Archived News

State pledges to clamp down on improper activity at Haywood DOT

coverWaste, favoritism and possible fraud and corruption by state highway workers in Haywood County enriched a local contractor and cost state taxpayers, according to a sweeping investigation released late last week by the N.C. State Auditor’s Office.

A handful of maintenance employees systematically padded invoices paid to a private contractor, used state credit cards to buy excessive quantities of tools that have since gone missing and filed questionable overtime, according to the investigation. Workers routinely violated N.C. Department of Transportation policies, from supervising relatives to moonlighting for a private contractor, creating the perception of “preferential treatment.”

Officials with the DOT have pledged to conduct an extensive internal review to figure out how the improper activity occured undetected during a two-year period. 

It was brought to light by an anonymous whistle blower, who circulated letters detailing the corruption in early 2011. The allegations were also reported to the state fraud hotline at the time, kicking off an 18-month investigation by the N.C. State Auditor.

The DOT has taken disciplinary action against three employees in recent days. Two were reprimanded but won’t lose their jobs. The third employee could be suspended or lose his or her job.

“As we continue to digest the audit, there may be additional disciplinary action take place,” said Greer Beaty, head of DOT communications in Raleigh.

Related Items

Top DOT officials say the issue is far from over.

“This isn’t just we are going to reprimand a number of employees and move on,” Beaty said. “We are going to look at all the policies and procedures at a local level, a division level and statewide. We want to eliminate any opportunity for people to make a mistake or a really bad decision.”

The DOT’s own inspector general has launched an internal investigation on the heels of the state auditor’s report. The DOT, the state auditor or both will turn their findings over to the State Bureau of Investigation if the behavior is deemed not merely improper but possibly criminal.

That’s something they just don’t know yet, said Jon Nance, DOT’s chief engineer in Raleigh.

“We want to look at what happened, why it happened, and what the intent was,” said Nance. “Was there criminal intent or personal gain to be realized? We want to make sure we have a chance to go back and look at all of it and do the investigations we need to do to determine that.”

The DOT’s Office of Inspector General had initially launched an investigation of its own when whistleblower allegations became public in early 2011. But, the DOT pulled back when the State Auditor’s Office got involved. Now, with those findings as a baseline, the DOT will resume its own investigation to “dig deeper” into what happened and how to fix it, Beaty said. 

The improper activity involved more than half a dozen employees in the DOT maintenance office in Haywood County. The level of that involvement ran the gamut. Some knowingly and routinely violated DOT policies. Others turned a blind eye to what was going on around them.

Others simply fell in with what had become a pervasive culture and way of doing business in the office. And others still — particularly the manager in charge — condoned it all by rubberstamping everything from overtime for employees to cost over-runs by private contractors without asking questions.

“I deeply regret that the N.C. Auditor’s Office found fault with some of our employees’ actions,” said Joel Setzer, head of DOT’s Division 14, a 10-county area that includes Haywood. “Unfortunately, we failed to perform to the level of expectation we have set for ourselves and that the citizens expect in the circumstances found in the Auditor’s report. “

Setzer said the findings should not undermine the good work and intentions of DOT employees as a whole.

“Day in and day out, our employees work hard for our citizens to best use the public dollars for transportation,” Setzer said. 

Setzer said he will do his part to ensure the activity doesn’t occur again.

For now, the investigation seems to begin and end with the lower level workers in the county maintenance department. Only time will tell whether the dragnet will venture up the DOT chain of command as the investigation moves forward. Specifically, should higher-ups have been aware of the loose ship being run by the maintenance office in Haywood?

“I don’t know at what point you say ‘they should have known a long time ago,’” Beaty said.

The investigation offers a stinging and embarrassing assessment of business as usual within the maintenance office.

But Art Hartzog, the newly hired head of the DOT maintenance office in Haywood, said the activity cited in the investigation was an “isolated instance.”

“I think people had good intentions,” Hartzog said. “The majority of our people work hard and do a good job. They do the best they can with a limited amount of resources.”

Hartzog was aware of the on-going investigation when he took over the job last September, but only vaguely. Hartzog’s predecessor, Ben Williams, now oversees the maintenance office in another county.


