This is an archived article that was published on sltrib.com in 2016, and information in the article may be outdated. It is provided only for personal research purposes and may not be reprinted.
A state audit found thousands of dollars in potentially fraudulent credit card purchases and shoddy oversight — including five years of unfiled tax returns — at the Economic Development Corporation of Utah.
Two top officials have left EDCUtah since the audit began: President and CEO Jeff Edwards announced his retirement Oct. 6, and Todd Brightwell, the chief operating officer, stepped aside earlier this year.
Brightwell — who is not directly named in the audit but receives much of the scrutiny for improper purchases and poor management — received a severance package that included a vehicle, several months' pay, health-insurance coverage and electronic equipment. Auditors questioned the generosity of the package.
"There is no doubt mistakes were made in the financial operation. … We've undertaken a robust set of changes to make sure all these recommendations [by the audit] are implemented," Edwards said. "Our business model is sound, and with these recent changes, we'll be able to do even better in the future."
A call to a number listed as Brightwell's was not answered Tuesday evening; the line's voicemail box was full.
Brightwell was found to have made at least $5,788 of improper credit card purchases that auditors said could be considered fraudulent. For example, Brightwell paid a $148 traffic ticket in Iron County and for a $48 traffic school course, bought two Apple iPhones for $425, paid $173 for two golf outings for, spent $207 at a pottery studio and bought $317 in unspecified goods at Wal-Mart.
Brightwell also had another $89,290 in credit-card purchases, more than half of which did not have a receipt or a business purpose — things like $16,000 in travel and another $24,000 in computer hardware, gas, parking, golf fees and a satellite-radio subscription.
When he left EDCUtah, Brightwell had $4,000 deducted from his severance package to repay EDCUtah for the unauthorized credit-card purchases, but auditors said that may be below what was actually owed and questioned why he was given such a generous offer.
"We believe that it is questionable to further enrich an individual who already improperly benefited from personal charges with a company credit card," the audit said. "With over 60 percent of EDCU funding coming from state and local taxpayer funds, this action by EDCU is strongly questionable."
Rep. Brian King, D-Salt Lake City, questioned why the severance was so lavish, and Edwards said that Brightwell had been a valuable part of EDCUtah for years. They agreed to how much they estimated he owed, it was deducted from the final amount and Edwards approved the settlement.
Brightwell also bought 15 devices from the Apple Store, although several could not be located after he left — a phone, a tablet and two computers.
EDCUtah has a budget of $3.2 million a year, with most coming from taxpayers, either at the state level or through dues paid by cities and counties.
As The Salt Lake Tribune reported in May, the audit found that EDCUtah failed to file its required tax returns for five straight years, beginning in 2010, prompting the IRS to revoke its tax-exempt status.
EDCUtah lost its tax exemption for about two years before it was brought to the management's attention.
The audit said Edwards appropriately took the blame for the oversight, but he said Brightwell and the agency's former office manager failed to provide requested data to the corporation's accounting firm despite multiple requests, and that Edwards was never told of the problems.
Some of the returns that were eventually filed were incomplete or contained errors that needed to be corrected. The tax forms were eventually filed and the tax-exempt status reinstated, although the audit suggests management may have made misleading statements to the IRS about why the tax forms weren't filed on time.
The audit suggests that EDCUtah executives may have broken state ethics law by buying $11,517 in meals and giving $867 in gifts to officials at the Governor's Office of Economic Development (GOED); the GOED technically contracts with EDCUtah for business recruitment. Many of the meals came at a time the GOED was updating its state contract with EDCUtah, increasing it from $525,000 to $900,000.
State law prohibits a contractor from giving gifts to its contracting entity. A legislative attorney called EDCUtah's practice "risky" and a minimum and possibly illegal.
"In isolation, any one gift or lunch may not rise to the level of concern," the audit said. "However, the frequency, totality and timing of gifts and lunches discussed throughout this section calls into question the relationship between EDCU and GOED."
It would be up to a prosecutor to decide whether criminal charges are warranted by either the unauthorized purchases or the gifts and meals.
Edwards "strenuously" objected to any suggestion that the meals were intended to influence GOED staff. He said they were normally sandwiches bought during contractually required work meetings and that lunchtime was merely a convenient time to meet.
Mileage logs also were missing, making it impossible to track the use of official vehicles.
In response to the audit, EDCUtah wrote that significant steps have been taken in the past year to address the issues auditors uncovered. For example, the corporation has a new credit-card policy and all but two cards have been discontinued.
It has overhauled its internal financial controls, a new finance committee will oversee governance of the organization and a new chief financial officer has been hired.
"EDCUtah would also like to reiterate that the questionable spending identified throughout this report was limited to a single, former executive," the organization said in its response.
Last week, EDCUtah touted "one of the most successful years" for the organization in its annual report, including commitments by companies to create more than 13,000 jobs and invest close to $1 billion in capital in the state "despite significant internal challenges this year." Unlike past years, when the annual report was rolled out at a lavish event downtown, this year it was distributed via email.
Twitter: @RobertGehrke