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Coming Up Empty

Although the Administration of Trenton Mayor Eric Jackson has long tried to ignore it, hoping (probably correctly) that by the time of next year’s city elections most voters would have forgotten it, the biggest scandal to rock the City in the last four years was the theft of over $4 Million Dollars of city funds by its former vendor Innovative Payroll Services (IPS) and its principal John Scholtz. Nothing else – and, Lord knows, there have been a LOT of other things – comes close.

The amount of money stolen was huge; the number of warnings received – and ignored! -  from state and Federal authorities was high; and the scale of municipal malpractice on all levels of Trenton’s government from lowly finance clerks to the City’s Comptroller up to the Mayor was breathtaking.  The Great Payroll Robbery is on a scale all its own.

However, in the early part of this year, this episode, which consumed most of 2016 as the theft was disclosed and prosecuted, seemed to come to a resolution. The guilty party, John Scholtz, was convicted and sentenced, and the City was well under way with the process of recovering its stolen $4 Million Dollars. In March of this year upon Scholtz’s conviction, Cristina Rojas of the Trenton Times wrote,

“[Mayor] Jackson says the city has recouped some of the money, though he didn’t have the exact amount on hand.

“‘We are still in the process of getting it back and being made whole and we’ll continue to work on that,’ he said.” [Emphasis added - KM]

Those two occasions eight months ago are, to date,  the only two times we’ve ever heard about the City’s attempts to get its stolen money back. It sure does sounds like a (reasonably) happy end after the embarrassment of the massive theft in plain sight, right? The Mayor made it sound, in that newspaper article and in meetings with at least one neighborhood group, that the process of recouping the City’s money was well under way, and achieving results, right? If you read the Mayor’s upbeat comments in the Times, or sat in the Cadwalader Heights living room listening to Mr. Jackson and his then-Finance Director Ron Zilinski, you’d certainly think that we’d only have have gotten more money back since then, right?

Right?

Sorry to have to break it to you this way, but as of this week in November the City of Trenton has not received a dime of restitution from the Great Payroll Robbery.

Not one dollar.

In response to two Open Public Records Act (OPRA) requests filed with the City Clerk’s Office over the last two months, Deputy Clerk Cordelia Staton – on behalf of the City – confirmed to me yesterday that no funds have yet been received by the City as even partial restitution for its losses to IPS.

Back in March, I found the Mayor’s statements about the City’s progress in getting money back hard to believe. At that point John Scholtz had pled guilty in Federal Court to stealing money from the City and dozens of other IPS clients, but he hadn’t yet been sentenced. Even more importantly, a final Restitution Agreement which would benefit all victims of Scholtz’s scam hadn’t been written.

Yes, as had been reported earlier this year, several assets of Scholtz’s and his company had been seized by federal court order and ordered sold. Other assets such as IPS bank accounts were frozen. But all of the proceeds from those asset sales, as well as proceeds from Chubb Insurance for what little performance bonding IPS carried, were deposited into a bank account under Federal authority and held until arrangements for restitution to all claimants had been made.

A Restitution Agreement was not issued until August 30 of this year, as part of Scholtz’s sentencing in Court . The City of  Trenton is listed first (page 6 of the linked document) as one of no fewer than 120 separate claimants (including the IRS) in line to claim a total of $9,566,460.79 in judgments. Trenton directly was awarded a claim of $863,317.24, with the federal Internal Revenue Service awarded an additional $3,568,233.16 (page 17) to make restitution for Trenton’s tax losses.

restitution 1restitution 2

I’ll just note here that although Federal Judge Freda Wolfson formally recognized 120 separate IPS victims as claimants, the City of Trenton by itself represented almost half of the Court’s judgment. We were the victims – or, considering all the warnings to the ongoing theft the Jackson Administration received and ignored, the suckers – of Scholtz’s theft nearly as badly as all of the 119 other parties, combined!!

After the Restitution Agreement was issued on August 30, it wasn’t until the end of September that the first movement of money was made to actually begin the process of making restitution to the ten dozen IPS victims, including Trenton, an amount of $755,489.33 “to be put toward the defendant’s [John Scholtz] restitution obligation.” Of that sum, Trenton (and/or the IRS) would be entitled to approximately $347,500, less any possible lawyer, court or other fees. That would represent about an 8% down payment on our restitution.

That is, if we ever see any of it. As I mentioned above, as of this week according to Deputy Clerk Staton in response to the second of two OPRA requests, the City of Trenton hasn’t yet seen one dime of restitution.We’ve come up empty, so far.

So, what the heck was Eric Jackson talking about in March, when he told Cristina Rojas of the Times and he told me and my Cadwalader Heights neighbors, that the city has recouped some of the money, and that he would “continue to work on that?”

Was he talking about the overall collective effort, headed by the Feds and still under way, to seize IPS and Scholtz assets and sell them for cash to distribute to the overall claimant pool?

I don’t think so. The clear implication of the Mayor’s words in March was that The City of Trenton had started to recoup its stolen millions, and looked forward to getting more back through the rest of 2017.

But 2017 is nearly over, and we haven’t received a dime.

So, again: What the heck was Eric Jackson talking about in March?

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