Report: Pagano took $475,000 in unauthorized vacation payments

Metra leaders trusted former Executive Director Phil Pagano completely, but that trust was rewarded by a blatant disregard for rules resulting in his obtaining thousands in unauthorized payments and forging the signature of his boss, officials said Friday.

Pagano, who died when he walked in front of a train May 7, took at least $475,000 in unauthorized vacation payments, officials said.

The deceit was enabled by a climate of limited checks and balances where Pagano had the confidence of the Metra board and broad executive powers.

"No one was willing to tell Phil no," attorney James G. Sotos stated in a report.

Sotos, who was hired by Metra April 30 to investigate Pagano's financial dealings, will turn his findings over to the Illinois attorney general's office. He said in addition to breaking Metra's rules of conduct by falsifying documents and dishonesty, Pagano likely violated state and federal laws.

Pagano, 60, also owes Metra $127,000 after he took out more than $800,000 in pretax loans from an executive incentive program and a life insurance plan, which totaled about $1 million as of this year.

There's no record Pagano, who was paid $269,600 a year, was true to his word and worked without vacations despite receiving pay for unused days and in fact he took time off in Florida this April as the scandal was brewing.

"There was a culture at Metra of trust and loyalty to Phil Pagano," Sotos said. "He was allowed to engage in acts over time without adequate oversight and accountability. He was such a strong leader, everything ran through him and he had a great deal of control over internal operations."

Back in 1990, Pagano started obtaining cash payouts for unused vacation time, but his demands became more aggressive, Sotos said. In June 2009, he requested a cash payout for his 2010 vacation, which prompted the agency's chief financial officer to question the request.

As a result, Pagano forged board Chairman Carole Doris' signature three times on vacation payout requests and a document stating he was entitled to advances on his time off, Sotos said. Doris contends she gave no such approvals to Pagano.

Sotos referenced a similar authorization when Jeffrey Ladd was chairman of the board, but said it was not signed and no original was available. Ladd could not be reached for comment.

Asked how this happened, Doris said, "The error was that we trusted too completely, too deeply. Phil Pagano had the trust and confidence of the staff here at Metra and of this board and previous boards. It's a sad coda to a distinguished career."

When Metra officials asked Pagano why this was going on, he said it was not for anything immoral or illegal. Sotos said Pagano believed he was entitled to the payments yet Doris noted he was contrite when confronted with the facts.

It's certain the agency was generous in its provisions to Pagano. In addition to his $269,600 salary, Pagano received a payment of $21,500 in 2008 for unused sick time. He also received an extra payment of $43,000 in vacation time in 2008 because of miscalculations by the human resources department.

Pagano died in Crystal Lake just hours before a meeting where directors were expected to fire him after 20 years at the helm.

He is credited with building ridership and rebuilding Metra after it dropped in popularity during the 1980s. Friends and colleagues called him a railroad expert and acknowledged the agency lost a wealth of institutional knowledge with his passing.

Metra Director Jack Shaffer of Cary praised Pagano for his leadership but acknowledged "we are guilty of not thinking the unthinkable."

As to Pagano's motive, Shaffer said he didn't know but it might have to do with the fact that Pagano's father has Alzheimer's. A Metra spokeswoman noted that Pagano had deflected questions about why he needed the money and did not give any specifics about his family needs.

Board members on Friday voted to establish two committees to investigate financial practices, senior managers' compensation and examine the operations of the executive director's office. They also appointed an acting inspector general.

"We are turning a new page for Metra," said Doris, a former prosecutor who lives in Downers Grove.

"We've got a lot of work to do," Director James LaBelle of Zion said.

Sotos said he did not find evidence any other Metra employees were trying to enrich themselves at public expense.

Sen. Dick Durbin, the Federal Transit Administration, the Cook County state's attorney and Illinois attorney general's office have intervened in the affair. The U.S. attorney's office and U.S. Department of Transportation also are involved.

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<li><a href="/story/?id=380940">The investigation of Phil Pagano<span class="date"> [5/14/10]</span></a></li>

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