Part 2: Aftermath

Last updated: May 02. 2014 9:27PM - 1267 Views
By - mechelberry@civitasmedia.com

City officials in 2004 included Council members Don Diosi (left) and Rod Sparks, Law Director Reese Mills, City Manager Phil Honsey and Council President Dennis Little. On the right side of the table: Council members Cathy George, Pauline Eaton and Fred Smith. Administrative Assistant Carol Dayne is at the far end of the table. (File photo)
City officials in 2004 included Council members Don Diosi (left) and Rod Sparks, Law Director Reese Mills, City Manager Phil Honsey and Council President Dennis Little. On the right side of the table: Council members Cathy George, Pauline Eaton and Fred Smith. Administrative Assistant Carol Dayne is at the far end of the table. (File photo)
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Confusion. Anger. Fear.

There are any number of words that could be used to describe the aftermath when news broke out of Galion’s finance director shooting himself.

Immediately following the incident, two investigations opened simultaneously: Galion police investigated the suicide attempt while the Federal Bureau of Investigation and the Ohio Bureau of Criminal Identification and Investigation began a joint investigation of city finances. Details on these investigations will be covered in future stories.

The first city council meeting after the incident was held on April 5, 2004. Ron Welly, a certified public accountant, was hired as interim finance director. Welly had worked with the city for the previous five years to compile financial statements for annual audits. At that time, he was the person most familiar with the city’s financial position. Soon after he was hired, Welly described his job as “putting out fires.”

While the city’s financial status was sorted out, city council began to cut all unnecessary expenditures. In a memo issued by the City of Galion on April 13: “In this time of financial challenges, we will not conjecture about causes and effects until the financial homework is properly completed.”

Council President Dennis Little was council president in 2004. At that time, he asked the citizens to be “patient, understanding and cooperative.”

Little spoke to the Galion Inquirer recently. In his words: “We tried to reestablish everything. We looked at several departments, sat down and figured out we had to do some major, major belt-tightening. We just didn’t have the funds to keep going at the level we had been when we thought we had the funds. That created a tremendous amount of problems for the city and the people; it directly affected services and costs.”

During the remainder of April, the city prepared for a state audit, which had been requested by city officials. In addition, the city hired Breen & Winkle, an independent audit firm, to conduct an independent audit, and to also review the city’s accounting procedures.

Pauline Eaton was also on city council in 2004. She had been in the position since 1994. “There was a lot of hysteria at that time,” Eaton recalled in a recent phone interview. “Galion’s a small town and this was a big deal. It’s not something that happens every day. I think a lot of us that were on city council and city staff, we were all in shock.”

Cathy George had joined council in 2003. She recalled in a recent interview: “It was devastating. Our meetings would go until sometimes midnight, discussing where to go and what to do. There was staff reductions, people that were wonderful employees lost their jobs not because of what they did, but because of what the finance director did to our community. We were just taking one step at a time. It was just a very difficult time.”

The April 28 edition of the Galion Inquirer reported there was a $2.2 million deficit in city funds. The city’s electric bills were also overdue. At that time, Little said of the news: “We were all misled as to the financial status of the budget.”

The citizens wanted answers

As information was slowly shared with the community over the next few months, there was a growing sense of frustration.

On May 6, 2004, a public meeting was held at St. Joe’s Activity Center. Hundreds of citizens filled the room, and dozens of them were upset or angry.

According to the Inquirer story about meeting: “…residents responded with rage, numerous questions, accusations and demands.” Questions like: What are the numbers?, Why should we pay for somebody else’s mistake?, Who’s responsible?

City officials explained Galion’s financial situation. City Manager Phil Honsey told citizens the checks and balances system was not as it should have been, as one signature was required on checks written by the city: Bill Bauer’s. Annual financial audits were being mailed directly to Bauer. Fraud risk assessments were completed by Bauer.

Honsey also said that the city tried to absorb the rising cost of electricity for several years. Instead of raising rates incrementally over a period of years, rates remained the same. Fiscal Emergency would later force the city to do something to make up for it.

“We all took quite a beating. Some of us council people were actually a little afraid for our safety that night,” Eaton recalled. “We knew the sensitivity of everything that was going on. We all felt like we’d been punched in the gut, but we also knew that the citizens felt the same way.”

Cathy George asked citizens to pray. “People were angry, and I was angry too,” she stated recently. “I got up and talked, because they were saying things about Mr. Honsey, and I said ‘He didn’t know what was going on.’ And somebody shouted that he should have known. Afterwards, I realized that he should have known, too, because it was his job to know…It was not a pleasant meeting. I’ll never forget that. There was nobody there who didn’t have an opinion, and rightfully so. I don’t blame them.”

