4 officials indicted over asphalt plant

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OKLAHOMA CITY – Three current or former county commissioners and the former manager of an association of 11 western Oklahoma counties have been indicted in connection with a $2.35 million asphalt emulsion plant in Clinton.

            Charged by the state multicounty grand jury with embezzlement and conspiracy were Tillman County Commissioner Joe Don Dickey, 65, of Frederick; Kiowa County Commissioner Tim Binghom, of Hobart; Monte Wade Goucher, 58; and Jerry Lynn Dean, 75.

            Dickey formerly was the president of Circuit Engineering District 7 (CED7) and now is a member of the association’s board of directors. Binghom is the current president of CED7. Goucher formerly was the manager of CED7, which is based in Clinton. Dean is a former county commissioner identified as a consultant to CED7.

            All four were booked and processed at the Custer County Sheriff’s Office in Arapaho and then released on bond, Undersheriff David Crabtree said. Bond was set at $15,000 each, court records reflect.

            An investigative audit performed two years ago by the staff of State Auditor & Inspector Cindy Byrd concluded that CED7 principals violated multiple state laws in the construction and operation of the asphalt emulsion plant.

            The two principal officers of the association contended the organization’s actions were legal and saved the taxpayers of their counties money on road construction.

            In a related matter, during the course of the audit “an employee came forward admitting to an embezzlement of CED7 funds.” Two accounting firms investigated that claim and the loss was set at $99,300. Nevertheless, for some inexplicable reason, no criminal charges were ever filed against the admitted thief.

CED7 constructed

oil plant at Clinton

            The state has eight circuit engineering districts, each comprised of multiple counties.

            Circuit Engineering District #7 was created in 1998 by 11 western Oklahoma counties: Tillman, Jackson, Kiowa, Harmon, Greer, Washita, Blaine, Custer, Dewey, Beckham and Roger Mills.

            The asphalt emulsion plant was constructed, equipped and operated by CED7 and its creation, the CED County Energy District Authority. Their primary purpose was to “engage in the business of manufacturing and marketing of a proprietary formula road repair and maintenance product,” State Auditor Byrd wrote.

            The plant was built at Clinton, financed with a $2,350,000 commercial loan that was repaid between July 2013 and December 2019 at a total cost of $2,677,902, the audit relates.

            “It was determined that the authorization … to engage in a business for this purpose is not in compliance with the law,” Byrd wrote.

            But Dickey told the Southwest Ledger in April 2020 that their legal adviser, Derryberry & Naifeh, and then-Executive Director Monte Goucher “guided us through the proper processes and procedures known to them.”

CED purchased

emulsion formula

            In January 2012, “without any prior discussion documented in official meeting minutes,” the Authority gave Goucher permission to purchase “a proprietary property (asphalt emulsion formula) to produce oil products for the benefit of the member counties of the District,” auditors wrote. The Authority contracted in April 2012 to buy the formula from its inventor for $575,000; that debt was retired in October 2019, ledgers show.

            The emulsion product was patented in 1993, but the ingredients and preparation instructions became public upon expiration of the patent in 2011.

            According to Goucher, although the patent had expired, purchase of the formula was necessary “because a number of details and nuances, along with the intellectual knowledge and notes of the inventor, were needed to properly produce” the emulsion.

            Auditors contended that the 7 Oil road emulsion “is not unique enough to be considered a sole-source product.” Although the formula was patented, “it was not exclusive,” according to engineers from the Materials Division of the Oklahoma Department of Transportation.

CED7 needed

oil for roads

            “One of the core services counties perform is county road maintenance,” Dickey noted.

            “The primary material we use is road oil. Approximately 12 years ago the major supplier of road oil in the state filed for bankruptcy and the product was difficult, if not impossible, to obtain. We could not adequately maintain our roads.

            “The counties in Southwest Oklahoma, guided by our legal counsel, formed a trust authority, enabled by statute, which could provide this material. This gave the counties control over the quality and availability of this product.”

‘7 Oil’ was created

to manufacture,

market emulsion

            CED7 and the Authority in 2012 created a joint venture called 7 Oil “to engage in the business of manufacturing and marketing an asphalt emulsion formula road repair and maintenance product,” records reflect.

            State auditors criticized several member counties for “incorporat[ing] the specific 7 Oil emulsion product or other product specifications” into their bidding requirements. This discouraged vendors other than 7 Oil from bidding on the product and ensured that the emulsion made by the 7 Oil plant was chosen for their county road projects, auditors contended.

            “Counties may not restrict their bid solicitations in ways that result in restricted, non-competitive bidding, which could result in paying higher prices for goods or services,” auditors wrote.

‘7 Oil’ charged

members more

            Although the practice was not prohibited, 7 Oil bid its products “at higher amounts in the member counties,” auditors pointed out.

            For instance, in May 2017 the Authority bid $1.70/gallon for an emulsion product in Comanche County and for an “anionic oil” in Stephens County, two non-members of CED7. The next month, though, the Authority bid $2/gallon for its emulsion in Tillman, Beckham, Custer, Washita and Roger Mills counties, which are members of CED7.

            “This appears to undermine the objective of the joint venture, which was to reduce costs for CED7 member counties,” state auditors wrote.

