Denham Springs Wastewater Department Audit Overview Findings, Ethics, and Oversight (2014-2024)

Pervasive Uncompensated Loaning of City Equipment and Personnel, Potentially Constituting an Illegal Donation of Public Funds.

From as early as 2014 through 2016, the Denham Springs Wastewater Department regularly loaned its vacuum truck and operator to other governmental entities, including Livingston Parish Sewer District No. 1 & 2, the Town of Livingston, and the City of Walker. This occurred approximately once a month.

Critically, these loans were made without written agreements or reimbursement for the equipment's use or the operator's wages. The City also lacked proper documentation, such as log books, to track equipment use.

The LLA determined this practice was a potential "donation of public funds," explicitly forbidden by Article VII, Section 14(A) of the Louisiana Constitution. Attorney General Opinion 09-0018 clarifies that such transfers are only permissible if there is legal authority, they are not gratuitous, and the public entity expects at least equivalent value, conditions which were not met.

Mayor Gerard Landry acknowledged this as a "long-standing tradition" but committed the City to implementing new policies, developing ordinances for charging FEMA rates, ensuring reimbursement, maintaining log books, and establishing Cooperative Endeavor Agreements. Wastewater Superintendent James Clark, while denying personal authorization, acknowledged receiving requests and pledged to maintain log books.

City-Owned Assets Loaned to External Entities

The Denham Springs Wastewater Department routinely loaned its vacuum truck and an operator

These assets were provided to other governmental entities, including Livingston Parish Sewer District No. 1 and No. 2, the Town of Livingston, and the City of Walker.

Wastewater Superintendent James Clark stated he would receive requests to use the vacuum truck and would send it with an operator "to help the other agencies save money". He also indicated the truck was used to clear material deposits and "sludge".

Department personnel indicated that the vacuum truck and operator were loaned to other government agencies approximately once per month. This consistent, monthly occurrence suggests these activities were part of the department's regular operations during work hours.

The City did not have written agreements to govern these loans, specifically lacking intergovernmental agreements or cooperative endeavor agreements.

Crucially, the City did not receive reimbursement for the use of the vacuum truck or for the wages paid to its operator. Mayor Landry noted the difficulty in ensuring "equal value" for the services provided through this cooperative tradition.

The LLA determined this practice constituted a potential "donation of public funds," which is explicitly forbidden by Article VII, Section 14(A) of the Louisiana Constitution.

Attorney General Opinion 09-0018 clarifies that such transfers are only permissible if there is legal authority, they are not gratuitous, and the public entity has a "demonstrable, objective, and reasonable expectation of receiving at least equivalent value," none of which were met in this situation.

Auditors found a significant lack of records. The Department did not maintain any documentation, such as log books, to record the use of the vacuum truck when loaned out.

This absence of documentation meant there was no way to track equipment use, monitor its impact, or ensure accountability for the resources expended.

Developing an Ordinance for charging FEMA rates and hours spent when other agencies use City equipment and employees.

Implementing new policies to ensure reimbursement for each use and proper documentation and monitoring of City equipment.

Superintendent James Clark confirmed that log books would be maintained to document equipment use. He also stated that supervisors would ensure loaned vehicles were refueled by the borrowing agency.

The Wastewater Department began logging all work for outside agencies, tracking reimbursements/reciprocal help, and working to establish Cooperative Endeavor Agreements with each agency.

James Clark, while acknowledging receipt of requests, denied personally authorizing any equipment loans, stating it was the responsibility of former Public Works Director Tom Walton, or that approvals came from former Mayor Jimmy Durbin or Mayor Gerard Landry

James Clark's Dual Role and Private Business Interests:

James Clark served as the Wastewater Superintendent for the City of Denham Springs.

Concurrently, he owned a private company named GRC Construction LLC. GRC Construction was an active Limited Liability Company registered in Louisiana, with James B. Clark listed as the registered agent and a member.

Between January 2014 and March 2016, GRC Construction held contracts to perform grass-cutting services for Livingston Parish Sewer District No. 1 and Livingston Parish Sewer District No. 2.

This period coincided precisely with the timeframe when the Denham Springs Wastewater Department was regularly loaning its vacuum truck and operator to these same sewer districts, among other governmental entities.

The LLA's investigation implicated Clark in authorizing the loan of the City's vacuum truck and operator to Livingston Parish Sewer District No. 1 and No. 2 during the identical period his private company, GRC Construction, held contracts with these districts.

