It Pays to Be DART Board Chair

Categories: Schutze

The biggest issue facing Dallas Area Rapid Transit right now is the growing drumbeat for an independent audit, based on DART’s billion-dollar budget goof. That means some accounting firm may get the job of doing an overall performance audit. And the first one in line for that job might be Deloitte & Touche, DART's external auditors.

I guess Deloitte might also be viewed as having an interest in not having some other accounting company review its work for DART. Let’s assume the accounting firm would like the job, and wouldn’t want to have problems that might knock it out of the running.

So this: At the tag-end of a long presentation to the DART board’s audit committee, a representative of Deloitte made the following announcement to the committee members: “One additional item,” said Deloitte employee Terry Kile. “As a part of every audit we look to make sure we maintain independence, and we’re always looking at areas of independence to make sure that that is appropriate.

“We identified a matter -- last week, actually -- and it’s an affiliate of Deloitte & Touche, Deloitte Services. Some of their human resources folks had gone into a contract with your board chair, Miss [Lynn] Flint Shaw, to pay her about $20,000 on an annual basis to help identify ways in which the accounting profession might be promoted among minority students and local high schools.”

A personal note here. I got word of this several days before the meeting, and I had been asking DART about it. DART spokesman Morgan Lyons confirmed to me that some kind of contract between Flint Shaw and Deloitte had been canceled. No details. Naturally, I was all ears when this Deloitte guy brought it up at the meeting.

“It came to my attention last week,” he said. “We terminated the contract last week.”

O.K. But listen to this:

“We paid her about half of that amount," Kile said. "In working with our independence folks, we looked, and we said that the amount that we paid, about $10,000, is not material to us, DART, or to Miss Flint Shaw.”

Hit the "pause" button for a second.

Shaw is being investigated by the Dallas County District Attorney right now about an accusation that she forged an official document with Craig Watkins’ signature in order to avoid paying back a personal debt of $7,500.

In a separate matter, I have reported here that at least $17,000 in her recent city council campaign finance reports did not go to the guy to whom she said she paid it, according to the guy -- lawyer Michael Sorrell, also the president of Paul Quinn College.

I think 10 grand is important to her. By the way, 10 grand is important to me. Is 10 grand important to you?

Kile said: “We didn’t think that that impaired her independence in any way. However, our office standards required that we do notify you of that. Also, your own policies require that we fill out a conflict of interest form, and that’s attached to that letter as well.”

After a pause so pregnant I was beginning to think it needed a Caesarean, audit committee chair Raymond Noah said, “I have a suggestion to the board that we receive this notification and place it in the hands of the general counsel for purposes of review and comment.”

I called and spoke with Deloitte spokesman Jerry Bennett yesterday. He said he would get back. Radio silence. Called again today. He said, “Jim, we don’t talk about contracts with vendors, nor do we talk about our clients.”

I asked what Deloitte’s policy would be generally on entering into side deals with directors of companies it audits. He said, “I’m not certain that that’s something that I’m prepared to discuss with you.”

I asked if Deloitte has any conflict policies. He suggested I put my question in an e-mail. I did that. He e-mailed me back: “In response to your question, Deloitte does have conflict policies that are internal to our organization. We do not disclose those policies publicly."

Here is one of my questions, which I think I will put in the form of a blog item rather than another e-mail: How many other undisclosed side-deal contracts does Deloitte have with DART board members? Is Deloitte or any Deloitte “affiliate” paying money to DART directors for any reason at all?

The directors are supposed to vote thumbs up or thumbs down on a contract worth approximately $2 million over five years to Deloitte. Why would Deloitte have a contract like this with a director?

How many more deals like this with other DART vendors does Shaw have? How many deals do other board members have?

This particular deal popped out, I must assume, because of all the pressure cooked up by Shaw’s other legal problems and by the political pressure surrounding the billion-dollar budget goof. Somebody at Deloitte must have felt the heat coming. But how many more deals have not popped loose yet?

Another question: When Deloitte was auditing DART, did Deloitte not notice that DART was about a billion dollars short on its construction budget? Is that not Deloitte’s job?

Of course if it did notice it and if it had brought it out, that would have been very embarrassing for the DART board. Real embarrassing. Is there something about the relationship between Deloitte and DART board members or DART board chairpersons that tends to make them not want to embarrass each other? --Jim Schutze

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