Investigations underway into City of Hutto’s ‘unauthorized’ severance deals

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Editor’s Note: More than a week after this report was published, former Hutto Economic Development Director Susan Cates’ lawyer contacted KXAN to correct the record concerning her termination agreement. Cates was offered a separation agreement by the city, but “declined” to sign it. Cates did not receive the four weeks’ severance package offered to her in 2018. This article has been updated to reflect that and we’ve included Cates’ complete statement in this report.

HUTTO, Texas (KXAN) — “Motion passes five, zero,” Hutto Mayor Doug Gaul announced just seconds after every Hutto council member voted yes to an ordinance that could allow more than a dozen former Hutto employees to tell why they signed severance packages in exchange for leaving their city positions.

We’d like to be precise with the number of employees who got these separation deals, but the city admits there’s no way to know the exact number today.

Those packages paid those employees their salaries long after they left their jobs with the City of Hutto. Most of the deals also allowed those employees to continue coverage under the city’s health insurance plan despite their employment ending.

Hutto’s new city attorney confirmed during a Thursday council meeting that none of the agreements — or the taxpayer dollars spent on them — were ever approved by a council vote.

“From your ordinances, that something only council can act on,” Hutto City Attorney Dottie Palumbo told council members during the Aug. 13 meeting.

CONFIDENTIAL: Do Not Discuss

The city confirmed the separation agreements started in 2017 soon after former city manager Odis Jones was hired. Records provided to KXAN show Jones signed the first agreement on Feb. 16, 2017.

That deal allowed a former city engineer to resign and the city continued paying her for another four weeks after she quit. Those payments included taxpayer-funded health insurance, but the agreement does not detail the exact dollar amounts connected to that particular deal.

This is the nondisclosure language taken from a September 2017 separation agreement signed by former Hutto City Attorney Michael Shaunessy.

The last agreement was signed on Dec. 6, 2019 when current Hutto Assistant City Manager Byron Frankland signed the agreement, which created for the city’s human resources head, Allison Hosgood. Hosgood’s deal would authorize the city manager to continue paying her for up to 24 weeks “’In the event’ she’s terminated,” the agreement stated.

Since 2017, employment separation agreements provided to KXAN show $835,480 in proposed agreements, but the city still doesn’t know if that total was actually paid out in separation deals for employees who either resigned or were terminated. That total includes deals given to Jones when his employment ended in December 2019 and a settlement paid to former city spokeswoman Emily Parks.

Former Hutto City Manager Odis Jones talks with a citizen before the start of this 2019 council meeting, which ended up being Jones’ final council meeting as city manager in Hutto. (KXAN Photo/Jody Barr)

Jones and Parks’ agreements were approved by council — the only two deals the city’s attorney said are valid separation contracts.

Not including Parks and Jones’ separations, the records we obtained in this investigation show at least $329,227 was to be paid to 16 former employees in what the city now calls “unauthorized” severance packages. That total doesn’t include payments made to two of the 16 because the severance documents did not list the exact dollar amounts.

The agreements also include language that would prevent the employees from discussing even the existence of a separation agreement. The records are “strictly confidential,” the contract states.

Investigations, subpoenas in the works

Hutto council members Tanner Rose and Mike Snyder asked the city’s attorney to draft an ordinance and have it ready for the Aug. 13 meeting. The ordinance, if approved, would void each of the agreements and remove the nondisclosure provisions contained in the deals.

The ordinance would also allow the city to recover any tax dollars paid to former employees.

“If we void these, are we expecting that those employees, those former employees, would have to pay back?” Mayor Doug Gaul asked during the meeting.

“There’s a provision that allows you do to anything necessary and appropriate to carry out the terms of the ordinance,” Palumbo responded.

Hutto Councilmen Tanner Rose (left) and Mike Snyder said they both plan to issue subpoenas to each person who signed off on a separation agreement. They also plan to interview each former employee who received payment to find out why their employment with the city ended. (KXAN Photo/Jody Barr)

That means when the city’s forensic auditing firm completes a review of the city’s finances, the firm could make recommendations in its final report related to the payouts. At this point, the city still couldn’t tell council an exact dollar amount or the exact number of agreements the city manager’s office executed.

Rose and Snyder said they heard about the payments long before either were elected to their council offices. They weren’t sure whether the rumblings about the agreements were simply rumor, until a few of the agreements were made public by unnamed sources. After taking office, both said they tried to get the records from Jones’ office.

Jones’ office would not produce the records, Rose told KXAN.

