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Ferguson 2011

Ferguson 2011

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Published by James Bruggers
Former MSD human resources chief gets paid $140,000 to keep his allegations silent.
Former MSD human resources chief gets paid $140,000 to keep his allegations silent.

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Published by: James Bruggers on Aug 11, 2011
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Time: 05-28-2011 23:42

User: lhack

PubDate: 05-29-2011 Zone: MT

Edition: 1 Page Name: A 1 Color:

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MSD paid fired official $140,000
Deal kept him quiet on waste allegations
By James Bruggers
jbruggers@courier-journal.com The Courier-Journal

Five months after firing its human resources director last year, the Metropolitan Sewer District paid him $140,000 as part of a settlement that required him to keep

silent about allegations he’d made about waste, fraud and mismanagement within the agency, The Courier-Journal has found. A copy of the Dec.15 settlement, which the newspaper acquired under the Kentucky Open Records law, shows that MSD denied the validity of Jerry Ferguson’s allegations but agreed “to provide (him) with certain conditions,” including the money, which was slightly less than a year’s salary at the time of his departure.


Ferguson, who was a member of the agency’s executive team, also agreed to turn over to MSD all documentation he had accumulated for a threatened lawsuit under state whistleblower protections. Ferguson’s accusations about the agency had been outlined in a

clined to provide a copy of the letter to the newspaper. Assistant legal counsel Stephanie Harris said Deal boosted releasing Ferguson’s claims would pension of former “constitute an unwarranted invaMSD human resion of personal privacy” and resources director’s veal “preliminary correspondence predecessor. in which opinions are merely exStory, A10 Ferguson pressed.” But the newspaper obtained a letter his lawyer, Garry Adams, copy of the letter, which claimed sent to MSD six weeks after his cli- some employees or contractors ent was fired, for undisclosed reasons, on Aug. 12, 2010. MSD de- See MSD, A11, col. 1


Karen Hill, mother of National Guard Sgt. Jonathan Adam Hughes From left: Senior Airman Ashton Goodman, Sgt. David Neil Wimberg, Sgt. Jonathan Adam Hughes


The legend of Valhalla is about to grow

Once a year, on Memorial Day, we pay tribute to those who have died while serving our country. But for some families in Kentucky and Indiana, the loss is felt more deeply, every day. Tricia Wimberg, for example, has been known to take a lawn chair to Zachary Taylor National Cemetery, where sometimes she’ll talk to her son, Sgt. David Wimberg, who died in 2005 in Iraq.



Allyson Echols has a living legacy of her husband, Lance Cpl. Thomas Echols. Their daughter, Julia, was born not long after Tom was killed in Iraq in 2006. And Mark Goodman’s daughter, Senior Airman Ashton Goodman, is still making a difference in the lives of women in Afghanistan through a grant established in her name following her death in 2009.

Hale Irwin peers over a hill in the rough along the 17th fairway Saturday at the Senior PGA Championship at Valhalla Golf Club.

By Matt Stone, The Courier-Journal

pens.” Valhalla Golf Club Rick Let’s do. Start with has already collected a Bozich win, the co-leader Irat dazzling stack of cre9-under-par, 207. He surdentials to certify it as vived a three-putt, douone of the top 100 ble-bogey 7 on the final American courses. Jack hole to shoot a 2-under Nicklaus designed it. 70 on a muddy Saturday. Tiger Woods won a maAll Irwin has done is jor title here. The Amerwin three U.S. Opens ican team soaked Valand more events (45) halla with champagne than anybody on the during its Ryder Cup Champions Tour, including the victory three years ago. Today, Valhalla’s list of un- last Senior PGA Championship forgettable moments is primed that was played here in 2004. to grow. Check the leaderboard He’s also 65 years, 11 months and as we move into the final round nearly 4 weeks old. That means a Hale Irwin vicof the Senior PGA Championship presented by KitchenAid. tory today would make him the It’s a stretch to say that you oldest winner ever on the have to prove you’ve won a PGA Champions Tour — by nearly Tour major championship to three years. “What’s that old granddad play in one of the final Sunday doing?” asked Tom Watson, who groups. But not much. Six guys who have won a shot a 68 Saturday to park himcombined 18 majors are packed self at 8-under, one behind Irwin into the top dozen players on the and co-leader Kiyoshi Murota of Japan. Senior PGA leaderboard. “I mean, geez, what’s that “We all put on our pants the same,” Hale Irwin said. “We all play golf. Let’s go see what hap- See BOZICH, A4, col. 1

Patricia Montgomery, mother of Spc. Ryan Montgomery From left: Spc. Ryan Montgomery, Lance Cpl. Thomas P. Echols, Cpl. Joshua Moore

Complete coverage of Saturday’s round includes Eric Crawford on Tom Watson, five questions for Tom Lehman and more in SPORTS. More photos of the tournament are at www.courier-journal.com.