Investigation findings

Here’s a summary of the State Auditor’s investigation:


• There was inadequate oversight of a private contractor, namely Burton Edwards of Maggie Valley, hired to do road maintenance and construction. Edwards directed his own crew and fleet of heavy machinery, billing the DOT by the hour depending on the number of equipment operators and type of machinery he had on the job from day-to-day.

DOT timekeepers posted at the job site to monitor the work and ensure invoices submitted by Edwards matched the actual work his crews performed, failed to rein in escalating costs, however. They allowed Edwards to add more manpower and machinery without getting proper approval. Costs ballooned from an estimated $1.8 million to $5.5 million. According to the findings, “invoices were not properly approved,” timekeepers “did not properly monitor the costs,” and “as a result, funds were moved from other projects to pay for the overrun.”


• The head of the DOT maintenance office in Haywood County, namely Ben Williams, failed to properly oversee state credit card use. Rather than signing off on paperwork himself, his office assistant used his signature stamp to approve spending. This “reduced his ability to detect unauthorized and wasteful spending,” according to the report.

Use of a signature stamp by an office assistant in lieu of actual oversight also allowed cost overruns by a private contractor to go undetected. The head of the three-county maintenance district, which Haywood is under, was ultimately in charge of monitoring invoices submitted to the DOT by Edwards. But he had his office assistant sign off on the invoices with his signature stamp instead, and failed to realize for several months that Edwards was billing the DOT for far more work than the state had originally agreed to. He told investigators “he was too busy to check and sign the large volume of invoices that came in each day.”


• Two timekeepers posted on the job site to monitor the work of private contractor Burton Edwards racked up excessive overtime. Overtime was so rampant it accounted for nearly half their pay. “They were the only timekeepers who routinely received overtime payments. These employees said that no one questioned them about their hours worked, and they did what they were told,” according to the report.

Investigators questioned the legitimacy of the hours. The two employees were tasked with supervising job sites of private contractors, but they routinely logged three to four more hours each day than the crews they were supervising.

Approval of the overtime was sketchy as well. Per DOT policy, only the immediate supervisor with direct knowledge of what the employee is doing is supposed to approve the overtime. In this case, the overtime was approved by a different supervisor. 


• The head of the maintenance office, Ben Williams, was first cousins with one of the maintenance employees, Brad Williams. Ben approved state credit card purchases and overtime for his cousin. “This may lead to preferential treatment in the maintenance department,” the report states.


• Maintenance workers were allowed to buy an excessive number of tools and gadgets. 

“While the purchases included items that could be used in the employees’ work, the quantity of individual items was excessive and unnecessary,” the investigation states.

Workers bought tools from a traveling tool salesmen who would roll into the maintenance yard and entice workers with his traveling inventory. The “truck vendor” was not a preferred vendor for the state, however, and thus the 35 percent discount offered by preferred vendors didn’t apply to these purchases.

In hindsight, Ben Williams conceded to investigators the purchases were “excessive” and “we probably bought too much stuff.” 

He added “when people need something, I try to help them out...I’m kind-hearted and ...some people view me like Santa Claus.”

According to employees, their boss’ mantra was “if you need it, get it.”

Perhaps most troubling, some of the items bought by three of the maintenance workers on state credit cards cannot be located — a total of 17 items costing $1,854. When confronted by investigators, workers claimed the tools in question had been stolen during a break-in the previous year. At the time of the break-in, the DOT filed a crime report with police detailing what had been stolen. However, none of the 17 missing tools purchased with state credit cards were listed in the crime report. 

In a possible effort to cover their tracks, the maintenance employees filed an updated crime report to include the 17 tools, “after our inquiries and a full year after the break-in,” investigators noted in the report. Employees said they simply hadn’t realized those tools were among what was stolen. Investigators cast doubt on the story, however.

“These circumstances raised doubts about the propriety of these purchases,” the report states.