Clark himself acknowledged receiving requests from other government agencies, including the Livingston Parish Sewer Districts, to use the vacuum truck and that he would send the truck and an operator "to help the other agencies save money".

He also stated the truck was used to clear "material deposits and 'sludge'" from construction areas and lift stations, services that could potentially benefit areas maintained by his grass-cutting contracts.

The LLA explicitly stated that "the superintendent appears to have authorized the loan of the Department’s vacuum truck and operator to the sewer districts". Auditors further identified the "Cause" of the potential violation as: "The Department's superintendent could have authorized the use of City owned resources for the governmental entities with which he had personal contracts for services".

The LLA highlighted that this created a situation where Clark, as Superintendent, entered into transactions with the sewer districts in which he had a "personal, substantial economic interest," leading to a potential violation of state ethics laws.

At the time of these occurrences (January 2014 to March 2016), there was a lack of formal agreements or documentation for the loaning of City equipment. The City was unable to produce intergovernmental or cooperative endeavor agreements, and the department did not maintain log books for equipment use. This absence of formal procedures meant there were no explicit safeguards to prevent such uncompensated loans, let alone to disclose or scrutinize potential conflicts arising from them.

The LLA noted that state ethics laws (La. R.S. 42:1113(A)(1)(a) and 42:1112(A)) prohibit public servants from entering into contracts under their agency's supervision where they have a controlling interest, or participating in transactions with a substantial personal economic interest involving the governmental entity. The very existence of this situation demonstrated a failure in existing oversight mechanisms to identify and prevent this type of conflict.

In his formal response, James Clark denied authorizing any equipment loans to other agencies, stating that this responsibility belonged to Tom Walton, the former Public Works Director, or that approvals came from former Mayor Durbin or Mayor Landry. He maintained that because he "did not authorize the use of equipment by any other agency," he did not believe he violated any ethical rules.

The LLA formally recommended that the Louisiana Board of Ethics review this information for potential violations and take appropriate action.

Mayor Gerard Landry acknowledged the audit findings and confirmed that the City had required all employees to complete annual ethics training. He also stated that the City "will request and take action upon any recommendations given by the Louisiana Board of Ethics". Clark himself pledged to fully cooperate with any ethics investigation and implement any recommended changes.

The City's management response in 2016 also indicated that the City had ethics policies in place and required annual training.

This situation highlighted a critical lapse in ethical oversight and internal controls, necessitating the LLA's recommendation for the City to consult with legal counsel and the Louisiana Board of Ethics to ensure compliance with state ethics laws.

In his formal response to the LLA on June 7, 2016, Mayor Gerard Landry acknowledged the audit findings. He characterized the uncompensated loaning of equipment as a "long-standing tradition in Denham Springs to cooperate with neighboring municipalities and Livingston Parish to achieve mutually-beneficial goals". While recognizing this tradition, he conceded that it was "difficult to ensure that the taxpayers of Denham Springs receive equal value" from these cooperative efforts.

To address the "Donation of City Equipment and Personnel" finding, Mayor Landry committed the City to several corrective actions:

Developing an Ordinance: The City would work with its legal counsel to "construct an Ordinance under which FEMA rates and hours spent will be charged to other governmental agencies" when they utilize City equipment and employees for sewer work.

Implementing New Policies New policies would be put in place to "ensure that the City of Denham Springs is reimbursed for each use by another governmental agency" and to "ensure that the use of City equipment is properly documented and monitored". These steps were aimed at ensuring all City expenditures comply with the Louisiana Constitution.

Regarding the "Ethics – Prohibited Transactions with GRC Construction" finding, Mayor Landry's response indicated:

Existing Ethics Training: The City had a long-standing practice of requiring "all employees to complete annual training given by the Louisiana Board of Ethics," offering both online and live sessions. He committed to ensuring each department had policies for employees to attend and complete this annual training.

Preventing Gratuitous Donations: He stated that the new ordinance and policies related to equipment loans would "prevent gratuitous donations from the City of Denham Springs to other governmental agencies from occurring".

Cooperation with Board of Ethics: Mayor Landry explicitly stated that the City "will request and take action upon any recommendations given by the Louisiana Board of Ethics" to ensure compliance with state ethics laws regarding transactions between City employees and government agencies conducting business with the City.

Denial of Authorization: Clark stated, "I did not authorize any equipment to be loaned to other agencies. This was the job and responsibility of Tom Walton, our former Public Works Director". He further explained that Chevis Ball, from Livingston Parish, would contact Tom Walton to request the use of the truck.