Text CJNEWS to 44636 (4INFO) for the local news alerts


Louisville area: Mostly sunny and hot today and tomorrow.

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Time: 05-28-2011 19:36

User: lhack

PubDate: 05-29-2011 Zone: KY Edition: 1 Page Name: A 11 Color:






| A11

MSD | Official agreed to remain silent
Continued from A1
were being paid to do little or no work; that MSD was overpaying employees and giving bonuses to some who weren’t eligible for them; and questioned the financing of certain MSD land deals. It also accused Bud Schardein, MSD’s executive director, of favoring his friends in the agency; asserted that MSD wasted its money by hiring a former state senator as a teambuilding consultant at $350 an hour; and raised concerns about MSD’s no-bid contract with its main outside legal counsel, Larry Zielke, saying it wasn’t properly awarded and was “wasteful and excessive.” Adams also asserted in the letter that Ferguson was let go in “retaliation of good faith reports of waste, fraud and mismanagement and violations of law he discovered at MSD,” and in “direct contravention of the Kentucky Whistleblower Act.” As part of the settlement, Ferguson’s termination was changed to a resignation, and both he and MSD agreed to neither discuss the case nor say anything derogatory about the other side. Ferguson declined to talk about the settlement for this story, citing the confidentiality agreement. His attorney said he could only confirm that he had sent a letter outlining Ferguson’s accusations to MSD and then entered into negotiations in fall 2010. “Those negotiations ended in a resolution satisfactory to the parties,” Adams said. Arnold J. Celentano, MSD’s board chairman, said in a telephone interview that the board agreed to the settlement last year after hearing both from Schardein and Ferguson. “We all came to the conclusion that Bud was telling the truth, and the way to solve the problem was do whatever had to be done,” he said, adding the board agreed with Zielke then that “it’s OK to pay” Ferguson to resolve the dispute. Celentano said Ferguson “wasn’t doing a good job” and “employees were having a real rough time with him.” Schardein declined to discuss the case, writing in an email that the newspaper was seeking to “harm rather than benefit the agency.” “Mr. Ferguson’s claims were settled at the direction of the MSD board,” Schardein wrote. “The board decided upon settlement to avoid additional protracted litigation expense, and there was no admission of wrongdoing or liability.” Schardein said he supported the board’s decision. Phillip Sparkes, director of the Chase Local Government Law Center at Northern Kentucky University, said such settlements over a dispute firing aren’t unusual. “And it’s not uncommon in those kinds of settlements to include confidentiality agreements of one kind or another,” he said, which can help the employee move on to another job and allow a public agency to focus on its priorities. But University of Louisville professor Steven G. Koven, who directs the Master of Public Administration Program, said that the confidentiality agreement makes it difficult for the public to determine if Ferguson’s allegations are valid. Through open-records requests, however, The Courier-Journal uncovered some details about allegations outlined in Adams’ letter to MSD. For example, records show MSD paid former state Sen. Lacey Smith $19,750 for team-building work done in 2009 and $25,000 for similar work in 2010. The 2009 work was done without a contract, something the agency allows “for small purchases,” according to Harris. The work in 2010 was covered by a no-bid contract dated April 1 of that year. One of Smith’s invoices listed an hourly rate of $350, and in an interview, the graduate of Harvard Law School said that is his standard rate. He said he worked substantially more hours than he billed the agency and that MSD got its money’s worth from his team-building sessions, seminars, personality testing and one-on-one counseling. “This is an organization with more than 600 employees, and it’s led by an executive team,” he said. “Unless (the executive team) functions as a team, the public is not going to get the services … it’s entitled to.” Included in the advice Smith gave to Schardein: The executive team and all employees needed to understand his objectives “with great force and clarity and must agree with them and support them with enthusiasm that borders on passion under-girded by a sense of urgency.” Smith also said the executive team members needed to learn how to trust each other and set aside personal agendas. Other records detail Zielke’s no-bid contract. Zielke and his law firm have been paid at least $5.9 million by MSD since Jan. 1, 2006, including $950,000 for handling the agency’s bond sales. (As of February, it had billed MSD for $29,000 in the Ferguson case.) The work is in addition to about $1.2 million in legal work from several other outside attorneys over the past five years, and work by MSD’s in-house legal services department, with its staff of four attorneys. Zielke said state law allows public agencies to hire lawyers, much as they can hire engineers and other professionals for their services — without competitive bidding. And he said most of what he does for MSD is legal defense work, which requires his expertise. “Defense work is complicated and expensive and you have to know what you are doing. I know what I am doing.” He added that no local lawyer knows MSD matters as well as he does. “I’ve been there 26 years. I’ve kept my rates as low as possible — $130 an hour. My normal rate is $400 an hour. MSD is getting a great deal.” But the $130-an-hour rate doesn’t apply to legal work on bond issues. Zielke’s firm has charged fees ranging from $125,000 to $150,000 for work on MSD bond issues that ranged from $180 million to $330 million in the past three years. Zielke declined to say how that would translate into an hourly rate. Some MSD critics have questioned the relationship among Zielke, the MSD board and management — and whether MSD could save money through more competitive bidding of professional services. No-bid contracts on professional services allow “you to give work to your friends,” said Louisville Metro Council member Jerry Miller, R-District 19, who has criticized such contracts. Mayor Greg Fischer, who took office in January, has said he plans to bring more competitive bidding for professional services contracts throughout metro government. While the new policy only applies to metro government, Fischer spokesman Chris Poynter said the mayor encourages all local agencies, including MSD, to adopt the same approach. MSD officials wouldn’t say whether they would adopt such a policy.