• The DOT employee in charge of selecting private contractors for state jobs moonlighted for Burton Edwards, the contractor who pulled down the lion’s share of work. Edwards was paid $8.6 million over a two-year period for work performed by his fleet of heavy machinery and crew of equipment operators. During the same period, the DOT contracting officer moonlighted as a consultant for Edwards on site plans and environmental permitting. “This conflict of interest seriously diminished the integrity of the Division’s contracting process,” according to the report.

The jobs awarded to Edwards were no-bid contracts, giving the DOT more discretion to pick the best firm rather than the lowest bidder. Edwards billed the state based on the number of equipment operators and type of machinery on the job any given day, rather than a pre-determined budget.

Investigators were unable to determine whether the “disproportionate” volume of work awarded to Edwards amounted to preferential treatment. To be fair, Edwards’ firm, Carolina-A-Contracting, has one of the largest equipment fleets with specialized machinery that other private contractors simply don’t have, which goes a long way toward justifying his role as the go-to private contractor for no-bid jobs.

“However, the existence of an undisclosed business relationship between the owner of Caroline-A-Contracting and the individual responsible for selecting contractors created the perception that inappropriate preference was given,” the report notes.

When DOT employees want to take on extra work outside their state job, they must fill out a form and get permission from their superior. The contracting officer did so, and was granted approval from the head of Division 14, Joel Setzer. On the forms, however, she failed to divulge exactly whom she was performing outside work for or that it posed a conflict of interest. Setzer’s approval of her outside work came with the caveat she alert him if her consulting work posed a conflict of interest.

She told investigators that she was “naïve” and didn’t realize working for Edwards while awarding him state jobs was a conflict of interest, according to the report.


Corrective action

The state DOT has certainly taken swift and decisive steps in response to the investigation. The State Auditor’s investigation provided a starting point, offering a recommended fix for each instance of improper behavior.

Beaty said the DOT welcomed the perspective of an external investigation.

“Someone with a critical eye coming in and going ‘Here’s what happened and if you eliminate this you eliminate the opportunity for something to happen,’” Beaty said. “This audit points those places out and says, ‘OK the processes and controls you have aren’t enough’ and we are able to say, ‘Agreed.’ If you read the response we said ‘We concur.’

Long before the Auditor’s report came out last week, however, the DOT had tightened up maintenance operations considerably.

At the Haywood DOT maintenance office, credit cards were taken away and private heavy equipment operators are no longer being hired by the hour under no-bid contracts. In fact, those steps were taken when the investigation was under way and long before the recent findings were released.

The former head of the Haywood County maintenance office now oversees the maintenance office in another county so he no longer be supervises his cousin.

Changing policies alone won’t change behaviors without proper retraining, Beaty said. Indeed, the maintenance workers cited in the investigation were breaking policies already on the books — be it intentionally or due to ignorance. So it’s unclear whether additional policies would have helped given the laissez fare workplace.

“You have to retrain and readdress and change the work culture and make sure they know what the policies and procedures really are, not just how things had always been done,” Beaty said. “Even those folks who did everything right and didn’t make mistakes, they need to be retrained, too. It has to be a systematic approach.”

The state has also suspended the practice of awarding no-bid contracts to private contractors who are paid by the hour instead of by the job. For now, the DOT wants to avoid the potential of abuse. The system relies on both the integrity and diligence of DOT timekeepers assigned to keep tabs on contractors — namely to ensure they don’t drag out a project in order to make more or embellish their invoices with more work than they actually did.

But if the timekeeper isn’t paying attention, or is even complicit in the overbilling, there’s the potential for fraud.


Finding a balance

It’s difficult to write a foolproof policy, one that would completely stamp out any chance of fraud.

“I think we have been trying to at the DOT over the past years to move to very trackable and accountable systems,” Beaty said. “There is some real conversation about how can we have the resources available to get the job done, but eliminate an opportunity to make a mistake or a really bad decision.”

The challenge is coming up with policies that provide the right level of checks and balances without adding so much red tape that workers are constantly handcuffed from doing their jobs efficiently. As Nance put it, you would have to hire a timekeeper to keep tabs on the timekeeper, a potentially never-ending chain.

But for now, the DOT has ceased the practice of paying private equipment operators by the hour.

