ORGANIZED CRIME UNIT SPENT DRUG CASH ILLEGALLY, AUDIT SAYS

Went To Golf Fees, Travel, 'Nonexistent' Informants

Cloaked by its undercover status, the Police Department's Organized
Crime Unit illegally spent cash seized from drug investigations and
often was unable to account for where the money went, according to a
state audit released Thursday.

The audit report by the Tennessee Comptroller's Office seared the
department for its "blatant lack'' of control over the funds. Still
looming are criminal investigations by the FBI and TBI, and Police
Director Bill Oldham has warned that criminal indictments are possible.

The audit covered a five-year period from July 1994 through March
1999, and Dennis F. Dycus, director of municipal audits, said it
unearthed the worst situation he's seen during a long career.

"What concerned me was the overall blatant lack of respect for
authority which permeated throughout the department,'' Dycus said.

Auditors found, for example, that more than $43,000 in cash was paid
to "apparently nonexistent" confidential informants.

They reported more than $100,000 in confiscated funds were illegally
spent during one year on everything from golf fees for then-police
director Walter Winfrey to unspecified lawn care services.

There was no documentation of more than $40,000 spent on travel,
auditors said.

Significantly, auditors took issue with more than just how confiscated
funds went out of the department. They reported instances, where cash
was coming into the coffers improperly. The audit identified more than
$260,000 in cash taken by MPD without making a formal claim on the
property as required by state law.

The police circumvented the state regulations by simply writing their
own set of rules, many of them illegal, according to the auditors, who
called the financial manual ``counterfeit.''

But at least the MPD made it look official on the outside: They graced
it with the state's original cover design.

These "illegal policies and procedures,'' coupled with an absence of
independent audits, resulted in a "blatant lack of internal controls
over undercover cash operations,'' auditors said.

Police officials had braced for release of the audit, notifying City
Council members of its potential impact earlier this week. They began
instituting reforms months ago.

Mayor Willie Herenton was not available for comment following release
of the audit but issued a statement saying his administration "will
not tolerate the activities revealed by the audit.''

Oldham said there could be "no justification for that kind of
action.''

The police director met with news reporters Thursday afternoon and
promised continued revamping of OCU procedures to ensure the
department is in compliance with state law. He also vowed continued
cooperation with the FBI and TBI.

The audit "does point out to us serious problems which we have to
address and will address,'' Oldham said.

Oldham was second-in-command at the time of the infractions and
concurred with a majority of the auditors' findings.

In several instances, that concurrence put Oldham at odds with another
of the department's brass, Deputy Chief Brenda Jones.

Jones headed OCU for the final 13 months covered by the audit and was
stripped of her OCU responsibilities in May. She remains deputy chief
over special operations. And though the audit reaches back to July
1994, Jones was the only commander singled out by name.

Jones declined comment Thursday, citing the pending criminal
investigation. But in written responses to auditors, the deputy chief
said she inherited many of the practices from previous department
heads and suggested that others shared responsibility.

"It should be noted that the deputy chief was not solely responsible
for all disbursements from confidential funds,'' she said in one of
the audit's written responses.

However, auditors penned a stern rejection.

". . . Jones was commander of the OCU from February 19, 1998 through
June 1, 1999. Our findings addressed the fact that in 329 instances
between June 2, 1998 and May 21, 1999, confidential cash was used in
violation of state law. All of these instances occurred during the
time that Deputy Chief Brenda Jones was commander of the OCU.

"It would appear that . . . Jones, as commander, had authority over
and responsibility for the cash operations of that unit.''

Also Thursday, Jones's predecessor at OCU, Bob Jones, said that while
he headed the operation, Brenda Jones handled all financial matters at
the insistance of Winfrey.

Winfrey "told me that Brenda Jones would be in charge of financial
matters.. . . Brenda was the one you went to,'' said Bob Jones, who
headed the unit from 1995 until Brenda Jones assumed the command.

Winfrey, who retired April 1 after five years as director, did not
return telephone messages.

Auditors began plowing through the department's files in April after
The Commercial Appeal reported widespread misuse of forfeited drug
money, which annually fuels operation of the OCU budget. The unit has
between 75 and 80 officers.

Dycus said more than 1,000 man-hours were invested in the
investigation spanning six months.

