ST PAUL, Minn. - Minnesota officials have stripped a state vendor of a $15 million-a-year contract to sell Ford SUVs to law enforcement agencies and instituted new fraud prevention policies following KARE 11’s Double Billing the Badge investigation.
The investigation into police vehicle purchases from Nelson Auto Center of Fergus Falls, MN exposed a taxpayer rip-off totaling roughly three quarters of a million-dollars, according to the dealership’s own estimate. It also revealed major holes in the oversight of purchases made through state contracts.
Following KARE 11’s original report in April, the state launched a criminal investigation which resulted in a five-count indictment against a former dealership manager.
Court documents indicate investigators have identified 205 police and government agencies across Minnesota that either did not get all the features they paid for or were double-billed for equipment such as spotlights and heated mirrors on their squad cars.
“I’m angry!” Minnesota Department of Administration Commissioner Matt Massman exclaimed. “This is a very frustrating experience to have had a state contract taken advantage of like this.”
KARE 11’s investigation discovered the Department of Administration missed multiple early warnings by a whistleblower and even reports of overcharges from several police agencies.
RELATED: Watch whistleblower report here
In response, Commissioner Massman has instituted a new Internal Review Policy that requires workers at his department to take immediate steps to investigate whenever there is any report or discovery of overpayment, overcharge, miscalculation, or allegation of potential fraud involving a state contract.
Massman said the intent of the new policy is “to protect the integrity of the procurement process, and ensure the proper expenditure of public dollars.”
He says a compliance expert has also been hired to review other state contracts for abuses.
“We want to make sure we’re putting the resources on it to get this right – and frankly to deter any potential vendor from doing something similar on another state contract,” Massman said.
The state temporarily suspended their contract with Nelson Auto Center in April. Now, Massman tells KARE 11 the dealership has been fully stripped of the contract.
Nelson Auto’s former fleet manager, Gerry Worner, is awaiting trial on criminal charges.
RELATED: Charges filed
Otter Tail County Chief Deputy Prosecutor Michelle Eldien describes it as a scheme to defraud taxpayers.
“It’s certainly hundreds of thousands of dollars that should not have been recouped by an individual here,” Eldien said.
Court records show that Worner made a 40 percent commission on profits from police car sales. That means any overcharges added to his compensation.
When KARE 11 reporter A.J. Lagoe contacted Worner in April, he declined comment.
While admitting mistakes were made, Worner’s attorney, Kent Marshall, labeled them honest mistakes.
“I don’t believe that anyone sat down and devised a method of obtaining more money for these vehicles than what anyone had coming,” said Marshall.
Nelson Auto’s owner Brent Nelson told state investigators he fired Worner when he learned about the double billing and that he made Worner cut $320,000 in checks to cover “his share” of what needed to be refunded.
While Worner is the only person facing criminal charges, court records indicate two other Nelson Auto employees were aware of the scheme and claim to have told Worner, “they did not feel it was right and what they were doing was morally wrong.”
Brent Nelson has promised his dealership will make a full refund once the state makes a final determination of what it is owed. In April, Nelson told KARE 11 the refunds could total nearly $750,000.
Between Oct. 21, 2014 and March 1, 2017, BCA investigators identified 1,220 suspect transactions.
However, KARE 11 discovered double billing on police car purchases dating back years earlier.
Massman said the Dept. of Administration is nearing completion of an internal audit which examined 3,000 purchases dating back to 2011 to identify the full scope of the refund taxpayers are owed.
“We clearly are seeing a systematic pattern of overcharges,” Massman said.
That internal audit is expected to be completed in November.
Our investigation started after a tip from a viewer.
If you have a suggestion, or want to blow the whistle on fraud or government waste,
email us at: investigations@kare11.com