GBI in criminal investigation of former DOT treasurer

By Ariel Hart

The Atlanta Journal-Constitution

The state attorney general’s office has requested a criminal investigation of former DOT treasurer Earl Mahfuz, following searing reports from the state auditor and inspector general last summer concerning DOT accounting and spending.

The letter from Senior Assistant Attorney General David McLaughlin asked the GBI particularly to determine whether Mahfuz instructed DOT employees to stop recording contracts just before the end of the 2008 fiscal year, and whether he lied to investigators or DOT officials about them. The attorney general’s office requested the GBI investigation in a letter dated Oct. 28. The Atlanta Journal-Constitution obtained the letter under the Georgia Open Records Act.

The unrecorded contracts totaled $153.4 million. Not recording them in the computer system by year’s end made it seem like the DOT had more money than it did to balance the books, the inspector general found, and constituted an abuse of Mahfuz’s authority.

DOT Board Chairman Bill Kuhlke said he did not believe DOT or Mahfuz was guilty of wrongdoing, and he was not concerned about the investigation. “The initial audit report we got didn’t indicate to us there was any criminal activity involved,” Kuhlke said. “I haven’t had any conversation with the GBI, so I haven’t got any idea what they’re looking for.” He added that the DOT had worked with auditors to correct the mistakes they found in the department’s accounting.

The reports criticized a range of accounting and spending actions at the DOT, and referred the matters to the attorney general for his review.

The attorney general said not to limit the GBI’s review to the contracts, but it singled them out for mention.

According to the inspector general’s report, a contracts payable manager said Mahfuz “looked me dead in the face and told me to stop” recording the contracts.

When Mahfuz was interviewed, the report says, he “wavered between denying that he instructed his staff to stop entering contracts to stating that he asked his staff to place the contracts temporarily on the ‘back burner’ in order to pay contractors. When initially questioned about the unrecorded contracts, Mahfuz stated that he was ‘blown away’ when he first heard about it” at a meeting. Some others who were at the meeting, except one, said Mahfuz admitted during the meeting to giving the order to stop recording the contracts.

Shortly after the reports were released in late July, Gov. Sonny Perdue wrote Attorney General Thurbert Baker, urging him to investigate the “alleged illegal accounting techniques and cover-up that occurred over the past several years,” and bring charges if necessary. “Inaction will allow an infected wound to fester and send the wrong message to Georgians generally,” Perdue wrote. “As importantly, if no wrongdoing occurred, then the accused deserves a clean name.”

A spokesman for Perdue, Bert Brantley, said Thursday that the allegations were “very serious” because such financial information was used by state leaders to make policy decisions.

DOT spokeswoman Karlene Barron said the staff would not comment before investigators issued a final report. Mahfuz did not return a message for comment.

An investigation does not necessarily mean officials have determined a crime occurred. In 2007, the attorney general declined to bring charges after Perdue requested an investigation concerning DOT board member David Doss and ties to vendors. Doss, who has defended Mahfuz and called the state probes political, told the AJC Thursday he was "completely exonerated" by that probe.

The difference between the state reports and the current GBI investigation is that the auditor and inspector general conducted administrative probes, but the GBI’s is criminal, said Inspector General Elizabeth Archer. In addition, where the inspector general and auditor may not demand personal information like home bank statements, the GBI can through the attorney general, said John Thornton, director of the auditor’s state government division.

Beyond the contracts, GBI spokesman John Bankhead would not comment on what investigators were looking for, what laws might have been broken, or how long it might take. The state auditor’s report noted Thornton said the report used the phrase "possible financial statement fraud" not as a legal term but as “a broad general term used in the accounting profession, where financial statements are prepared that aren’t accurate, and it’s done intentionally in order to mislead.”

The GBI will deliver a report to the attorney general, who will then decide whether criminal charges are warranted, Bankhead said.

After the auditors’ initial findings in 2008, Mahfuz was demoted from treasurer to assistant treasurer. He now directs the department’s program for developing multibillion-dollar toll projects, and Kate Pfirman is the current treasurer.