GRDA Bidding Process Under Fire In New Audit

The Grand River Dam Authority is ripe for fraud, waste and abuse. That's according to the results of a state audit released Thursday.

The audit addresses several problems at the state agency, including possible conflicts of interest. The report touches on a relationship some call the good old boy network gone bad - using a state agency to line the pockets of the well-connected.

The Grand River Dam Authority is a state agency that provides wholesale power to smaller suppliers across the state. To get power to its customers, GRDA needs power poles.

Some of those poles are built by a young Claremore company called Pelco Structural. Phil Albert is Pelco's President.

We interviewed Albert months ago as a successful Oklahoma businessman.

"We think opportunities for small businesses like ours are plentiful," said Phil Albert, president of Pelco Structural. "We think it's a matter of seizing those opportunities, and we think hard work pays off."

But some GRDA employees don't believe hard work is what brought Pelco and GRDA together. They asked us to investigate Phil Albert's relationship with GRDA board member David Chernicky.

As a GRDA board member Chernicky has voted on billions of dollars worth of transactions for the state agency - including GRDA's purchase of Pelco power poles.

David Chernicky is Phil Albert's brother in law.

In June of 2007, Pelco Structural won a bid with the GRDA to make a million dollars worth of poles. Pelco got the contract when the GRDA board, including Chernicky, voted to approve it.

Since then Chernicky has voted on several occasions to approve many millions more in Pelco jobs, but according to other board members he never disclosed his family ties to Albert and Pelco. 

So, the question is - is it a conflict of interest for David Chernicky, a GRDA board member, to approve millions of dollars worth of state business to his brother-in-law's company. Both men say they've done nothing illegal or unethical. They point to the fact that Pelco got their jobs through the competitive bidding process.

So we dug through hundreds of GRDA's Pelco bid documents. We discovered when Pelco won that 2007 bid with GRDA it was not the lowest bidder.

Pelco won the award because GRDA engineers said the two lowest bidders didn't meet the project's requirements. But both losing companies turned in protest letters, arguing they did meet the requirements.

In the end Pelco still won out.

Chernicky never responded to my requests for an interview, but in a phone conversation with Phil Albert, he said his brother in law has no financial interest in Pelco and nothing to gain from its GRDA contracts.

12/8/2011 Related Story: Audit Finds 'Exposure To Fraud, Waste, Abuse' At GRDA

But we found, at the same time Pelco was winning GRDA jobs, Albert was also the Vice President of Chernicky's Oil and Gas Company, New Dominion.

Still, Albert says, those ties do not legally add up to a conflict-of-interest.

State auditor Gary Jones says Oklahoma's conflict of interest laws are weak, and he is working to strengthen them. 

"People become very distrustful of government, and that's one of the things we need to do is to clear up any questions there might be, so people will instantly be able to tell, yes based on this, they do have a conflict of interest," said Gary Jones, State Auditor and Inspector.

"Maybe they shouldn't be on a board. Maybe they shouldn't be voting on particular things, and let's make that clear."

Read The Official Audit

In his audit report of the GRDA Jones said the brother-in-laws' relationship does not appear to be an illegal conflict of interest, but does recommend that the Attorney General review the situation to see if any laws were broken.

In a text message late Thursday Chernicky responded, saying among other things "I serve for public good, not for personal gain."