New Jersey comptroller details waste by Delaware River Port Authority

The Delaware River Port Authority has wasted millions of dollars of toll payers' money through mismanagement and political cronyism, the New Jersey state comptroller said in a report issued Thursday.

Comptroller Matthew Boxer chastised the DRPA for practices such as its much-criticized "economic development" spending and its now-ended free E-ZPass benefits for DRPA executives and their families and friends.

Boxer also exposed an insurance payback deal allegedly orchestrated by George E. Norcross III, the South Jersey insurance executive and Democratic Party power broker who is chairman of the board of Cooper University Hospital in Camden.

"In nearly every area we looked at, we found people who treated the DRPA like a personal ATM, from DRPA commissioners to private vendors to community organizations," Boxer said in a statement. "People with connections at the DRPA were quick to put their hand out when dealing with the agency, and they generally were not disappointed when they did."

The DRPA operates four toll bridges and the PATCO commuter rail line linking Philadelphia and South Jersey. Gov. Corbett has chaired the DRPA since early last year. Camden County Freeholder Jeffrey Nash is vice chairman.

Gov. Christie said Thursday that the report "covers a history of financial mismanagement at DRPA, which thankfully is behind us."

Christie said he had "forced the DRPA to implement critical reforms and fundamentally change its practices and culture . . . and will continue to work with Gov. Corbett in enforcing reforms at DRPA."

Much of the report focused on exchanges of money by insurance companies that worked for DRPA in what the comptroller called "a series of ambiguous and nontransparent dealings."

More than $1.5 million in commissions derived from DRPA work was shared among "disclosed and undisclosed insurance brokers," regardless of whether they performed any work for the agency, the report said.

One arrangement provided $455,000 over seven years to Norcross' insurance company, now known as Conner Strong & Buckelew, and to Michael Martucci, an independent insurance broker designated by Norcross.

The money was paid by Willis Insurance of New Jersey as a "referral fee" for securing DRPA insurance business for Willis, executives of that company told investigators.

The Willis executives said they had not sought the DRPA business but were notified in a 2002 e-mail from Norcross that they had been selected, despite the fact that "neither Norcross nor Conner Strong formally work for the DRPA, have the authority to appoint DRPA's insurance broker, or have any official role in DRPA's decision-making process," the report said.

Norcross told the comptroller's investigators that the money had nothing to do with the DRPA but was for other marketing and referral efforts on behalf of Willis.

A spokesman for Norcross issued a statement Thursday saying the comptroller's report showed Norcross' company had acted in an "entirely proper, legal and ethical manner."

In the report, Norcross said he had been offered the opportunity to be the DRPA's New Jersey insurance broker "by someone from Gov. McGreevey's office." He turned the work down because "he did not want to risk bad publicity. . . . Norcross stated that working for DRPA would be too much of a 'reputational risk,' " the report said.

Norcross is part of a group seeking to buy the company that owns The Inquirer, the Philadelphia Daily News, and Philly.com.

U.S. Sen. Frank Lautenberg (D., N.J.) said Thursday that "this is yet another example of how a corrupt political machine operates to enrich itself and local politicians at the expense of everyday people."

Norcross fired back at Lautenberg with a statement that the senator "has been picking the pockets of no-bid, pay-to-play vendors at the DRPA and other public agencies throughout New Jersey for decades."

"It's appalling that the only time Sen. Lautenberg shows any interest at all in South Jersey is when he needs campaign money and votes. He has been missing in action on the critical issues affecting the citizens of this region."

Norcross and Lautenberg also have been feuding this week over the proposed merger of Rutgers-Camden and Rowan University.

The comptroller's DRPA investigation began in 2010 amid disclosures about insurance-related payments at the DRPA, misuse of E-ZPass privileges, and a pervasive culture of political favoritism and pay-to-play practices.

Since the investigation began, at the request of the New Jersey and Pennsylvania governors, the DRPA has tightened many of its spending and management rules.

The DRPA said Thursday that it had addressed many of the problems cited by the comptroller and "will be taking steps to evaluate and address recommendations in the report as promptly as possible."

