FBI Probe

Rigged contract bid lands firm 'lucrative' deal, prosecution alleges

Govt. focuses testimony on tax collection contract

ALLENTOWN, Pa. - The firm that landed a delinquent tax collection contract thanks to an alleged rigged bidding process was in line for a “lucrative” deal with the city of Allentown, according to testimony in the federal pay-to-play trial.

Prosecutors on Thursday called to the witness stand the president of the law firm that held the contract for years before Mayor Ed Pawlowski allegedly directed city staff to steer the contract to a politically-connected law firm.

Authorities allege Pawlowski traded city contracts for campaign donations for his aborted U.S. Senate race. He’s facing a 53-count indictment on bribery, conspiracy and mail fraud charges.

Prosecution witnesses testified Thursday about how the bidding process for collecting Allentown’s delinquent property taxes was manipulated for a firm that had deep political and fundraising ties in Montgomery County that Pawlowski saw as key to his political aspirations.

The city in in 2014 awarded the tax collection contract to Northeast Revenue Services, replacing Portnoff Law Associates, which had done the work for 13 years.

Michelle Portnoff, the firm’s president, testified the firm had collected more than $15 million in outstanding revenue for the city in that time and earned more than $600,000 in fees.

Under questioning from Asst. U.S. Attorney Michelle Morgan, Portnoff testified that Allentown officials notified the firm in late 2011 that it did not plan to renew its contract. Any issues were resolved, and Portnoff continued its work through 2013, she said.

The firm received a similar letter near the end of 2013, but Portnoff said she wasn’t concerned because she felt any issues were addressed and the firm was doing “a good job for the city.” She would later testify under cross-examination that Portnoff’s contract was under automatic renewal every two years.

Dale Wiles, a former assistant city solicitor, regularly worked with Portnoff.

“Our point person, Dale Wiles, told us we had nothing to be concerned about regarding our renewal,” Portnoff said.

Wiles would later plead guilty for his role in rigging the bidding process.

The city in 2013 opted to seek bids for the delinquent tax collection services through a request for proposal or RFP. Portnoff told jurors that the city had never gone through such a process, but that she wasn’t surprised by the decision.

Portnoff later told the jury that Pawlowski called her two days before the RFPs were due to solicit a campaign contribution, a request that she denied.

“I refused to give a contribution because the RFP was pending,” Portnoff said.

She testified that it was it an “inappropriate conversation” because of the pending bid and was concerned it would affect the firm’s prospect’s of landing the contract.

“Did you feel pressure to contribute?” Morgan asked.

“Not really, but it’s a very awkward situation to be in,” Portnoff replied.

She later acknowledged donating $5,750 to “Friends of Ed Pawlowski,” with the last donation coming five months before the city solicited bids for the tax collection work.

Portnoff testified she wasn’t surprised when she learned her firm had not received the contract. The review committee did not interview them, and Wiles stopped returning her phone calls, she said.

In response to a question from Morgan, Portnoff said Northeast Revenue was based in Luzerne County and had been established a few years earlier in response to her firm’s proposal to collect delinquent taxes in that county. And unlike Portnoff, Northeast did not have an established satellite office in Allentown, she said.

Under cross-examination, Portnoff said she was aware there was a chance her firm could lose the contract every two years, but said she was confident it could compete.

She also acknowledged Pawlowski never discussed, in general, the contract or pressured her to contribute to his campaigns.

The prosecution opened testimony Thursday by continuing its redirect of former city Managing Director Francis Dougherty. Dougherty has pleaded guilty to his role in allegedly rigging the bidding process for a street light contract, so it was awarded to a firm with strong political and fundraising ties in western Pennsylvania.

McMahon noted in his cross-examination that the business consultants hired by The Efficiency Network or TEN – the firm that landed the $3 million contract – routinely contacted Dougherty, not the mayor, about the status of the bidding process and contract.

Under questioning from Asst. U.S. Attorney Anthony Wzorek, Dougherty testified business consultant James Hickey was intimately involved in writing the bid specifications in TEN’s favor.

“They were involved to where I thought I had no choice but to work with them,” Dougherty said, citing the pressure put on him by Pawlowski to get the contract in TEN’s hands.

The contract was cancelled after the July 2015 FBI raid of city hall, and Dougherty said the mayor never mentioned it again.

McMahon also attacked Dougherty’s plea deal in which federal prosecutors deemed him a “minor participant” in an effort, according to the defense, to lessen his sentence. The defense also zeroed in on the fact that investigators narrowed their focus on a handful of the hundreds of contracts Pawlowski has signed.

Wzorek asked Dougherty whether he addressed the “inherent conflicts” posed by Fleck, who served as the mayor’s campaign manager while also representing companies for whom he worked to get city contracts. Dougherty said it was an issue he addressed with his boss.

“Did he fire them?” Wzorek said.

“No,” Dougherty replied.

“Did you ask him why not?” Wzorek said.

“He needed these people for higher office,” Dougherty said.

In response to an earlier line of questioning from the defense, Wzorek probed Dougherty as to why he didn’t go to law enforcement with what he had been seeing regarding certain contracts in city hall.

Dougherty had been fired from the Philadelphia School District after informing about a corrupt contracting process, testifying that his financial situation was “precarious” and on the “precipice of bankruptcy.”

“Would you have risked a second firing?” Wzorek asked.

“No,” Dougherty replied.

 “Why?” Wzroek asked.

“I was already too toxic to be hired elsewhere,” Dougherty said.

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