N.J. report: DRPA wasted millions in toll dollars

The vew going westbound through the Ben Franklin Bridge toll plaza in Camden. . (Peter Mucha / Staff)

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 damning report issued Thursday.

Comptroller Matthew Boxer chastised the DRPA for practices such as its much-criticized "economic development" spending and its now-halted 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 the vice chairman.

The Norcross insurance arrangement provided $455,000 over seven years to Norcross' insurance company and an 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 Boxer's 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. That, despite the fact that "neither Norcross nor [his company] 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.

Norcross said he had been offered in 2002 the opportunity to be the DRPA's New Jersey insurance broker "by someone from Gov. McGreevey's office," the report says.

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 currently is part of an investment group seeking to buy the company that owns The Inquirer, the Philadelphia Daily News and philly.com.

He could not be reached for comment today. His secretary said he was out of town.

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.

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.

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

The DRPA responded Thursday that it had already 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 also 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 Norcross' Cooper University Hospital.

The 15-year-long spending spree on economic-development projects such as concert halls, sports stadiums, museums, and monuments, contributed to the DRPA's $1.4 billion debt. More than 40 percent of commuters' tolls now goes to pay principal and interest on that debt.

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 fact, [chief executive John] Matheussen did not even know how a project could get evaluated and approved if it came from the general public."

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

The report singled out the $3.5 million the DRPA gave in 2009 for the President's House memorial near Independence Hall and the $3 million it gave that same year for levees and floodgates on the Repaupo Creek in Gloucester County.

Both projects lacked required documentation and "it is unclear how informed decisions to provide over $6.5 million in grant funding . . . were made."

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."

"A significant number of the funded projects had connections to CEO Matheussen," the report said, including the Seaman's Church Institute, the Battleship New Jersey, the World Trade Center of Greater Philadelphia, the Philadelphia Sports Congress, the Philadelphia Convention and Visitors Bureau, and the Southern New Jersey Development Council.

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 Company, 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, but state regulators and lawmakers should act to outlaw it, 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 found that DRPA executives were actively engaged in the redistribution of the commission payments.

"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.

The free-pass program "resulted in the loss of more than $1 million in toll revenue over the past 10 years," the report said.

That program ended in 2008.

Contact Paul Nussbaum at 215-854-4587 or pnussbaum@phillynews.com