One citizen acted as a voice of reason that night. Jan Shuck was quoted as saying: “I’m very much disappointed to find most people came here with a negative attitude. I am saddened to have seen some of the rudeness and nastiness.”

During April and May of that year, letters from citizens poured in. In response to the May 6 meeting, Pamela S. Cole had this to say: “We are angry because we are upset and frightened. No one wants higher electric bills, no one wants to pay higher tax bills, no one wants to be without adequate fire and police protection, no one wants age old storm sewer systems or outdated electric service, and no one wants to drive on substandard city streets…We cannot go back and undo so we need to go forward in a planned direction…My question to Galion is—do we seize the opportunity to settle down and improve upon our situation or do we all move away and leave the last person living in Galion with one hellacious electric bill?”

Jean Saylor also wrote a letter. It read in part: “Now let me understand this: ALL of Galion will have to pay with a SUBSTANTIAL RATE INCREASE, because of the SINS of others. I did NOT cause this problem — neither did the other people in Galion! Yet our city LEADERS say we are just as guilty!”

At the council meeting on May 11, 2004, the room and outside hallway were filled with citizens. Dozens more waited on the sidewalks and in the parking lot outside. Extra police officers were on hand to keep order.

Mike Laughery, an accountant in the audience, asked about the monthly financial statements of city accounts. Little said the 2002 audit (completed in 2003) cited some shortcomings. While the report was addressed to council, it was mailed to Bauer. “We never saw it,” Little was quoted as saying.

Jo Swain, a citizen, defended council members. “We elected seven people to do a big job. It’s clear they did not know we had a big problem until recently,” she stated. “There are a lot of things to pay attention to and you can’t watch them all.”

Gene Watson, another citizen, commended the city leaders for keeping the community informed.

Lack of accountability

Bauer’s qualifications as finance director were questioned during several city council meetings. He had worked in the Finance Department for just one year before being promoted to Finance Director.

Council member Fred Smith said of Bauer at that time: “He was faithful, diligent, he signed checks…I know there was a lot of trust put in Mr. Bauer, but we thought it was earned trust.”

The Galion Inquirer had several employee evaluations for Bauer on file. In all of them, the city manager rated him as “exceptional” or “above standards” in almost every category. In the written comments, Honsey called Bauer a team player who “does whatever it takes.”

In the evaluation for the period of Jan. 2002 - Jan. 2003, Honsey did cite concerns with financial reporting. In the most recent evaluation from a period of Jan. 2003 - Jan. 2004, Honsey wrote: “Excels in all categories except in making up to date financial reports available to department heads…” The document was signed on March 9, 2004.

Early in her first term on city council (in 2003), George had requested further details on the city’s financial statements. “I kept visiting the Finance Office asking for more information and a lot of times Bill wasn’t available. At least they said he wasn’t. I continued to get bits and pieces of information but he never gave me the whole thing…I didn’t know why I didn’t get full information, why Mr. Bauer wasn’t forthcoming, why he put up so many roadblocks to accessing information that I asked for.”

George went on to explain her and another member of city council ended up doing their own research. “I couldn’t understand why other people weren’t questioning too, but I think there was a lot of trust there that probably was misplaced,” she commented. “It happened a decade ago but it feels like yesterday. I still rehash things and wonder why I didn’t know more, why I didn’t have more ability to find things out.”

Little recalled flaws in the system itself. “One of the things that we stated right up front was that we had not required the Finance Department to be more computerized than they were,” he stated. “It became apparent that a lot of different accounts were charged to departments that weren’t in that jurisdiction. For example, we found mosquito spraying was under the city manager’s account. We basically had to reconstruct the whole system.”

Eaton also served on city council’s finance committee during that time. According to her, the committee did receive monthly financial statements. She recently explained: “Bill always gave us financials, we had them at every single meeting. He showed us reports and everything. My job at that time was state director for Heritage Ohio. I was traveling all over the state. As I was going into all these other small towns and working with them, they were laying off staff people and were all in financial distress. I thought, ‘Galion is doing so well. Why aren’t we laying people off?’

“When I came back for one of the committee meetings, I asked Bill outright why Galion was doing so well and other cities weren’t. He said it was because of all the programs we had in place…When he gave me the answer, I had no reason to distrust him. And all the figures he gave us added up. Then we found out those figures just weren’t real.”

This is the second story in a series the Galion Inquirer is publishing to analyze the effects of fiscal emergency on the community.

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