NEW CITY, N.Y. -- County Executive Ed Day is asking legislators to sever ties with PKF O'Connor Davies, a auditing firm with which Rockland has $1 million in contracts.
The federal Securities and Exchange Commission announced Monday that PKF O’Connor Davies and one of its senior partners, Domenick F. Consolo, had agreed to settle charges that they issued fraudulent audit reports in connection with municipal bond offerings by the town of Ramapo and its local development corporation for the construction of its baseball stadium in Pomona.
According to the SEC, Consolo and PKF O’Connor Davies consented to its order without admitting or denying the findings.
In a statement Wednesday, the firm acknowledged reaching a settlement with the SEC “relating to our audits of the Town of Ramapo."
"We did so on a ‘neither admit nor deny basis.’ We believe that the circumstances regarding the Town of Ramapo are unique and do not affect our other municipal clients, PKF O'Connor Davies spokeswoman Shelly Orlacchio said.
"However, we’re confident what we learned through this process will provide valuable insights that will benefit our municipal clients moving forward,” the statement said.
According to a report by lohud.com, Ramapo Town Supervisor Christopher St Lawrence and former Deputy Town Attorney Aaron Troodler, the former executive director of the Ramapo Local Development Corp., are both facing federal securities and wire fraud and conspiracy charges in connection with the stadium project. Their trial starts in January.
They are also facing civil charges filed by the SEC, lohud.com reported.
The indictment accuses the two men of selling $150 million in municipal bonds based on made-up financial documents that exaggerated Ramapo's revenues so it could get an better interest rate on loans, the lohud.com story said.
On Tuesday, Day sent a draft resolution to the county Legislature seeking to dump the Mamaroneck-based auditors.
"Our character is judged by the company we keep," the county executive said.
"PKF O'Connor Davies is our auditor and conducts a business that speaks to the county's credibility and financial stability. Our auditing firm must be above reproach."
"We cannot jeopardize our bond rating," he added. "We have to stand united to protect the county's finances and its standing with credit-rating agencies. There cannot be any unanswered questions."
The firm agreed to forfeit approximately $380,000 in audit fees and interest and pay a $100,000 penalty, the SEC said. O’Connor Davies also must engage an independent consultant, it added.
The SEC also said that Consolo has agreed to pay a $75,000 penalty and be suspended from practicing public company accounting. He is also prohibited from acting as the engagement partner or engagement quality control reviewer on any municipal audit for five years, the SEC said.
The SEC probe found that the firm and Consolo had allowed Ramapo to record a $3.08 million receivable in its general fund for a property sale that Consolo knew had not occurred. The federal agency also said that Consolo had “ignored red flags” and relied upon “what turned out to be false representations by Ramapo officials about other receivables, interfund transfers and liabilities."
According to the SEC, the firm also failed "to take appropriate steps to mitigate the risk of material misstatements even after senior management became aware that Ramapo’s financial statements were being investigated and Consolo had received complaints about possible fraud."
Rockland has three contracts with PKF O'Connor Davies: $532,950 for auditing county finances for fiscal years 2015, 2016 and 2017; $319,000 to audit Summit Park Hospital and Nursing Care Center and the Department of Mental Health and $111,000 for accounting services to review the proposed 2017 budget.
Day said the county is also looking into other contracts with PKF O'Connor Davies, including one involving a Deferred Compensation plan offered to employees.
Resolutions for all three contracts were approved by the Legislature, Day said.
Day said he returned the resolutions to the Legislature unsigned, reflecting his “discomfort doing business with a firm that was under investigation in the Ramapo case.”
The county executive said at the time that under the county charter, "the selection of this firm is clearly the choice of the county Legislature."
Day said he would like to see proposals for a new accounting firm.
Rockland County had been doing business with PKF O'Connor Davis and its predecessor companies for more than 30 years, Day said.