Baltimore Sun

State agency investigates auditor of Norris spending

A state agency is investigating the accounting firm that failed to uncover all but $61.85 of the $20,000 from an obscure police account that Baltimore Police Commissioner Edward T. Norris pleaded guilty to misusing.

The Maryland Board of Public Accountancy has launched an inquiry into Ernst & Young, which the city hired to audit a police supplemental account that Norris raided for extravagant personal spending.

The investigation was prompted by a complaint filed by Circuit Court Clerk Frank M. Conaway, a write-in candidate for mayor who accuses the auditing firm of overlooking Norris' misspending to please Mayor Martin O'Malley, who stood behind the police commissioner when the spending was first called into question.

Liz Williams, a spokeswoman for the state Department of Labor, Licensing and Regulation, which oversees the board, confirmed yesterday that the investigation is under way. She declined to elaborate.

"I'm very pleased that an investigation is being carried out so that the citizens of Baltimore can know the truth about how this accounting firm does business for and with the city," Conaway said.

The board has the authority to reprimand an accounting firm, impose fines and suspend or revoke its license to practice if it finds violations of the state's Public Accountancy Act.

Charlie H. Perkins, a spokesman for Ernst & Young, declined to comment.

Rick Abbruzzese, a spokesman for Mayor Martin O'Malley, also declined to comment, except to say, "It's campaign season."

O'Malley hired Ernst & Young in August 2002 after The Sun reported that Norris had used the fund for personal expenses, including his bills at a trendy Manhattan hotel and steakhouse.

The audit cost taxpayers $35,000 and found that Norris had tapped the account for just one personal purchase, a $61.85 item of clothing at Nordstrom's in Towson.

The auditors also recommended reimbursement of the $600.21 they said a police lieutenant colonel had spent to fly his wife to a conference in San Diego. That allegation turned out to be false, according to the city's finance department.

A November 2002 review by the city's finance director, Peggy Watson, found Norris made $6,000 in questionable expenditures.

About a year later, federal prosecutors charged Norris with spending about $20,000 on gifts from Victoria's Secret lingerie store, liquor for his home and trips to New York for romantic encounters. Norris pleaded guilty in March to federal corruption and tax charges and, in June, was sentenced to six months in prison.

When Norris was indicted, Watson said she was satisfied that the city and Ernst & Young uncovered all that they could.

"What the Justice Department did, I couldn't have found and Ernst & Young couldn't have found," Watson said at the time. "We don't have subpoena power. The documents we looked at didn't say they were spending the money on lingerie."

In his letter to the state board, Conaway said Ernst & Young glossed over evidence of misspending to please the O'Malley administration, which in July 2001 awarded the firm an $850,000 loan to move to an Inner Harbor building and pays the firm $140,000 a year to perform routine auditing for the city.

At the time, the firm said its examination was limited.

"We did feel that we could identify any 'obviously personal' purchases," the auditors wrote in their report. "The explanations provided sounded reasonable, however, [and] we did not extend our procedures to perform further 'investigation' into these items. Such an investigation is beyond the scope of typical audit procedures."