Baltimore's mayor said yesterday that "most likely we should not be doing business" with a private equipment supply company after disclosures about an off-the-books account used by the Fire Department to purchase unauthorized equipment.
Mayor Sheila Dixon, responding to a report in The Sun on the account with Draeger Safety Inc., one of the largest air mask distributors, would not say whether she continues to have confidence in Fire Chief William J. Goodwin Jr.
"I'm going to be reassessing all our department heads," Dixon said. "We want the best people who are going to follow our rules and regulations. I think he's made every effort to be transparent. I think that we need to know that none of our agency heads can think they can just go around the system so they can accommodate their [own] process."
Baltimore's finance director, Edward J. Gallagher, said the way the Fire Department conducts business with Draeger must change, particularly in making discounted purchases from the company and letting the money accumulate in an unauthorized account instead of being returned to the city as is required.
"I'm putting Draeger on notice that the city will not continue this practice," Gallagher said. "We would expect any discounts, or whatever, to be taken on the front end, and we'll pay them for the goods that we receive."
Comptroller Joan M. Pratt, who is considering challenging Dixon for the mayor's seat in September, said she has ordered a city auditor to investigate.
"The circumvention of control of the city's procurement system by the Fire Department is of great concern to me," Pratt said.
The account was funded through a series of rebates, returns and discounts given by Draeger to the Fire Department after the city had agreed to pay the full amount for equipment. The city also paid for items that the department never received, and that money also went into the account, according to the documents.
The company kept the money and allowed the Fire Department to use it to buy more equipment. Douglas V. Campbell, who ran the Fire Department's air mask unit, was in charge of the account and kept records in a handwritten ledger using a purchase order number that did not comply with city naming standards. Campbell has declined to comment beyond acknowledging that he kept a ledger for the account.
Draeger said it did nothing wrong, that the account was approved by fire officials and that no one, including Campbell, benefited personally. Goodwin has said that while the account was inappropriate, it was used to buy legitimate equipment.
Campbell was able to buy from Draeger without getting approval from a city purchasing agency, which must sign off on items over $1,000, or from the Board of Estimates, a panel that includes the mayor, the City Council president and the comptroller, which authorizes spending above $5,000.
Records show that in addition to fire-related equipment, Campbell bought an $11,000 sound system for the Fire Academy and $3,800 in furniture for classrooms.
Discounts and rebates are supposed to be negotiated before the city approves a spending item. Returns are supposed to go through the city's Finance Department.
Gallagher, the city's finance chief, said he wants the company to write a check to the city for the balance of the account, roughly $2,600.
Gallagher said he does not hold the company responsible.
"I don't think we can blame Draeger," he said. "I think the blame for allowing that to happen is with the city. Every corporation has its rules. The mayor and City Council of Baltimore has its rules. That is the end of discussion."
Gallagher said he has instructed his purchasing and budgeting offices to give closer scrutiny to Fire Department requests.
Dixon said she wants to know whether other cities that do business with Draeger use a similar system of credits and rebates. "I'm going to ask my Finance Department to find out," the mayor said. "Most likely we should not be doing business with them."
Pratt called the rebates and discounts used to fill the account examples of "overpayments" by the city for equipment.
"It is an overpayment, because there were credits that were being accumulated that allowed them to make future purchases," the comptroller said. "The city might not continue the relationship with the company because it was not responsible."
A Draeger representative declined to comment for this article, but Graeme A. Roberts, the company's vice president and chief financial officer in its Pittsburgh office, has said previously that the firm's business practices are consistent with industry standards. He indicated that the account was set up at the request of the Fire Department.
Since 2001, various city agencies have purchased $3.5 million worth of specialized equipment from Draeger, including air masks for police and firefighters. Draeger is the only company that supplies replacement parts and upgrades for its air masks, so curtailing the business relationship could mean replacing all of the city's breathing equipment. The company has supplied air masks to the Baltimore Fire Department for 20 years.
Goodwin was in Cambridge, Mass., yesterday attending a 19-day fellowship at Harvard University's John F. Kennedy School of Government. Rick Binetti, a Fire Department spokesman, said the chief would not comment beyond written statements to The Sun last week.
Goodwin has said that he knew of the account's genesis, but thought it was legitimate and had ended years ago.
In one case, the Fire Department account received about $64,000 in rebates from Draeger when Baltimore's Police Department purchased air masks for roughly $1 million. Matt Jablow, a police spokesman, declined to say whether the department would ask for money back.
Paul Blair, the head of the police union, said the money is not significant, given the scope of the department's budget. But he said the money should be returned and that it could be used for replacement batteries for police radios.
City Council President Stephanie Rawlings-Blake said she was "disappointed" to learn of the account. She said earlier this year that she noticed another instance of the Fire Department circumventing city procurement rules. In that case, she said, the department bought and received about $20,000 worth of equipment before getting Board of Estimates approval.
"My concern at that time, and clearly it remains, is that the rules for purchasing are followed by all agencies," Rawlings-Blake said.
Binetti acknowledged that the Fire Department made a mistake in that instance, too. The spokesman said the department is investigating the off-the-books account with Draeger.