3 On Your Side Investigates: Busted Budget

Updated: Sep. 25, 2019 at 11:21 PM CDT
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JACKSON, Miss. (WLBT) - The fallout from a state investigation into Pelahatchie’s finances has found its way into five different court cases, proceedings that have inflamed the tiny Rankin County town and caused a massive rift between Mayor Ryshonda Beechem and the Board of Aldermen to only get worse.

Understanding that rift means revisiting what caused it in the first place: an investigation that spanned two state auditors, involved dozens of transactions and claimed town officials broke several state laws with money moves totaling more than a million dollars.

That investigation also has its critics, most notably former Pelahatchie Mayor Knox Ross Jr., who is one of the nine elected officials named in the state’s case.

The 100-page complaint details how, from 2015 to 2017, those officials used money from the town’s drug seizure fund for unlawful purposes, transferring more than $1.1 million altogether.

Ross said he believes that case isn’t as airtight as one might think.

“No one took any money. It didn’t happen. It never has happened. And there’s no allegation of that," Ross said.

Ross draws a line in the sand between embezzlement and misappropriation with that statement, the latter being what State Auditor Shad White and his team of investigators believe really took place here.

“Our conclusion at the end of this was that there was a misappropriation and misappropriation means the law says money has to be spent on X and you spent it on Y," White said.

White says X represents “law enforcement” in that example.

Unfortunately this has turned into a public spectacle where no one can seem to sit down and get an answer to it."

State law requires that municipalities spend money from their drug seizure fund on law enforcement.

From 2015 to 2017, the auditor’s investigation revealed 45 withdrawals from the Pelahatchie Police Department’s drug fund.

Not one, according to those court documents, was used for law enforcement purposes.

Who authorized the transfers? Pelahatchie’s board of aldermen and mayor during that time period, which includes current mayor Ryshonda Beechem and Ross, who served as mayor before her.

“We spent it all on the city, and we spent it all on police and public safety purposes," Ross said.

When confronted with the fact that the auditor’s case determined most, if not all, transfers did not involve law enforcement uses, Ross shook his head.

“We disagree with that. Very, very strongly disagree with that. Our CPA doesn’t agree with it. Our attorneys don’t agree with it, and unfortunately this has turned into a public spectacle where no one can seem to sit down and get an answer to it," Ross said.

Minutes later, Ross admitted some of the financial transactions -- withdrawals he called loans -- were not used for anything related to law enforcement.

“The only thing that anyone was concerned about were the loans from the drug seizure fund to the enterprise fund. Well, I mean, we thought that was a good use of cash. We weren’t going to be using it for police," Ross said.

“In the beginning you’d mentioned that the transfers, the withdrawals from the drug seizure fund went to law enforcement-related things, but borrowing against or borrowing to put that money back is obviously a different use," I said.

“It is, but it’s a loan. It’s a loan to be paid back,” Ross said, again calling the transfers loans. "Why not just use it from there when we need it? We can put it back, which we can’t find anything that says we can’t do that, and that’s exactly what we did.”

Court documents show $89,000 had been transferred to the town’s enterprise fund from 2015 to 2017.

White said the law here is very clear.

“The legal principle behind the fact that you have to spend forfeiture money on law enforcement is a pretty longstanding one, so people around the state understand that," White said. "Chiefs of police and sheriffs and everybody else, they know that. It’s a pretty hard and fast rule.”

3 On Your Side Investigates: Busted Budget
3 On Your Side Investigates: Busted Budget(WLBT)

White’s investigation says some of those transfers from the Pelahatchie Police Department’s drug seizure fund helped the town avoid overdrafts.

Some had no reason given for the withdrawal.

Not one, investigators maintain, was included in the town’s minutes, meaning the public had no idea.

Current Mayor Ryshonda Beechem told us last year that she didn’t know the reasoning behind the transfers, either.

After she took office in July of 2017, Beechem said she signed bills given to her by the town’s clerk because she was told they needed to be signed right away.

“I was under the impression people abide by the law. I have no other reason to justify that until the second month and I realized what I was being asked to sign wasn’t legal," Beechem said in May 2018.

