Auctioneer owes city $744,636

Audit shows debt from sale of cars for Baltimore

Numbers alarm mayor

Auction Alliances Services' operator says it can't pay

June 10, 1999|By Gerard Shields | Gerard Shields,SUN STAFF

A Baltimore auctioneer owes the city $744,636 in proceeds from automobiles sold for the city as far back as 1994, a city audit shows.

Auditors from Comptroller Joan M. Pratt's office delivered the news to Mayor Kurt L. Schmoke and the city Board of Estimates yesterday, noting that the auctioneer says he doesn't have the money to pay the city.

The city plans to file a civil suit against Auction Alliances Services Inc. of Towson in an attempt to retrieve the money. The city also plans to claim bonds that the company posted when it was hired, in hopes that they will make up for at least half of the money owed.

The mayor and other city leaders are alarmed that the city could be owed so much money without detecting it.

"Do you think there is more money out there?" Schmoke asked.

"There could be," responded city purchasing agent John Miller.

The City Council is expected to adopt today an austere $1.8 billion city budget. Budget officials say Baltimore faces $153 million in budget deficits over the next four years because of stagnating property tax revenues as an average of 1,000 residents a month move out.

Yesterday, the board approved hiring a new auctioneer, Atlantic Auctions Inc.

In its latest contract with the city, Auction Alliance won a 1997 contract to sell surplus city automobiles every other Wednesday at the city impoundment lot on Pulaski Highway. The cars are ones that have been abandoned in the city or removed from the city's fleet.

The company also held auctions four times a year to sell unused city vehicles and other city surplus items. The company received 8.5 percent of the proceeds, Miller said.

Miller requested the audit in September as part of a regular review of the city's surplus property. The city audit found that Auction Alliance had failed to pay the city its share of proceeds from 11 auctions back to 1994.

The lapse occurred because the city

Purchasing Department thought the city Collections Department had ensured that the payments were made, Miller said. The latter said it wasn't responsible, he said.

"Obviously, there was a breakdown of who was doing the follow-up," Miller said.

Company admits wrong

Auction Alliance, operated by Fred J. Winer, initially contested the city's finding, Miller said, but then agreed that it owed the city $954,636 in auction proceeds. The company recently paid the city $210,000 but said that because of financial problems, it could not pay the rest at that time.

"He's had a financial meltdown, and we're feeling the results," Miller said.

Neither Winer nor other company officials could be reached for comment.

Schmoke immediately suggested that Pratt expand the audit to determine whether the city might be owed other money through similar contracts.

"The guy obviously ran into a cash problem and sees that the easiest way out was not to pay us," Schmoke said.

History repeats itself

Erwin Burtnick, financial affairs adviser to City Council President Lawrence A. Bell III, noted that the city has had similar problems previously. Under Mayor William Donald Schaefer, an auctioneer withheld payments to the city.

"This is not new," said Burtnick, who was an assistant to Hyman A. Pressman when Pressman was city comptroller. "We've had problems with city auctioneers before."

City Finance Director William R. Brown Jr. suggested that the city require all checks for purchased city items be made out to the city finance director to avoid the problem. The city would then pay the auctioneer its share of the proceeds.

City rules will have to be examined before the plan is implemented, Miller said, because of legal commitments that make the auctioneer responsible for paying the city even if purchasers withdraw.

"Since we have been burned twice, even though it was a long period of time in between, we obviously need a new system," Schmoke said.

Schmoke had one last question before backing the city move to seek the rest of the money owed by Winer.

"Did the check bounce?" Schmoke asked.

"I don't think so," Miller said.

Pub Date: 6/10/99

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