The DRPA has spent the last of the $500 million in economic-development money that drew much of Boxer's criticism. Its final disposition of that borrowed money, in December, included $6 million for a cancer center being built at Cooper.

The 15-year spending spree on economic-development projects such as concert halls, sports stadiums, museums, and monuments contributed to the DRPA's $1.3 billion debt. More than 40 percent of commuters' tolls now go to pay principal and interest on that debt. Tolls increased by $1 to $5 in July 2011.

The comptroller's report said the DRPA used "money it did not have and funded this campaign through a pattern of borrowing that was imprudent and detrimental to its financial standing."

The borrowing for economic-development projects also violated the DRPA's federal charter, which allows such spending only with funds that are surplus to the needs of the agency's bridges and other facilities, the report said.

The DRPA flouted its own rules and spent the money on favored projects selected by the governors, DRPA commissioners, or other state officials, the report said.

This process, the report said, "created an environment in which the board could direct funding to politically favored entities without appropriate . . . or independent objective consideration."

In a review of 23 economic-development projects, the comptroller's investigators could not find one that met the DRPA's own rules for having supporting paperwork.

Finally ending economic-development spending, when the money ran out last year, "is a significant step towards DRPA refocusing on its core business," the report said, noting that investigators found the DRPA "violated its charter and its own internal policies, weakened its financial position, delayed infrastructure spending, and was forced to raise tolls before taking this step."

The report also was critical of a $700,000 "social and civic sponsorship fund" set up by the DRPA board, because "the vast majority of this funding . . . went to organizations linked to DRPA officials or to organizations that provided a personal benefit to DRPA officials in exchange for the contribution."

The investigators criticized a payment-sharing deal by New Jersey and Pennsylvania insurance brokers for the DRPA.

The New Jersey broker was Willis and the Pennsylvania broker was the Graham Co. of Philadelphia.

The DRPA required the two companies to split insurance commissions equally regardless of work performed, the report said. The arrangement was not illegal in New Jersey, but state regulators and lawmakers should act to outlaw it as it already has been in New York, the report said.

This "true-up" arrangement, which The Inquirer reported in 2010, required Graham to pay Willis more than $500,000 over six years, the report said.

The report also said Graham paid the West Insurance Agency of Philadelphia $684,254 between 2000 and 2010, though investigators could find no evidence that West had performed any work for the money.

Graham told the comptroller's investigators that the payments to West were required by the DRPA board.

The West firm was acquired in late 2010 by PK Financial Group, and officials there did not respond Thursday to requests for comment.

"The DRPA's focus should have been on saving public funds rather than shifting them among its vendors," said John Hoffman, director of the comptroller's investigations division.

The report also examined the now-ended practice of giving free E-ZPass trips to DRPA executives, board members and former board members and their families and friends.

It "resulted in the loss of more than $1 million in toll revenue over the past 10 years," the report said.

Economic Development

The agency incurred debt to fund economic-development projects and ignored capital projects on DRPA bridges and facilities.

There was inadequate oversight of economic-development projects. Quarterly presentations to the board on them stopped in 2004 due to lack of board interest.

The agency shifted from giving loans for economic development to outright grants, though its charter called for the program to be self-sustaining.

Charitable Gifts

Most of the money handed out by the Social and Civic Sponsorship fund was to groups connected to DRPA commissioners and executives. It paid for tickets to galas, black-tie dinners, carriage rides around Philadelphia, and sporting events for commissioners.

In one case, the commission got VIP passes and 12 tickets to NCAA lacrosse playoff games at the University of Pennsylvania in return for a $5,000 donation.

Free Tolls

Free bridge passage for DRPA employees, commissioners and some relatives cost more than $1 million in revenue over 10 years.

A secretary made 1,124 free bridge crossings

after her boss was no longer a bridge commissioner.

Fifty-three "random" people with no DRPA affiliation accidentally got free passage from 2003 through 2008.

Reforms

The report finds that new policies in the last two years have eliminated many practices it criticized.

Source: N.J. Office of the Comptroller

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Inquirer staff writer James Osborne contributed to this article.