The records were eventually made public and released in an open records request by the city weeks after Jones’ departure, according to Palumbo.

“I think the public is going to be very happy that a dark part of our history is going to be potentially exposed,” Snyder said during the meeting.

DATEEMPLOYEEPOSITIONAPPROVERSIGNED? AMOUNT WEEKS
2/16/2017Laura ArthurSr. Associate EngineerOdis JonesSigned N/A 4
3/23/2017Earl MorrisChief of Police Odis JonesSigned $45,191.795
9/7/2017Danielle SinghAsst. City ManagerMichael ShaunessySigned $32,307.6614
2/20/2018Ashley StathatosN/AOdis JonesSigned $20,576.9810
8/2/2018Carroll MenascoHuman Resources DirectorAllison Hosgood/Odis JonesSigned $13,846.158
8/6/2018David MasonPurchasing ManagerAllison HosgoodSigned $13,538.468
3/11/2019Scot StromsnessEx. Dir. of Community ServicesAllison HosgoodSigned $46,442.3121
6/25/2019Marc FloresBuilding InspectorAllison HosgoodSigned $8,768.008
6/26/2019Edena AtmoreAsst. City ManagerAllison HosgoodSigned $59,230.8222
7/25/2019Renee HuertaCode Enforcement OfficerAllison HosgoodSigned $5,440.008
12/5/2019James WeheierChief Development OfficerAllison HosgoodSigned $32,307.6912
12/6/2019Allison HosgoodHR DirectorByron FranklandSigned N/A 24
This chart was created from information pulled from each of the proposed separation agreements that includes signatures of Hutto city officials. The agreements do not show whether the dollars listed in the agreements were actually paid.

DATEEMPLOYEEPOSITIONAPPROVERUNSIGNED AMOUNT WEEKS
10/4/2017William ReitmeyerDetectiveOdis JonesUnsigned $9,305.608
2/7/2018Susan CatesExecutive Director of Economic DevelopmentOdis JonesUnsigned $8,461.544
1/10/2019James BrysonAssistant Director of FinanceAllison HosgoodUnsigned $15,348.628
3/4/2019Matt RectorDirector of Public Works and EngineeringAllison HosgoodUnsigned $18,461.548
This chart was created from information pulled from each of the proposed separation agreements that do not include signatures of Hutto city officials or employees named in the agreements. The agreements also do not show whether the dollars listed in the agreements were actually paid.

Not all of the agreements were executed.

Susan Cates, the city’s former economic development director was offered a four-week severance package in February 2018, but her attorney told KXAN “Cates did not execute any transition, termination, settlement, confidentiality or similar agreement with the City of Hutto nor did she accept public monies, unauthorized or otherwise, from the City of Hutto in conjunction with her wrongful termination.,” Christopher Nichols wrote in a letter to KXAN.

Cates went before council in 2018 to tell the public the she “was fired by my boss, City Manager, Odis Jones.” Cates went on to spell out how she was fired by Jones in her prepared statement.

The questions during the Aug. 13 council meeting eventually turned to whether any of the city officials who approved the agreements could face criminal investigations.

“Is there anything we can do for these being signed for the past three years from a legal standpoint or a monetary standpoint for them being executed without our knowledge?” Rose asked Palumbo.

“I had a similar client where we made a demand on a fidelity bond based on some actions that had been taken, so that would be the course of action that you could take as far as the fact that these were signed by officers of the city without authority,” she told Rose.

Fidelity bonds are insurance policies that would protect a city from being sued as a result of “fraud or dishonesty,” according to the U.S. Department of Labor. “Fraud or dishonesty includes, but is not limited to, larceny, theft, embezzlement, forgery, misappropriation, wrongful abstraction, wrongful conversion, willful misapplication, and other acts,” the DOL website shows.

“So, the actual: was a crime committed, is it a felony because of the amount, we would know the answer to that question upon the completion of the forensic audit,” Snyder asked during the meeting.

Agreements provided to KXAN show former Hutto human resources director Allison Hosgood signed off on most of the separation agreements. (KXAN Photo/Jody Barr)

“That’s what we’re anticipating,” Palumbo responded.

Typically, Texas law and most municipal purchasing laws allow city managers to make expenditures of up to $50,000 without the approval of council. In Hutto’s case, the individual expenditures on each of the separation agreements totaled less than $50,000.

The problem is, the tax dollars used to pay the former employees falls outside the city manager’s office’s spending authority, the city’s attorney told council in the meeting.

