Forensic Audit Report Shows Warren Mayor Violated

Legal Spending Limits by $460,037.58 in 2021-2022

 Mayor Diverted funds from budget for promotional TV ads featuring himself and for gift cards.
 Court of Appeals previously declared that Mayor was in violation of state budget law.
 Mayor was obstructing audit until Circuit Judge ordered him to produce financial records.

For Immediate Release

September 21, 2023

Contact: Council Vice President Garry Watts (586) 215-2222

Council Secretary Mindy Moore (586) 703-5177

Warren, MI – The Warren City Council today released a Forensic Audit Report
concluding that the Mayor of Warren violated legal spending limits in the city’s Downtown
Development Authority (DDA) by $460,037.58 in Fiscal Year 2021-2022. The audit found,
among other things, that the unauthorized spending included over $50,000 for television
ads featuring the mayor and $60,000 on gift cards that were approved to be paid with
COVID relief funds, but the auditors found no evidence that COVID relief funds were used.
The audit report has been forwarded to the Michigan Department of Treasury for
corrective action and a copy has been provided to the Michigan Attorney General.

During the COVID pandemic in 2020, City Council members were receiving
complaints from residents about frequent TV ads featuring the mayor, with many residents
asking if funds could be better spent on other priorities. After a council investigation, it
was determined that the mayor was using the DDA “contractual services” account to fund
television ads and other promotions. In the 2021-2022 budget, city council reduced the
DDA contractual services budget to zero ($0) and the community promotions budget to
$10,000. The 2021-2022 fiscal year ran from July 1, 2021 through June 30, 2022.

On September 15, 2021, Council Vice President Garry Watts attended the DDA board
meeting and heard an announcement that the mayor would use his own budget, and ignore
the budget approved by city council. The Michigan Court of Appeals ruled in a published
opinion on December 29, 20221, that the mayor was in violation of the law and must follow
the city council’s approved budget. The appellate court also upheld a preliminary
injunction barring the mayor from further illegal expenditures. However, the preliminary
injunction was issued after the mayor had already authorized $460,037.58 in unlawful
spending in the DDA budget.

Councilman Garry Watts was outspoken against unlawful spending and on

November 9, 2021, the Council approved his proposal to refer the matter to the Michigan

1https://www.courts.michigan.gov/siteassets/case-
documents/uploads/OPINIONS/FINAL/COA/20221229_C361288_30_361288.OPN.PDF
Department of Treasury. After review, the Department indicated that it would review an
audit upon submission and if the audit identified deficiencies that Treasury may require
corrective action or take other action as necessary. The city council followed Treasury’s
lead and authorized an audit, and after over two years of obstruction by the mayor,
Macomb County Circuit Court Judge Kathryn Viviano on May 3, 2023, ordered the mayor to
cooperate with the audit and produce city financial records to the auditors.

Councilman Garry Watts stated: “After the mayor violated the budget and
obstructed the audit for two years, we finally have the truth from an independent auditor.
The mayor and his political appointees are not above the law. If it’s not in the budget, they
do not have the legal authority to spend the money. I hope the Department of Treasury and
Attorney General take swift action to deter future violators from illegally spending tax
dollars.”

Council Secretary Mindy Moore added: “How is this any different than what former
prosecutor Eric Smith did? The mayor spent money that he was not authorized to spend
and wasted it on television ads featuring himself. Council would never have approved
television ads after the feedback we received from residents. They also paid $450 an hour
lawyers without council approval. The mayor ignored the checks and balances and acted
without authority, and I hope that state officials in Treasury and the Attorney General’s
office take notice.”

The independent forensic audit was performed by Rehmann Corporate Investigative

Services (CIS), a highly respected auditing firm in Troy, Michigan. The audit also notes that
$60,000 was spent on a gift card program out of the community promotions budget of the
DDA, and that account was only funded with $10,000 by city council. The DDA meeting
minutes of September 15, 2021, indicate that the gift cards were to “stimulate small
business with COVID relief money.” The auditors were unable to confirm the use of COVID
relief monies to pay for the gift card purchases. In addition to violating the budget, there is
a concern that the gift card expenditures are not an allowable expense using municipal tax
dollars and the council has also asked for this to be reviewed by the Department of
Treasury.

When making the 2021-2022 budget cuts, the council budget resolution indicated
that the mayor could bring a plan for spending money in the contractual services or
community promotions budget at any time for council consideration. Instead of following
proper protocols and procedures, the mayor decided to take the law in his own hands and
spent the money without legal authority.

Attachments:
 Forensic Audit Report dated September 20, 2023
 DDA Meeting Minutes September 15, 2021

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