Approval by Mayors: Clark clarified that any other requests for loaning the vacuum truck that he received "were approved by Mayor Durbin or Mayor Landry prior to the loaning of the truck".

Ethics Violations Denial: Regarding the potential ethics violations related to his company, GRC Construction, Clark maintained, "I did not authorize the use of equipment by any other agency, and therefore do not feel that I violated any ethical rules".

Commitment to Cooperation: Despite his denial, Clark pledged, "I will fully cooperate with the investigation of the Board of Ethics and make any changes they recommend".

Corrective Actions: He reiterated the City's commitment to implementing new policies for reimbursement, proper documentation, and stated that "log books will be maintained to reflect the use of City equipment by other entities". He also mentioned that City supervisors were responsible for and did ensure that loaned vehicles were refueled by the borrowing agency.

Acknowledgment of Finding: The response noted that during the LLA's investigation, it was determined that the "Wastewater superintendent had a separate company which had grass cutting contracts with two of the governmental entities that the City's vacuum truck and licensed operator were loaned to".

Emphasis on Ethics Policies and Training: The City highlighted that it "currently has ethics policies in place and requires employees to attend annual training".

Recommendation for Board of Ethics Review: The City endorsed the LLA's recommendation, stating, "We recommend that the Louisiana Board of Ethics review this information and take appropriate action". This indicates the City's reliance on the state's ethics authority for a definitive ruling and further action on the potential conflict of interest.

The core issue is that while the City possesses written ethics policies and procedures, these documents do not include a requirement for documenting how employees and officials are notified of any changes to the entity’s ethics policy. This particular item, identified as item (4) in the audit criteria, is consistently found to be missing from the formal written policies.

This deficiency has been noted without fail in the annual LLA reports for the fiscal years ending June 30, 2022, 2023, and 2024. It represents a persistent formal gap in the City's ethical oversight framework.

Employee Ethics Training: Documentation demonstrated that employees and officials did complete their required one hour of ethics training annually.

Notification Documentation: The City did maintain documentation demonstrating that employees and officials were notified of any changes to the entity’s ethics policy during the fiscal period, as applicable.

This indicates that while the City's operational compliance for ethics training and notification is sound, its formal written procedures have not been updated to reflect or mandate these practices regarding notification of policy changes.

Each year, the City's management has provided an identical response to this recurring deficiency: "The City will update its written policies to include how employees are notified of any changes to the entity's ethics policy". This consistent commitment acknowledges the formal gap in their documentation and pledges to rectify it.

This recurring finding underscores the importance of meticulous review and formal updates to ensure that written procedures fully align with actual practices and legal requirements for robust compliance and oversight, even when practical compliance is otherwise observed.

Unauthorized "Donation of Public Funds": The most pressing issue identified in 2016 was the routine uncompensated loaning of the City's vacuum truck and operator to other governmental entities, such as Livingston Parish Sewer District No. 1 & 2, the Town of Livingston, and the City of Walker. This practice, occurring about once a month, lacked written agreements, reimbursement, or a demonstrable exchange of equivalent value. This was deemed a potential violation of Article VII, Section 14(A) of the Louisiana Constitution, which prohibits the donation of public funds.

Pervasive Lack of Documentation: A critical contributing factor was the absence of proper documentation, including log books to record equipment use and the inability to produce intergovernmental or cooperative endeavor agreements to authorize such work.

Potential Ethics Violations by Wastewater Superintendent James Clark: James Clark, the Wastewater Superintendent, owned GRC Construction, a company that held grass-cutting contracts with Livingston Parish Sewer District No. 1 and No. 2 between January 2014 and March 2016. During this same period, Clark was implicated in authorizing the uncompensated loan of the City's vacuum truck and operator to these very same sewer districts. This created a potential conflict of interest and a violation of state ethics laws (La. R.S. 42:1113(A)(1)(a) and 42:1112(A)), which prohibit public servants from engaging in transactions where they have a substantial personal economic interest or contracts under their agency's supervision.

Mayor Gerard Landry's Commitment: Mayor Landry acknowledged the audit findings, recognizing the "long-standing tradition" of inter-municipal cooperation but conceding the difficulty in ensuring "equal value" for services provided. He committed the City to developing an ordinance to charge FEMA rates and hours for equipment and personnel use by other agencies, implementing new policies for reimbursement, and ensuring proper documentation and monitoring of City equipment use. He also affirmed that the City requires annual ethics training for all employees and would act on recommendations from the Louisiana Board of Ethics.

