A trend of living large at Metra; officials plan to hire outside auditor

Absolute authority coupled with limited checks and balances created a culture of largesse at Metra in the midst of fare hikes and financial crises.

A Daily Herald review of documents from Metra obtained through the Freedom of Information Act raises questions about liberal spending under the tenure of former Executive Director Phil Pagano.

In 2007, CTA, Pace and Metra faced a transit meltdown with threats of service cuts and fare increases as the three agencies sought additional funding from Springfield.

The same year, charges to Pagano's company credit card totaled $14,158.

Credit card charges by Pagano from 2008 to mid-April 2010 totaled $16,628 - a period marked by declining revenues and two fare hikes.

Pagano died May 7 this year in a suicide the same day Metra board directors were expected to fire him for financial misconduct after a long and heralded career. He took at least $475,000 in unauthorized vacation pay and owed the agency $127,000 from loans on a bonus program, officials reported.

The $30,786 in expenses since 2007 involved pricey dinners at posh restaurants, meals for staffers and directors, entertaining legislators, and items at a golf pro shop. Specific spending includes:

• More than $5,690 for dining in Springfield including $3,000 at the Sangamo Club, $654 at Gallagher's steak house, and $230 at Saputo's Italian restaurant. Metra officials said the Sangamo Club spending was for a legislative reception and other expenses were for working dinners with consultants and legislative officers.

• $462 for a seafood restaurant in Washington, D.C. Metra officials said this was a dinner with legislative liaisons and consultants.

• More than $2,200 at Old Oak Florist in Homer Glen, for funeral arrangements for Metra staffers and officials or their relatives.

• More than $2,200 for meals at the Corner Bakery in Chicago. Metra officials said these were working lunches or breakfasts for staffers or directors as well as safety poster contest judges.

• A $193 charge at the Blackwolf Run golf shop in Kohler. That expense was questioned and Pagano was asked to reimburse the agency.

"The question is are these expenses appropriate, given the fiscal status of the agency and the responsibility of protecting public assets?" asked Terry Pastika, executive director of the watchdog Citizen Advocacy Council.

Metra officials don't scrutinize credit card expenses, which is a contrast to local governments such as Arlington Heights, where travel and purchases are reviewed, said Mayor Arlene Mulder, who is also a Metra director.

"I definitely think we have to look at financials more closely," Mulder said.

"I think the executive director had a lot of ability to make independent decisions," Metra spokeswoman Judy Pardonnet said Thursday. "As related to the charges, some of them are quite justifiable, and with others - board members may have questions and as a result may change policies and procedures."

For example, Pardonnet said, it's unclear if the board has ever talked about a funeral flowers policy.

On Wednesday, two Metra committees established to review financial policies and the executive director's role will likely vote to recommend hiring an outside auditor to scrutinize the agency's books, Pardonnet said.

Under state law, Pagano had broad powers to hire employees and set compensation. A report to Metra on the financial irregularities concluded "no one was willing to tell Pagano no," and the fact no one questioned his requests for vacation payouts until the summer of 2009 or checked if he was taking vacation or not bears that out.

The report concluded that Pagano forged the Metra chairman's signature on a form stating he could receive advances on vacation pay contrary to agency policy. His requests for advances were approved by Deputy Executive Director for Administration Michael Noland and Chief Financial Officer Frank Racibozynski. In June 2009, Racibozynski told Pagano he needed authorization for a request for all his 2010 vacation pay, which led to more forgeries, the report stated.

But aside from the money obtained fraudulently, Metra directors also allowed generous benefits to Pagano and other executives at a time of financial restraint.

In addition to 11 weeks of vacation, a $269,000 annual salary, about $1 million from an executive bonus program and a life insurance plan, Pagano had two retirement plans.

Metra contributed between $73,000 and $99,000 annually to his retirement plan. The agency also contributed to 401(k) accounts for 22 high-ranking employees in 2010. Pagano would have received a $22,000 contribution in 2010.

University of Illinois at Chicago transportation professor and former Pace Executive Director Joseph DiJohn called the double pensions highly unusual.

"When I was at Pace, there never was any intention for the employer to make a contribution to the 401(k) in addition to the existing pension plan," he said.

Pardonnet noted that the two board committees will "look closely into decisions made by the executive director and everything associated with his authority to make those decisions."