That’s why -- except recently with town paychecks, retirement funds and the power bill -- Beechem’s attorney Thomas Bellinder has told her not to sign anything on behalf of the town.

“The most frustrating thing is to follow the law and have to face a little repercussion over it," Beechem said.

Beechem said she went to the board of aldermen to tell them she believed those drug seizure fund transfers were against the law, but nothing was done.

She then went to the state auditor and cooperated fully with the investigation.

Beechem is named in the state’s case for 5 of those 45 withdrawals, plus authorizing three loans the state maintains were unlawfully issued.

Now Bellinder and Beechem are weaponizing the auditor’s investigation -- copying and pasting entire sections of it -- to go after those aldermen, from temporary restraining orders to a writ of mandamus, most recently, which asks a court to remove the aldermen from office for violating the law.

“The vast majority, a great, great portion of this, is based on what the state auditor was able to uncover because of their ability to get in places where even the mayor herself was unable to go," Bellinder said.

Bellinder believes the actions by the aldermen could constitute criminal behavior, based on his interpretation of the auditor’s case and how aldermen reacted when Beechem told them they were breaking the law.

“We’re talking about accounts where there’s a paper trail. We’re not accusing anybody yet, that’s been determined, of any fraud or intentional malfeasance here," Bellinder said. "It just appears that over a period of time, you consistently broke the law. The response was, no, let’s just cover it up. Let’s reduce her salary, maybe she’ll quit.”

White said any talk of criminal conduct takes the state’s case out of context because they found no evidence of criminal wrongdoing.

“You would see the attorney general pursuing criminal charges or you’d see the local district attorney pursuing criminal charges. That would ultimately be their decision and you don’t see that in this case,” White said.

Ross wanted to look into the case himself, so he asked for everything the auditors got through a public records requet and looked it over himself, since he’s a CPA.

“I reconciled the statements for every year, got every check, all the backups for all the checks, what all of it was done for, put that all together in spreadsheets."

Essentially, Ross said, he checked the state auditor’s math.

“I found some mistakes. And then that work has been reviewed by May and Company CPA firm. They concurred with it. Made a report on it," Ross said. "The only issue we could find in all of this was where we loaned money from the surplus of the drug seizure fund to the enterprise fund to basically keep the sewage flowing in this town. It never once caused a deficit or anything. Why in the world would any reasonable person say we have to pay that back personally? We never benefited from it. That’s where it went. That’s what was done.”

White said he was approached by Ross about his concerns.

“We gave the former mayor a chance to come in and present any sort of disputes that he may have had with the findings. He did," White said. "The lead agent in charge who’s a CPA reviewed it, the lead attorney in the investigations division reviewed it. And of course it went to the Attorney General’s office. And despite all that, we got a lot of agreement that the demands are accurate and they need to be litigated.”

White said Ross and other aldermen will have their chance to present that evidence in court. He also said he’s not surprised by the skepticism.

“This is typical. Somebody who is the subject of a demand is going to say, ‘Well, I didn’t do it,’ and we’re very careful in the state auditor’s office," White said.

At the same time, that office can miss things.

The state auditor’s investigation’s cites evidence from 2015; however, a 3 On Your Side analysis of Pelahatchie’s yearly audits before 2015 -- submitted to the state auditor every year -- show several years where drug seizure money was transferred, possibly in violation of state law.

The firm hired by the town to conduct the audit never red-flagged this practice, meaning they either missed it each year or considered it legal.

It took the state auditor’s office years to catch it, too.

“We don’t have the legal ability to go through the finances of a municipality with a fine-tooth comb because we’re barred by law from auditing, though we can do it if we trigger an investigation. But we can’t do it for the whole city’s finances for every city every single year," White said.

Ross and the other aldermen will have to wait until the case makes its way through the court system to be able to clear their names.

“I haven’t done anything wrong. This board hasn’t done anything wrong, but if it takes court action, and court fights, we’re perfectly willing to do that, too,” Ross said. “And so you want us to pay a million dollars back on money we spent properly, that we contend we spent properly, that we didn’t take, that we didn’t steal, and is showing in this town, because you don’t like how we accounted for it?”

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