“Obviously taxpayers are getting fleeced,” State Representative Sarah Anderson said with exasperation in her voice.
The chairwoman of the State Government Finance Committee in the Minnesota House said she’s seeing red after watching KARE 11’s reports exposing how law enforcement agencies have been systematically overcharged.
Last year, a KARE 11 review of police car purchasing records revealed hundreds of thousands of dollars in questionable charges by Nelson Auto Center of Fergus Falls on thousands of specially equipped police squad cars sold to law enforcement agencies across Minnesota.
After our reports, the state launched a criminal investigation. Gerry Worner, Nelson Auto’s long-time fleet manager, was fired and later charged in a multi-year scheme of Theft by Swindle. He pleaded guilty and was sentenced in July.
No one else from the dealership was charged. The owners say they cooperated with the investigation and with an official state audit of squad car sales dating back to 2010.
The audit found that more than 200 police agencies had been overcharged on 3,225 vehicles. As a result, Nelson Auto sent refund checks totaling $803,309.
But records reveal other overcharges state auditors missed.
Through an open records request, KARE 11 obtained invoices used in the audit. They show what Ford charged Nelson Auto for a car and what the dealership charged police agencies.
“These numbers don’t match. Not even close!” said Steve Kleiber.
Kleiber is retired now, but he has a background in both fleet sales and law enforcement. He is the whistleblower who raised questions last year when he suspected Nelson Auto Center of double billing for options like spotlights and heated mirrors on squad cars.
When we asked Kleiber to review the newly obtained invoices, he found discrepancies auditors for the Minnesota Department of Administration had overlooked.
“It’s pretty obvious,” said Kleiber of overcharges he spotted.
State officials now acknowledge the questionable charges total hundreds of thousands of dollars in additional suspected taxpayer overcharges.
“And that’s just wrong,” Rep. Anderson said. She wonders how state auditors missed so much questionable police car double billing – even after an audit.
Anderson said she had conversations with Department of Administration officials months after KARE 11’s original investigation and was told the overcharging situation was solved. She says she was shocked when she saw KARE’s new report documenting additional overcharges.
“After having conversations with me on this issue, they’ve said it was taken care of,” Anderson recalls. “Then something else happens, and I don’t like being surprised by these things.”
“We need to make sure that we’re protecting the taxpayer’s investment in these things. That we’re getting the best value for our dollars and that we’re not getting fleeced in the process.”
Nelson already has been forced to repay Ford $210,000 in excess discounts the dealership received from the automaker and never disclosed to the state as their contract required.
But another issue remains in dispute.
KARE 11 discovered that Nelson Auto had pre-ordered hundreds of vehicles from Ford at one price level, then sold them to departments like Rosemount at a higher price level.
Because of a price hike from Ford, the state had agreed to amend its contract for future purchases. But the pre-order practice netted Nelson Auto an extra $750 per car over and above the $224.94 fixed profit limit spelled out in the state contract.
“It’s definitely not within the spirit of the contract,” Assistant Commissioner of Administration Yoakum told KARE 11 after we first alerted the state about the practice. Since then, records show the state determined the pre-order tactic resulted in some police agencies not getting vehicles equipped the way they were ordered.
On June 4, Elizabeth Hayes, Minnesota’s Chief Procurement Officer, sent a letter to Nelson Auto that states:
“Nelson’s deviation from the structure and intent of the contract resulted in a monetary windfall in favor of the dealership and was detrimental to law enforcement agency customers. As a result. Nelson’s should not reap the benefit of the difference in pricing…”
The letter goes on to say that the state is seeking an additional reimbursement for the difference in pricing on 279 pre-ordered vehicles.
That pricing difference is estimated to be at least $209,250.
However, Nelson Auto’s owner so far has refused to reimburse that money. In an email, Brent Nelson told the state:
“We strongly believe we sold the vehicles at the correct contract price that existed at the time the order was placed. We would ask that this issue be submitted to arbitration to be resolved or put in the court system for resolution.”
Several months have passed, but officials at the Department of Administration told KARE 11 they have not yet decided what to do.
Rep. Anderson says it should have been an easy decision.
“They need to take them to court obviously!” she told KARE 11. “It’s just really frustrating that the agency seems to be slow rolling their response on this issue.”
Anderson says lawmakers and taxpayers are owed answers and that’s why she’s calling for legislative hearings to ask why the department hasn’t acted quickly and decisively.
“It should have been fast, immediate and reflective of what the taxpayers would expect of their state agency and that’s to get the money back,” she said.
Rep. Anderson said hearings into the police car double billing and the state’s response will likely be held in January when the legislature reconvenes.
The Office of the Legislative Auditor also has an on-going investigation into how the police car contracts were handled.
If you have a suggestion for an investigation,
or want to blow the whistle on fraud or government waste,
email us at: investigations@kare11.com