tion agreement” in 1999 in a racial-discrimination case before the Kentucky Human Rights Commission. The Courier-Journal reported at the time that settlement was for $195,000 and included requirements that Ford, while not agreeing to any wrongdoing, would take steps to document its diversity program with the commission. MSD, an agency with 650 employees and an operating budget of $110 million, hired Ferguson to lead its human resources department in October 2008 at a salary of $130,000. He replaced Kathy Cooksie, who retired Jan. 1, 2009. If there were any problems with Ferguson’s work at MSD, they weren’t reflected in his two annual performance evaluations — including one given just four months before his Aug. 12, 2010, termination. As part of that evaluation, Ferguson was given a $4,118 annual pay increase, pushing his salary to $141,107.20. MSD also gave him a $4,110 lump-sum performance award, records provided to the newspaper show. Ferguson’s 2010 review described him as “a natural leader due to his courage and decisiveness.” He was praised for strongly promoting MSD policies and procedures and for having made “outstanding progress in ‘reinventing’ MSD’s human resources procedures and practices.” “Hiring is done in a fairer and more consistent manner,” the evaluation said. Ferguson’s claims and settlement occurred just months before three board members — chairman Audwin Helton, vice chairman

A letter from the attorney for fired MSD official Jerry Ferguson details waste accusations and claims Executive Director Bud Schardein, shown at left at a west Louisville sewer facility, favors his friends.
Courier-Journal 2006 file photo

Growing controversy

Marty Hoehler and past chairwoman Beverly Wheatley — resigned from the board at Fischer’s request. The resignations came after a March 20 CourierJournal story detailing how businesses that the three owned did work for the agency they helped oversee. MSD subsequently adopted a tighter ethics policy, and the Metro Council has passed a resolution calling on all city boards and commissions, including MSD, to adopt the city’s broader policy. Three new board members who don’t do work for MSD were sworn in Monday. MSD finances also have increasingly become a focus of public attention, as the agency has taken on record debt and raised its rates 5 percent to 7 percent annually since the mid-1990s, in large part to meet provisions of the Clean Water Act and protect the city from flooding. MSD board members gave preliminary approval May 9 to yet another 6.5 per-

cent rate increase, just under the 7 percent limit that officials say would require Metro Council approval — a move that would subject the proposal to broad scrutiny from 26 locally elected representatives. “There’s no accountability for how they spend their money,” Louisville resident and MSD customer David Johnson said of the MSD board. “We have no vote,” he said. “We have no say over those people.” The agency’s eight board members are appointed by the mayor, and its executive director and chief engineer serve at the pleasure of the mayor. Laura Bentley, another MSD customer, said she would like to see some MSD belt tightening. “I just don’t think they should raise their rates every time they fall short in their budget,” she said. The agency has also come under criticism for its mounting debt — about $2.6 billion, including interest, with more borrowing to come to pay for a 19-year,

$850 million sewer rehabilitation program as part of a 2005 settlement with the U.S. Environmental Protection Agency and Kentucky water-quality regulators. For their part, Schardein and MSD board members defended the agency at their May 9 board meeting. As one example, they cited how the city has survived record rains and high waters on the Ohio River this year without flooding in its protected zones. Schardein described himself as one of the community’s most fiscally responsible public servants and challenged anyone to provide examples of financial waste at MSD. Fischer declined to be interviewed about the Ferguson case. Poynter said the mayor didn’t want to comment on “internal personnel” matters. “He has confidence in Bud,” Poynter said. “When there have been concerns, they have agreed on a good solution.”
Reporter James Bruggers can be reached at (502) 582-4645

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Before coming to work for MSD in October 2008, Ferguson worked two months as an insurance administrator in the Kentucky Personnel Cabinet, state officials said. Before that, he worked from 1997 to 2001 in human resources for Ford Motor Co., MSD records and his resume show. Officials for the Personnel Cabinet and Ford declined to comment on Ferguson’s work performance. While working at Ford, Ferguson won a “concilia-

Ferguson’s MSD career


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