Actions not authorized,

State Auditor asserts

            State statutes do not authorize circuit engineering districts or county energy district authorities to manufacture, market and sell asphalt road emulsion, Ms. Byrd wrote.

            Circuit engineering districts are “governmental entities created by statute,” she wrote. Lack of oversight of CEDs, “combined with a statute that lists numerous but vague, undefined ‘powers’ has led to CEDs ‘expanding’ those ‘powers’.”

CED7 paid $17K

to exec’s wife, son

            The auditors claimed that CED7 committed nepotism when it paid nearly $17,000 to the executive director’s wife and son between 2010 and 2013.

            Goucher’s son received 16 checks from CED7 that totaled $13,204, ledgers show. He was paid for contract labor, per diem, trailer usage, pay period bonus, and labor, the checks indicate.

            And Goucher’s then-wife received five $750 checks totaling $3,750 from CED7 for “a fifth-wheel rental.” Moreover, minutes of CED7 meetings “do not appear to reflect board approval for any of these payments,” auditors reported.

            Title 21 of the State Statutes “prohibits executive officers from appointing family members to any positions or duties in the officers’ government entity when the pay or compensation for the positions or duties is to be paid out of the public funds of the government entity.”

‘Maybe a few mistakes

but no wrongdoing’

            By statute, CED7 has an independent audit that is performed every year, “is submitted to the State Auditor’s office and is posted on their website,” Dickey said.

            “Maybe we made a few mistakes but there was no wrongdoing,” Kiowa County Commissioner Binghom, the current president of CED7, told the Ledger in April 2020.

            Goucher claimed Byrd sought media attention and was on a “political witch hunt.”

            In December 2018 the CED7 board voted to appoint Brian Young as the interim operations manager. Seven months later Young was appointed as the CED7 executive director to succeed Goucher, who “took another job for a lot more money,” Binghom said.

            Goucher “saved the counties a lot of money” when he managed CED7, Binghom added.

            As of December 2019, Young’s salary was $87,000, which was $58,000 less than the $145,000 Goucher was paid. Binghom said the salary discrepancy was because Goucher is a licensed design engineer but Young was not.

            Young resigned in March 2021, the agenda for the CED7 board of directors meeting that month showed. John Northup was appointed executive director of CED7 at the board’s July 2021 meeting.

Emulsion plant

            An official at the Association of County Commissioners of Oklahoma and a spokesperson at CED7 both confirmed on March 9 that the district no longer operates the asphalt emulsion plant, but neither knew how long ago the plant was shut down.

            However, the agenda for the June 16, 2020, CED7 board of directors meeting included, “Discussion and possible action on dissolving the ‘7 Oil Joint Venture’ between the 7 Oil County Energy District Authority and CED7.” It also included a discussion about appointing one or more liquidators of the 7 Oil joint venture.

            The agenda for the March 23, 2021, meeting of the CED7 board of directors included a financial report from CPA Russ Meacham “regarding the capital accounts and other matters of the two former joint venturers in the former 7 Oil joint venture: CED7 and the CED7 Energy District.”

            In addition, the agenda for the May 25, 2021, CED7 board meeting included, “Discussion of recent communications with Attorney General regarding former 7 Oil plant”.

            The agenda for the board’s July 27, 2021, meeting included:

            Ÿ “Discussion and possible action about Liquidators transferring oil plant assets to a new and independent trust in which CED#7 would be the beneficiary.”

            Ÿ “Discussion about who to approach about serving as Trustees of a new and independent trust.”

            Ÿ “Discussion and possible action about setting a special meeting (1) to formally accept the beneficial interest in a new and independent trust and (2) to appoint its Trustees.”

            As for Jerry Dean’s alleged role in the embezzlement conspiracy, the CED7 board recommended on March 23, 2021, that the liquidators hire Dean as “interim manager of the oil plant pending completion of the Liquidators’ duties…” Subsequently the board received regular “updates” from Dean on May 25, June 22, July 27, Aug. 24, Sept. 28, Nov. 2 and Dec. 7, 2021, and on Jan. 25, 2022.

Other ‘notable issues’

            Other “notable issues” cited by auditors were improper repayment of loans employees received from the district’s retirement plan and violations of the state’s Open Meetings Act by the CED7 board.

            For example, minutes of a CED7 meeting on July 28, 2015, reflect that the board discussed, in executive session, the restructuring of a consultant agreement with Dean.

            But according to a 2005 Attorney General’s opinion, “Discussing and awarding a contract for professional services when the recipient will be an independent contractor, rather than a public officer or employee of the public body, is not a proper subject for an executive session.”

Theft admitted but

no charges filed

            “Immediately after engaging in our audit” in 2017, “an employee came forward admitting to an embezzlement of CED7 funds,” State Auditor Byrd reported. An internal investigation of the alleged embezzlement was performed by Clinton CPAs R.S. Meacham.

            After the internal investigation was completed and “appropriate law enforcement agencies” were notified, the Stillwater CPA firm of FSW&B “was engaged to perform a follow-up investigation.” FSW&B concluded that $99,300 “is the amount in which restitution should be based.”

            The district’s office manager admitted embezzling CED7 funds, auditors reported at the time, and she was fired in July 2017.

            It remains unknown whether the amount stolen was repaid. Furthermore, none of the four district attorneys who requested the state audit indicated whether criminal charges would ever be filed.