“The actions that were taken, these weren’t consultants where under your purchasing authority you can enter into an agreement with a professional and it’s under $50,000, it would be; the city manager can sign it. These were employees subject to city personnel policies and any change in their compensation benefits would have to be by council action. The amount didn’t matter,” Palumbo said.

The signatures

We obtained 16 separate separation agreements during the course of our investigation in Hutto. Former city manager Odis Jones’ signature appears on five agreements and “per Odis Jones” on a sixth. That sixth agreement shows human resources director Allison Hosgood’s signature with the “per” Jones note handwritten next to it.

Those records show the bulk of the agreements were executed by Hosgood, whose name shows up on nine agreements.

Former City Manager Odis Jones’ signature shows on this Feb. 16, 2017 separation agreement. It was the first agreement included in a document dump provided to KXAN from a city source.

A remaining member of Jones’ administrative team, Byron Frankland, signed off on Hosgood’s separation agreement, according to the document provided to us from a source within the city. Frankland listened to the council discussion during the August 13 meeting — a discussion that included legal opinions from the city attorney concerning the legalities surrounding the signatures.

“I’m not going to talk to you about that,” Franklin said as he walked out of council chambers following the meeting.

Gaul, who was mayor when the agreements were made, also wouldn’t stop to answer questions about whether he knew the agreements were happening.

Shaunessy responded to our request for an interview for this report, declining to participate, ““Thanks for your inquiry. I would like to comment but I am ethically prohibited from doing so,” Shaunessy wrote in an Aug. 14 email.

Former Hutto City Attorney Michael Shaunessy signed off an a separation agreement that paid an assistant city manager a 14 week severance after she resigned in 2017. (KXAN Photo/Jody Barr)

Jones, who is now the city manager in Missouri City, Texas, also declined to be interviewed for this report.

“Any document of which I’ve executed years ago as City Manager in Hutto was prepared by the City Attorney of Hutto at that time and Executed based on the City Attorney Advise of which I received. Therefore, please speak with them of whom I’ve copied to this response,” Jones wrote in an email response.

“We need to figure out what is it in this city hall that gives people the thought that they can sign agreements and circumvent city council when it comes to taxpayer dollars,” Snyder told KXAN. Snyder said the city’s already launched investigations internally to find out exactly how much was spent on the agreements and whether any other agreements like these might have been executed between 2017 and 2019. The investigations underway are known as a “Chapter 316 investigation,” which refers to the code section of the city’s charter.

Chapter 3.16 authorizes council to become an investigative body, which has the power of subpoena in Texas.

“The City Council shall have the power to inquire into the official conduct of any department, agency, office, officer, or employee of the City and for that purpose shall have the power to administer oaths, subpoena witnesses, compel the production of books, papers, and other evidence material to the inquiry. The City Council shall provide by ordinance, penalties for contempt in failing or refusing to obey any such subpoena or to produce any such books, papers or other evidence, and shall have the power to punish any such contempt in the manner provided by such ordinance.”

City of Hutto Charter

“We’ll be able to go through and ask these questions under subpoena and people will be forced by court order basically to answer the question under oath,” Snyder told KXAN.

Snyder and Rose also think the nondisclosure provisions inside the deals were created to keep information about city officials from council and taxpayers — information both believe the public should know.

“It’s hard not to draw the assumption that if there was no wrongdoing or no issues going on, why they were entered into in the first place,” Rose told KXAN.

Byron Frankland signed a separation agreement written for the city’s human resources director, Allison Hosgood. Hosgood’s agreement was the last agreement negotiated before Odis Jones’ departure on Dec. 31, 2019. (KXAN Photo/Jody Barr)

“Do you believe there’s something within these agreements, a story not being told that the public needs to know?” KXAN investigator Jody Barr asked Snyder following the Aug. 13 meeting.

“Oh, definitely. There’s nothing that runs through my mind that makes me think there’s a valid reason for that other than something is being hidden,” Snyder responded.

With council’s unanimous decision on Aug. 13, the table is set for the second reading of the ordinance. If the ordinance is approved on second reading, it becomes law.

“That’s the first step out of two for people to have the ability to tell their story. And, I believe that’s going to bring a lot of closure to a lot of wounds we have in Hutto is that people are able to tell what happened in their own words and I think that’s what’s going to help bring the divide of Hutto back together,” Snyder said.

Second reading could come at the next Hutto city council meeting, although an agenda officially setting the date for the second reading has not yet been posted.

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