James Clark's Defense and Cooperation: While Clark denied personally authorizing equipment loans, stating it was the responsibility of the former Public Works Director, Tom Walton, or approved by former Mayor Durbin or Mayor Landry, he pledged full cooperation with any Board of Ethics investigation and committed to implementing recommended changes. He also confirmed that log books would be maintained and that City supervisors would ensure borrowing agencies refueled loaned vehicles.

Formal Management Response: The City's management response in the 2016 LLA report confirmed that the Wastewater Department had begun logging all work for outside agencies, tracking reimbursements/reciprocal help, and was working to establish Cooperative Endeavor Agreements. The City also formally recommended that the Louisiana Board of Ethics review the information regarding prohibited transactions.

Persistent Procedural Gap: From 2022 to 2024, LLA reports consistently identified a specific deficiency: the City's written ethics policies lack a requirement for documenting how employees and officials are notified of any changes to the entity’s ethics policy. This specific item (item 4) has been repeatedly noted as missing from the formal written procedures.

Compliance in Practice, but Not in Policy: Interestingly, auditors consistently found "No exceptions" in practice during these years. This means employees were completing their required annual ethics training, and documentation was being maintained to show notification of policy changes. The issue lies in the formal written policy not explicitly stating this requirement.

Consistent Management Response: Each year, the City's management has provided the identical response: "The City will update its written policies to include how employees are notified of any changes to the entity's ethics policy". This indicates a repeated acknowledgment of the formal gap and a commitment to rectify it.

The 2016 audits exposed serious breakdowns in financial management, documentation, and ethical conduct within the Denham Springs Wastewater Department.

The City's and its leadership's swift acknowledgment of the 2016 findings and their commitment to corrective actions, such as new ordinances for charging rates, requiring reimbursement, maintaining log books, and establishing Cooperative Endeavor Agreements, show an intent to address the issues.

However, the recurring ethics policy documentation deficiency highlights a persistent need for meticulous review and formal updates to ensure that written procedures fully align with actual practices and legal requirements. Even with practical compliance, the absence of this requirement in formal documentation points to an ongoing need for administrative completeness and robustness in oversight.

James Clark: Conflict of Interest

Private Business Ownership: James Clark, while serving as Superintendent of the Denham Springs Wastewater Department, owned a private company called GRC Construction.

Contractual Activity (Jan 2014 – Mar 2016): During his tenure, GRC Construction held contracts to perform grass-cutting services for Livingston Parish Sewer District No. 1 and Livingston Parish Sewer District No. 2.

Relevant Documentation:

• Excerpt 1 – Denham Springs Audit: Equipment Loans, Ethics, and Oversight
• Excerpt 9 – Denham Springs Wastewater Audit: Loaning, Ethics, and Oversight
• Excerpt 18 – Denham Springs Wastewater: Audit Uncovers Fund Misuse and Ethics Lapses
• Excerpts 22 & 45 – Denham-Springs-Wastewater-Department-Loaning-Equipment.pdf

Use of City Equipment: During the same period, Clark was implicated in authorizing the loan of the City’s vacuum truck and operator to the same sewer districts—potentially for work tied to his private contracts.

Additional Documentation:

• Excerpt 1 – Denham Springs Audit: Equipment Loans, Ethics, and Oversight
• Excerpt 9 – Denham Springs Wastewater Audit: Loaning, Ethics, and Oversight
• Excerpt 18 – Denham Springs Wastewater: Audit Uncovers Fund Misuse and Ethics Lapses
• Excerpts 22 & 27 – Denham-Springs-Wastewater-Department-Loaning-Equipment.pdf

Gerard Landry – Mayor of Denham Springs (2016)

Role During Audit: Served as Mayor during the initial findings of the 2016 Denham Springs Wastewater Audit.

Reference: Excerpt 15 from "Denham Springs Wastewater Audit: Loaning, Ethics, and Oversight"

Public Statement & Policy Shift:

• Acknowledged a “long-standing tradition” of informal cooperation between city departments and external entities.
• Committed the City to adopt new policies focused on:
  • Reimbursement for city services
  • Formal documentation of interdepartmental actions
  • Legally binding intergovernmental agreements

Reference: Excerpt 15 from "Denham Springs Wastewater Audit: Loaning, Ethics, and Oversight"