Audit: Marshal Shook Down Businesses

A politically connected marshal managed to ​“coerce” a $5,000 delinquent tax fee from a business that had already paid up — and ​“misrepresented” facts in order to collect a $2,000 fee on a $133 tax bill.

Those details leap from a scathing, previously unreleased audit that led the city to overhaul how it collects delinquent taxes.

The audit, by RSM McGladrey, Inc., was released Monday to the Independent as a result of a Freedom of Information request. The city hired McGladrey on Nov. 25, 2008, to investigate a series of taxpayer complaints about how the city handled the administration of tax warrants to collect unpaid tax bills. The city released two drafts of the audit dated March and May 2009. The city never made the audit public.

Click here to read the May report.

The reports center on the conduct of state marshal and mayoral fundraiser Peter Criscuolo (pictured). At the time, Criscuolo was the city’s highest-grossing marshal, and its only go-to man for hunting down personal property tax scofflaws. Whenever a business hadn’t paid its personal property tax, the city would hire Criscuolo to issue an alias tax warrant. By law, he could collect up to a 15 percent fee on the overdue tax bill.

After interviewing taxpayers, auditors came up with eight examples where Criscuolo had collected excessive fees based on ​“coercion,” an erroneous tax warrant, or misrepresented facts. The marshal is no stranger to accusations of aggressive or rule-breaking tax collection — click here, here and here for other stories. Criscuolo did not return phone messages requesting comment for this story.

The city pulled Criscuolo off the tax-warrant beat for a while, reformed its procedures — and has since resumed giving him work.

Exhibit A: Rite Aid

Using a verbal threat, Criscuolo collected a $5,426 fee on a tax account that was not delinquent, according to the audit. Here’s what happened, according to the McGladrey report:

Rite Aid Corporation was issued a $30,458 tax bill for personal property tax for its store at 46 Church St. (pictured), due July 2, 2008. The company cut a check for the full amount on June 18; the check cleared on June 25.

On June 24, however, the office of former city Tax Collector C.J. Cuticello erroneously issued a tax warrant for over $36,000. Criscuolo served the warrant at the retail store in person. He ​“threatened to seize the taxpayer’s business,” the auditors found.

The manager notified Rite Aid’s corporate office, which called Criscuolo by phone and explained that the taxes had been paid. The taxpayer left phone messages with Cuticello’s office, but none were returned.

“To avoid a disruption to their business,” Rite Aid agreed to pay $16,143. The company cut a check for that amount, which included $5,426 in marshal fees. Thus, Criscuolo collected over $5,000 on a tax bill that was already paid in full, auditors concluded.

“He appears to have done so to a reputable business by coercion,” wrote Michael J. O’Neill, director of RSM McGladrey, who prepared the report. O’Neill noted that the errant warrant stemmed from the tax collector’s office. That office ​“failed to properly oversee this matter and to institute procedures” to keep track of how warrants were managed.

Exhibit B: LaFarge North America

Criscuolo was dispatched to the New Haven Cement Terminal on Waterfront Street to collect $133 in outstanding taxes. Using a phone call and a letter instead of an official tax warrant, he made off with a $2,015 fee by ​“misrepresenting” the amount of taxes due, according to the audit.

In this case, the auditors found there might have been improper collusion between Criscuolo and Cuticello’s office. Here’s what happened, according to the McGladrey report:

LaFarge paid two personal property tax accounts on Aug. 9, 2008, but underpaid by $132.79. As is common procedure, the tax collector issued a warrant for the outstanding amount as well as the next tax bill due Jan. 1, 2009. The warrant summed to $4,569.

LaFarge cut a check on Oct. 7 for $13,426.93. The check was too big — it represented the amount the city had demanded on Aug. 6, before LaFarge had paid up on its two accounts. The tax collector’s office sent the check back ​“without any cover letter or explanation.”

Then LaFarge heard from Criscuolo in late October with a new demand for $15,679.65. Criscuolo didn’t issue a tax warrant. He wrote a letter on his own stationary and made a phone call. The company complied with the demand. Criscuolo wrote that the amount due comprised $2,015 in marshal fees, a couple hundred dollars in other interest and fees, and $13,426.93, which was exactly the amount of the company’s rejected check.

