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Investigation uncovers improper contact between city employees, contractors


In a press release on July 27, the city of Denton reported that it found no fatal flaws in the Denton Energy Center procurement process and no evidence of fraud or criminal activity. According to an attorney representing Mike Grim and Jim Maynard, the city also found no inappropriate contacts between bidders and city employees during the quiet period for the contract.


UPDATED 12:10 p.m. to include the following statement from Jussi Heikkinen, senior director for business development at Wärtsilä

Wärtsilä has sold and built 56 power plants in the USA, most of which are owned by municipal public utilities. Showing the reference plants to potential customers, authorities and other interested parties is an important way for them to validate the performance, quality and reliability of our installed technology, and it is a standard practice to write a clause about this in the contracts. Wärtsilä has followed its code of conduct and the rules of the RFP in the Denton Energy Center project. There is no need to revisit the internal rules. We have nothing further to comment.


UPDATED 11:45 a.m. to include comments by Mayor Chris Watts:

An investigation into contracting irregularities at Denton Municipal Electric found that key employees had improper contact with bidders before the city awarded a pair of $100 million contracts last September, according to Denton City Manager Todd Hileman.

The compromises were grave enough that, had a losing bidder filed a lawsuit, the city would likely have lost the case, Hileman said. Investigators uncovered evidence that a DME employee was in contact with two companies before the contracts were awarded. That employee later served on the purchasing committee that scored the contracts. 

"By definition, that's not a level playing field," Hileman said. "The contracts should have been re-bid." 

Hileman did not identify the employee by name during an interview with the Denton Record-Chronicle on Wednesday morning. 

However, according to city records obtained previously by the Record-Chronicle, former DME employee Jim Maynard sat on the committee that scored the bids for both contracts. 

Maynard and another employee, Michael Grim, were fired in the wake of the contract investigation. The two men sued the city, alleging investigators violated the Texas Open Meetings Act and the Texas Whistleblower Act during the course of the investigation. 

Their attorney, Bob Goodman, could not be immediately reached for comment Wednesday. 

One of the contracts was awarded to Wärtsilä, a Finnish engine manufacturer, and the other was awarded to Burns & McDonnell, a Missouri engineering firm. The two companies are building the Denton Energy Center, a natural gas-fired power plant near Denton Enterprise Airport.

Kristi Widmar, spokeswoman for Burns & McDonnell, did not respond to a request for comment. Sari Luhanka, spokeswoman for Wärtsilä, said the company could not comment until Thursday.

Investigators focused on whether the two contracts contained any fatal flaws that would compromise the project or the revenue bonds being used to pay for it, Hileman said. 

"Nothing rose to the level that would for sure take down the contracts," he said. 

Construction on the Denton Energy Center began soon after the contracts were awarded in September. The city has spent about $50 million on the project so far, Hileman said. 

The plant is expected to cost somewhere between $225 million and $265 million to complete. 

Some community activists hoped the investigation would lead to the cancellation of the contract. One longtime critic, Deb Armintor, said the investigation was too limited by focusing on procurement. 

"You would think the staff wrongdoing would mention the lies we were told, including the lies about emissions," Armintor said. 

Investigators did not find any evidence of illegal activity, according to Deputy City Manager Bryan Langley. 

"If we had found a trail, we would have followed it to the end," Langley said. 

Wärtsilä published a press release announcing its Denton contract that included a testimonial from Grim, but neither Hileman nor Langley said Wednesday they were aware of it. 

Wärtsilä also received a contract provision that allows it to bring tour groups of other utility operators to the energy center. In May, the company published a short book, Goodbye to Deerland: Leading Your Utility Through The American Energy Transition, that features the Denton plant. The writer uses a fictionalized account of a utility director in small-town Texas to make the case for the kind of power plant Wärtsilä offers.  The book pivots on Denton and its construction of the energy center. 

John Ryan, Denton City Council, District 4DRC
John Ryan, Denton City Council, District 4

During the course of the investigation, council member John Ryan noticed the culture at DME didn't fit with the rest of the city, he said. 

"DME was being run as a private business when it's a public company," Ryan said. "Information was not being brought out to us." 

He expected the search for a new general manager for DME would help improve that. 

"All employees need to understand that you're operating with tax dollars," Ryan said. 

Dalton Gregory, Denton City Council, Place 5DRC
Dalton Gregory, Denton City Council, Place 5

Similarly, council member Dalton Gregory said it became clear to him that employees needed to understand purchasing procedures and follow them. City leaders also need a way to double-check to make sure those procedures are being followed, "so that we can be fair to all of our vendors and so that the public can be assured that when the city does business deals, they are done above board," he said. 

The investigation frustrated Gerard Hudspeth as a new council member. He said it became clear to him that fellow council member Keely Briggs had sounded the alarm before the contracts were awarded and other council members didn't take her concerns to heart. 

"This was all avoidable," Hudspeth said. 

Gerard Hudspeth, Denton City Council, District 1DRC
Gerard Hudspeth, Denton City Council, District 1

During the ordeal, he said he learned council members can't make good decisions when they don't trust each other as teammates. On their way to making a decision, council members also need to listen to citizens and answer their concerns. 

"I'm going to keep it in neutral, because if you're caught leaning, then you aren't open to new information," Hudspeth said. "That's why I make a decision at the last minute on stuff like this." 

Keely Briggs, Denton City Council, District 2 DRC
Keely Briggs, Denton City Council, District 2 

Putting council members in a corner and treating them like a squeaky wheel when they challenge a recommendation doesn't serve the city, Briggs said. 

"I think our eyes have been forced open by this experience," she said in an email. "We have to rigorously question the assumptions and recommendations that are brought before us. Not for the sake of being mean or negative but to make certain that everyone involved in the process has been thorough and that everyone and everything has been done the right way." 

Mayor Chris Watts said the entire experience affirmed to him that even when there are failures, if people are committed to integrity and transparency, they can address the problem. 

"Ultimately, the final decision rests with the City Council," Watts said. "We must be vigilant and ask the most transparent information of our staff."

The experience also confirmed the importance of the executive staff, he added. 

"We can't expect anything of them that we can't expect of ourselves," he said. "Leadership does matter."

The experience taught council member Sara Bagheri that state purchasing laws weren't written to protect the public. The laws have no real enforcement provisions, she said.

"Especially when combined with the confidentiality provisions in municipally owned utilities, the public has no recourse in violations of the purchasing act — it's the Wild West out there," Bagheri said.

Sara Bagheri, Denton City Council, Place 6DRC
Sara Bagheri, Denton City Council, Place 6

She will be pointing this weakness out to state legislators, she said.

"It's really disheartening to see the amount of time and energy spent on frivolous laws when, at the local level, Rome is burning," Bagheri said.

Council member Don Duff did not return a call for comment Wednesday. 

The city has paid about $8,000 in fees to the contract investigator so far, but Hileman expects the final cost to be higher, he said. 

PEGGY HEINKEL-WOLFE can be reached at 940-566-6881. 

FEATURED PHOTO: Trucks move in and out of the Denton Energy Center in December as crews erect the new power plant on the city's west side.
DRC file photo

In the Know

The document viewer below contains the score sheets for the companies that bid on the contracts to build the Denton Energy Center. The grid shows how each company scored on their bid for the job and the typed names and signatures of the city employees who evaluated the bids.