Edelen's office, but that is not what would happen were the auditor to come to Covington, Hoelscher said.

"This would be a case where we go in and talk to individuals, more like an investigation than an audit," Hoelscher said. An audit, she said, is where financial statements and ledgers are examined. That would not happen here.

"In a case like this we will discuss with the folks involved and we may decide that law enforcement is far enough along in this," Hoelscher said. "We have limited resources and have to make determinations on how to use them wisely to get more bang for our buck."

If the auditor's office were to come to Covington, there would be a cost to the City and its taxpayers. Hoelscher said the auditor's office bills the agency being audited or investigated and that can range from a few thousand dollars to as high as the $44,000 that Sanitation District 1 had to pay in 2011.
 
"It depends on how much time we spend there," she said, noting that the office spent 1,000 hours at SD1 three years ago.
 
The city commission does not meet in regular session again until September 10. The audit committee meets in a special session on Thursday at 2 p.m.
 
The task force assembled by the city commission on Tuesday is expected to spend ninety days on its work.
 
The auditor's office is keeping a close eye on the situation.
 
"Covington is certainly something on our radar and we are taking a close look at what is going on," Hoelscher said.
 
Kenton County Commonwealth's Attorney Rob Sanders also spoke with Auditor Edelen this week.
 
"If the Auditor's office is unable to commit to an audit or unable to complete an audit within the time constraints of the criminal case, then I will explore other options," Sanders said. "In the meantime, the Kenton County Police continue to lead the criminal investigation into the charges filed against the former finance director. The Kenton County Police agreed to handle the investigation at the request of Covington Police Chief Spike Jones to avoid any questions about the investigation's independence or integrity. The City of Covington has been completely cooperative with County Police Detectives as they gather evidence."
 
"It is important for everyone interested to remember this case, like every other criminal case, will take time to work its way through the legal system. The defendant is entitled to due process."
 
Written by Michael Monks, editor & publisher of The River City News
 
Photo: Kentucky Auditor Adam Edelen presents his findings within the Dayton Independent School District/RCN file