Mayor Willie Herenton: "The investigation by the Tennessee State
Comptroller's office has uncovered some very serious activities. I want the
public to know that my administration will not tolerate the activities
revealed by the audit report, and I have directed the Police Department to
implement new procedures and policies to prevent actions as these from
reoccuring."(Picture)Retired police director Walter Winfrey, who headed the
department during much of the audit period, did not return telephone
calls.(Picture)Deputy Chief Brenda Jones: Although she declined comment
Thursday, her responses to the audit are highlighted in the report. In one,
she said, "There is no documentation to support the finding that the deputy
chief was responsible for all disbursements from the confidential funds."In
its 54-page audit report issued in Nashville, the Comptroller's Office
portrayed the undercover drug investigative unit as largely uncontrolled,
with department credit cards and cash widely available, and with employees
untrained about permissible uses.

``The director of police failed to make employees aware of the
required procedures,'' the report states.

Dycus said he was concerned "by the degree of sophistication that
should have been there and was not." OCU is by far the largest
narcotics unit in the state, he said.

While the audit centered on major abuses, it unearthed violations
involving smaller sums as well, with employees cited for such things
as failure to promptly reimburse the department for airline tickets
purchased for spouses who accompanied them to out-of-town training
sessions.

Records showed that both Winfrey and Oldham took their wives on trips.
Oldham said he received approval on the front end from OCU and
reimbursed OCU for his wife's ticket upon their return. In retrospect,
he said he would not use OCU money for that purpose again.

"Hindsight is 20/20," he said.

In another finding, a pair of unnamed officers was implicated for
theft.

Auditors discovered the pair paid for a hotel room in Meridian, Miss.,
with department cash, then complained that their rooms were not up to
standard, received a refund and pocketed nearly $900.

Among the audit's major findings:

Auditors cited 329 instances in which funds were used for "purposes
other than confidential expenses.'' They cited several examples
including mobile phone service, lawn care services, meals for visiting
Russian police officers, food for drug dogs and golf tournament fees
for Winfrey.

State law requires purchases not related to confidential
investigations to be made under normal purchasing procedures. Auditors
said that did not occur in these instances - a misdemeanor offense -
and pinned responsibility on Deputy Chief Jones.

"It appears the deputy chief violated the cited statute.''

Also at issue, auditors said, was several thousand dollars' worth of
furniture purchased for Winfrey's office. By using the fund, the
purchases were deemed confidential, but auditors said there was no
reason to cloak the purchase and bypass normal purchasing procedures.

The examination revealed widespread abuses. Trips were taken without
approval of the city chief administrative officer as required, the
report said. Employees charged gasoline and used their cell phones
hundreds of miles from where they were assigned to training sessions.

In previous stories, The Commercial Appeal cited charge receipts and
cell phone bills, tracking one employee to Los Angeles when he was
supposed to be attending an anti-gang seminar 275 miles away in Las
Vegas.

Calls placed on a department cell phone assigned to Jones also raised
questions about her travels. In one instance, her phone was being used
in New York City when she was assigned to a conference in
Washington.Overall, auditors reported finding more than $42,000 in
travel expenses for which there was no supporting documentation.
Another $23,000 in travel was inadequately documented, they said. In
addition, more than $17,500 in travel expenditures was unallowable,
auditors said.

Much of the amount was incurred by a "few higher-echelon department
officials,'' auditors said but did not name those individuals. One of
these unnamed officials had taken more than $800 in cash travel
advances for meals but charged $667 in meals to an OCU credit card.

OCU routinely uses drug funds to purchase vehicles for its undercover
officers. These purchases are made by bid and coordinated by the
city's purchasing department.

However, auditors found instances in which vehicle upgrades - better
stereos, expensive wheels, and T-tops - were being paid for in cash or
by credit card, thus bypassing the bid process. The report identified
more than $5,000 of such upgrades to four cars.

Each of the vehicles was delivered based on the bid specifications but
altered when they were not to the liking of OCU employees, auditors
said.

"Based on the documents available in the city's files and information
obtained from the dealers involved, we find no reason, other than the
circumvention of the bid process, to obtain vehicles with extra
options in this manner.''

Brenda Jones told auditors the options were purchased so undercover
offices could "maintain a covert appearance'' among drug dealers who
routinely own expensive cars. She said there were no attempts made to
circumvent bid procedures.

Local churches and other not-for-profit organizations received drug
fund money for anti-gang and anti-drug programs. Such expenditures are
allowed but documentation relating to how the money was spent was
scant at best, the audit reported.

During 1997 and 1998, awards totaling $9,000 to six groups had no
documentation at all. Other expenditures were documented only by
budget sheets, amounts and check numbers.