“We are going to utilize a different process that has more checks and balances while our office of inspector general continues the investigation to ensure there are no improprieties,” Beaty said.

The practice is only being suspended for a portion of DOT’s Division 14, which covers the 10 western counties.

The Haywood maintenance office had already quit using that system for the most part.

“They’ve backed off of that a good bit,” said Art Hartzog, the new head of the Haywood maintenance office. In fact, there haven’t been any hourly jobs for private equipment operators in the eight months Hartzog has been on the job. The DOT still has to supplement its own maintenance with private contractors, like roadside mowing for example. But those are being paid by the job, not the hour.

Hartzog said there is a time and place for hiring private equipment operators at hourly rates. For example, if the DOT needs help quickly and doesn’t have time to put a job out to bid, but instead needs to rely on a stable of trusty private contractors to fill in.

“The catch to that is you have to monitor daily activities and progress and have people on site accurately keeping records and have everything go through the management chain. Those aren’t the kind of things you can delegate without management oversight,” Hartzog said.

The DOT faced the same conundrum over credit cards carried by maintenance workers. Clearly, state credit cards were abused, giving employees wide discretion to “buy what they needed” with essentially no oversight, according to the report.

That’s not how things were supposed to work. Ben Williams, the head of the maintenance office was supposed to monitor what his workers were buying. Instead, he not only failed to keep tabs on it, but espoused the idea of tool buying entitlement. Buying cool tools and gadgets for their trucks became a built-in job perk.

“The problem is expenses were not controlled by the person in charge of reviewing the expenditures,” said Eric Boyette, an investigator with the DOT’s office of inspector general.

Purchases on credit cards also go through a central bookkeeping office for review, but they don’t necessarily know whether specific tools were necessary or superfluous.

“Unless they are paying attention, they might not see them,” Boyette said.

The apparent credit card abuse begs the question: who should be allowed to carry them? Stripping all rank and file DOT maintenance workers of their credit cards could make their jobs far harder, forcing them to leave the job and go find a supervisor before heading to Lowe’s to pick up the part they need — meanwhile bringing the job to a screeching halt.

The DOT has begun replacing the state-issued credit cards with “procurement cards.” They better track what someone buys, where they buy it and when they buy it.

“It’s a little more control,” Boyette said.

The DOT maintenance office in Haywood County, however, lost their credit card privileges almost as soon as the investigation was launched and allegations of state credit card fraud became public.

Hartzog, who came on the job last September, seems to be taking a far more active role overseeing the road maintenance operations in Haywood than his predecessor. The former maintenance chief seemed to have a  “don’t ask, don’t tell” policy — whether it was cost-over runs, overtime or credit spending by employees. 

Hartzog doesn’t seem to share the same philosophy, however. When he first took over in September, maintenance workers were used to the old way of doing business.

Tracking purchases is his job, Hartzog said. He had to show workers it was nothing personal.

“It’s been a challenge but I think people understand where I am coming from. People have different management styles. Some people delegate, but ultimately it is up to the county maintenance engineer to make sure supplies and resources are being used efficiently,” Hartzog said.

Conducting an interview from his office earlier this week, Hartzog was asked whether there was anything else he wanted to add. He paused, then began ticking off key points until quite a list had formed.

“The importance of being held accountable and being thorough in record keeping, attention to detail, more direct oversight, following through the management chain, less independent actions without going through proper channels,” said Hartzog, whose 20-year career as a licensed engineer has included work for both the N.C. and S.C. DOT, as well as the private sector.

Leave a comment

Smokey Mountain News Logo
Go to top
Payment Information


At our inception 20 years ago, we chose to be different. Unlike other news organizations, we made the decision to provide in-depth, regional reporting free to anyone who wanted access to it. We don’t plan to change that model. Support from our readers will help us maintain and strengthen the editorial independence that is crucial to our mission to help make Western North Carolina a better place to call home. If you are able, please support The Smoky Mountain News.

The Smoky Mountain News is a wholly private corporation. Reader contributions support the journalistic mission of SMN to remain independent. Your support of SMN does not constitute a charitable donation. If you have a question about contributing to SMN, please contact us.