Accountants repeatedly warned Local 98 about lax financial controls, witnesses at Johnny Doc trial say

Accountants repeatedly warned Local 98 of the International Brotherhood of Electrical Workers about its lax financial controls in the years leading up to the indictment of the union’s longtime leader, John Dougherty. But those admonitions went largely unheeded, witnesses at Dougherty’s federal embezzlement trial testified Wednesday.

Kathleen Jackson, an outside accountant for Local 98, told jurors that her team had flagged several potential issues around expense reports and the use of union credit cards while preparing Local 98′s annual financial statement in 2016.

In a letter to the union’s executive board that year, she warned that failure to keep better track of how Local 98 officials were spending its money could “increase the potential that the local paid for expenses that were of a personal nature and weren’t for the business purpose of the local.”

» READ MORE: As it happened: Prosecutors comb through Local 98′s financial filings as they near the end of their case

Prosecutors showed Jackson’s memo to the jury Wednesday as they neared the end of their case against Dougherty, alleging he and others spent hundreds of thousands of dollars on themselves using union credit cards, petty cash, and Local 98 accounts under their control.

But as a series of accountants who’d sounded similar alarms testified throughout the day, lawyers for Dougherty insisted he’d never seen nor been told about those recommendations.

Jackson, for instance, said she’d addressed her letter warning of missing receipts and delays in explaining the business purpose of many expenses to the Local 98 executive board.

She acknowledged under cross-examination that she couldn’t say for sure that it had ever been shared with Dougherty.

Dave Clapcich — an outside auditor who later came to work directly for the union — had warned Local 98 as early as 2010 about the high number of expenses it was reimbursing for members without accompanying receipts.

He continued to raise alarms after coming to work directly for the union in 2015 — even delivering a presentation in 2016 on new guidelines for how expense reports should be submitted, including requirements that every purchase be backed up with a receipt and a full explanation of its business purpose.

But Dougherty attorney Greg Pagano insisted that the union chief did not attend that presentation and did not receive a handout Clapcich created explaining those new rules.

» READ MORE: John Dougherty trial: Day-by-day updates

Instead, Pagano said, the union chief spent most of his days outside Local 98′s offices zipping from meeting to meeting with political and business leaders advocating on behalf of the union and landing jobs for its rank and file.

“You hardly ever saw John in the office because he was out there creating man-hours for union members?” the defense lawyer asked Clapcich at one point during his cross-examination — a point on which the accountant agreed.

That question echoed the defense Pagano has offered throughout much of the trial — that Dougherty was so busy leading the 5,000-member union, its mammoth political operation, and the affiliated building trades union, which he also oversaw, that he may have been less than diligent in how he was spending union money.

» READ MORE: Defense casts Johnny Doc’s sloppy records of union expenses as a mistake, not a fraud

But Dougherty has maintained that any personal expenses that ended up on his Local 98 credit cards or expense reports were mistakes, not crimes.

Prosecutors have spent weeks seeking to puncture that explanation, showing that Dougherty was so cavalier with union money that he routinely misspent thousands of dollars on dinners with family, shopping trips, and home renovations then miscategorized them as business expenses.

And it wasn’t just his union he was fleecing, government lawyers said Wednesday, accusing Dougherty of also dipping into funds raised by South Philadelphia’s First Ward Democrats, an organization he oversaw as ward leader between 2010 and 2015.

He maintained significant influence even after leaving the post and directed his successor, Tommy Rumbaugh, to spend roughly $2,500 from the ward’s PAC on Dougherty and his friends, Special Agent Jason Blake, the FBI’s lead investigator on the case, told jurors.

Those expenses included more than $2,000 on Brooks Brothers gift cards and a 2016 steak dinner at Palladino’s restaurant on Passyunk Avenue to celebrate the birthday of Marita Crawford, Local 98′s then-political director with whom Dougherty has acknowledged he was having an affair.

Pagano stressed it was Rumbaugh — not Dougherty — who had actually spent that money.

But as Blake’s testimony for the day neared its conclusion, prosecutors displayed wiretapped conversations between the two that they said were indicative of their dynamic.

In the end, Dougherty had to miss Crawford’s birthday. His father, Rumbaugh, Crawford and others attended.

And as for the $477 tab? Dougherty texted Rumbaugh: “Put that on the ward card.”

Testimony in the case is expected to resume Thursday.

Join Inquirer reporters Oona Goodin-Smith and Jeremy Roebuck for a Reddit AMA on the trial on r/philadelphia Thursday Nov. 30 at 12:15 p.m. They’ll answer your questions on the case, what they’ve learned in court thus far and what’s to come.