The tax collector was ​“unable to explain how Criscuolo would have been aware of the amount of the erroneous check,” O’Neill wrote. ​“The information needed to perpetrate this scheme could have been gained without city authorization, or with the assistance of city personnel.”

O’Neill concluded that Criscuolo ​“misrepresented” the amount of the warrant to the taxpayer. The tax collector’s office failed to open an investigation into the matter in order to determine how Criscuolo learned about the rejected check, or to evaluate Criscuolo’s conduct, O’Neill wrote.

Reached Monday, city Comptroller Mark Pietrosimone said the auditor misunderstood the role of city personnel in that incident. He said the city found no need to reprimand anyone in the tax collector’s office. Tax Collector Cuticello was on his way out at the time, he noted.

Cuticello retired in May 2009. He did so of his own volition, not because of the problems found by the audit, city spokeswoman Jessica Mayorga said.

“I never left because of that. I left because I had an opportunity to retire and do different things,” Cuticello said Tuesday. He served nine years, during which time, he said, he instituted extensive controls and policies that were absent before. He said he left the office ​“in the best shape it had been in 15, 20 years.”

“It wasn’t confusion with my office,” Cuticello said of the instances cited in the audit. ​“It was confusion with the assessor’s office. There were multiple accounts sometimes for the same tax that the assessor’s office created. When the assessor does something and sends it to the tax office, as far as I was concerned it’s a legitimate account.”

Exhibit C: F.J. Dahill Company, Inc.

Though F.J. Dahill company had already paid its taxes, Criscuolo threatened to shut down the business, extracted a $23,000 tax payment, and made off with a $3,528 fee, according to the audit.

As in many of these cases, the problem started with an erroneous tax warrant: The city double-billed Dahill for a $17,697.04 tax bill and issued a $23,515.78 warrant on Oct. 2, 2008. Here’s what happened, according to the audit:

Criscuolo made a phone call. He ​“threatened to seize the taxpayer’s business, despite the taxpayer’s explanation that the taxes were not delinquent.” Dahill called the tax collector, who acknowledged the warrant had been issued in error.

Despite that fact, Cuticello ​“did not compel Criscuolo to relent in his efforts,” O’Neill wrote. Later that same day, Criscuolo knocked on the company’s door and continued to demand payment. Dahill told Criscuolo that the city had admitted the error. Criscuolo called the tax collector’s office, then accused the company of lying, according to the audit.

Criscuolo told the taxpayer that Cuticello was out of the office and could not have spoken with Dahill. He said he’d come back the following day to collect payment. The next day, Dahill wrote a check to the city for the erroneous tax bill. Criscuolo wouldn’t accept a check to the city. He demanded the check be written out to him personally. He claimed he was waiving the marshal fee, according to the audit. Dahill cut Criscuolo a check for $23,515.78.

In November, the taxpayer got word from the city that he was delinquent on his tax bill, because Criscuolo had passed along only $19,987.78 to the city on behalf of the taxpayer, and had kept $3,528 for himself.

Exhibit D: Sargent Enterprises, Inc.

In this case, the Sargent hardware company tried to pay its taxes directly to the city, but was allegedly forced to pay Criscuolo a full $538 in marshal fees. Criscuolo paid the taxpayer’s bill directly from his own bank account, and failed to prove that he had served the warrant within the 90-day time limit required by law, according to the audit. Here’s what happened, according to the audit:

The company owed $1,735.83 on a July 2008 tax bill. A warrant was issued in October for $3,581, which represents the amount past due and early collection of the January 2009 bill.

Sargent paid the $1,735.83 bill directly to the city on Jan. 23, 2009. Despite that payment, Criscuolo went after Sargent for the full tax warrant. Criscuolo cut a $1,845.98 check from his own trustee account on behalf of the taxpayer on March 11. He told the city he had received $2,383.98 from Sargent, and charged the full $538 in fees, despite the fact that Sargent had already made a payment directly to the city. Criscuolo’s check was deposited with the tax collector 39 days after Sargent paid Criscuolo, according to the report.

O’Neill found this case ​“problematic” on two fronts: According to a new city protocol, the tax collector wasn’t supposed to take money directly from a marshal. And Criscuolo failed to prove that he had issued the warrant before a Dec. 16 deadline.

Exhibit E: PXG Health LLC

In this case, Criscuolo collected an $8,000 fee on a $852.30 delinquency, according to the audit.

The taxpayer owed $852.30 on its July 2007 property tax bill. As is allowed by law, the tax collector issued a warrant on Oct. 2, 2008 for not just the delinquency, but the next payment due. The warrant totaled $56,837.77. Criscuolo charged a $8,000 fee, just under the 15 percent cap.

In another case, Criscuolo was given an erroneous warrant from the tax collector’s office for the Levy Dental Group. The marshal ​“threatened to disrupt their business unless payment was made.” The taxpayer called Cuticello’s office, but did not get a call back for ​“several days,” according to the audit.

Comptroller Pietrosimone said most of these cases were referred to the outside auditors after taxpayers complained to the city. He said the city conducted its own internal audit to address the problems, then hired McGladrey for extra support.

“No Documented Procedures” In Place

Four pages of each of the 12- and 13-page reports were devoted to Criscuolo’s conduct. Based on the above cases, the auditors concluded the city should stop using a single marshal to serve all its tax warrants. At the time, the city would hand Criscuolo as many as 500 warrants all on the same day in October, according to Pietrosimone.

The system was ​“inefficient” and disorderly, auditors noted: Several warrants, some with large balances, were never served. Two checks were found among warrants that were never sent to the tax collector for deposit. The volume of warrants ​“precluded timely service,” and the city did not communicate regularly with Criscuolo to see if taxes had been paid, auditors found.

In putting together the audit, McGladrey interviewed taxpayers whose checks had been refunded. In several cases, the tax collector’s office rejected taxpayers’ payments because the case had already been sent to Criscuolo for collection, auditors found. In some cases, checks were mailed back with ​“little or no explanation.”

Futher, auditors found ​“no documented procedures” for picking which accounts to be warranted, selecting and overseeing state marshals, tracking the status of warrants, and how the marshal is supposed to pass along payments to the tax collector.

McGladrey suggested the city stop using only one marshal to serve tax warrants. It suggested the city write guidelines for criteria for selecting marshals; consider hiring more marshals for the job. It also suggested getting rid of marshals and instead appointing city staff to serve as constables to serve warrants instead, using the revenue from fees to fund the new positions.

Pietrosimone said the city rejected that last suggestion — the tax collector is already a ​“constable,” according to the charter. The city opted to create a new system that spread out the work between more marshals.

A New Way Of Serving

The city was already working on the new system while auditors were investigating. In May 2009, aldermen passed a new law by which the city would go out to bid for marshal services, with the hopes of driving costs down.

Eight marshals responded. They agreed to lower their prices, including capping tax warrant fees at 10.5 percent, instead of the 15 percent allowed by state statute.

The new tax warrant system was rolled out in October 2009. For the first time, property tax scofflaws got letters advising them they were about to be hit with a tax warrant. If they didn’t pay, their accounts were added to a tax warrant list. The list was sorted according to how much they owed, with the biggest debt on the top, said Pietrosimone (pictured).

Under the new system, each of five marshals got only 20 warrants to start with — instead of one man getting 500 all at once. They had weekly or bi-weekly meetings with the new tax collector, Maureen Villani.

“We’re forced to keep better track of the warrants now,” Pietrosimone said.

Pietrosimone said the new tax warrant system has drawn no complaints — except for one from a strip club, involving marshal Billy Nolan. Click here to read the Register’s Mary O’Leary’s report on that.

Criscuolo is still working for the city, serving tax warrants. Asked what repercussions the marshal suffered as a result of the scathing audit, Pietrosimone said once the city learned about the various complaints around December 2008, the city pulled all the marshal’s warrants.

“You have no more authority to serve any more warrants. You’re not doing anything else for us until we get all this straightened out,” the city told Criscuolo, Pietrosimone said.

Mayoral Chief of Staff took Criscuolo aside and had ​“conversations” with him, Pietrosimone said. When the bids were reopened in early 2009, Criscuolo jumped back into the tax-warrant work.

“He followed the process,” said Pietrosimone. ​“As far as I understood, he was still allowed to do the work because of the type of repercussions that we did,” by yanking the remaining warrants and talking to him.

“He’s been made aware of the concerns, and changes have taken place,” added spokeswoman Mayorga.