Nutter overruled his inspector general to spare a key City Hall adviser

For more than two decades, Michael A. Nutter portrayed himself as the most ethical man in Philadelphia politics. As a councilman and then mayor, he demanded that everyone in local government -- from blue-collar workers to the suits in City Hall -- reject the corrupt culture and pocket-lining that long marred the city's reputation.

But Nutter whistled a different tune when he was confronted with evidence that one of his own cabinet members had crossed some ethical lines. In October 2012, Inspector General Amy Kurland told Nutter to fire then-City Representative Melanie Johnson for allegedly racking up questionable purchases with a credit card and checks from the Mayor's Fund for Philadelphia, a recommendation he didn't heed, multiple sources have told the Inquirer and Daily News.

Investigators at the Inspector General's Office initially suspected that Johnson -- whose salary topped out at $116,696 as of 2015  -- had misspent tens of thousands of dollars in her role as the fund's chairwoman, seven sources said. The probe stretched on for months. In the end, Kurland and the mayor concluded that there were just $733 in charges that could not be justified as genuine work-related expenses.

An Inquirer and Daily News review of credit-card records showed thousands of dollars of eye-catching expenses -- like a $1,687 bill from Cuba Libre, $589 at Maggiano's, and $559 on gift baskets -- that lacked any documented explanation. The fund also spent $248 on chocolate-covered pretzels for a Johnson family funeral.

The Mayor's Fund, a nebulous nonprofit with millions in its coffers, is now the subject of two separate probes: one by the city's Ethics Board, the other by City Controller Alan Butkovitz. Last summer, Butkovitz announced that his office had discovered that Desiree Peterkin Bell, who succeeded Johnson, had treated the nonprofit like a "slush fund," blowing close to $400,000 on hotels and travel in 2014 and '15. Peterkin Bell disputed that characterization and filed a defamation suit against the controller that was later dismissed.

In December, the FBI also interviewed Kurland and other staffers to inquire about the Johnson case, the sources said, but the bureau's interest proved short-lived.

Shortly after Kurland told Nutter to fire Johnson, the mayor  announced that Peterkin Bell was replacing Johnson, who was given a new, higher-paying, and improbably titled job: director of research and marketing for big events. She didn't leave the city's payroll until January 2016, when Mayor Kenney took office.

Johnson's spending was a warning that the Mayor's Fund needed stricter oversight, decades after it was misused by handlers in an earlier incarnation. But the investigation was never disclosed publicly, and was largely kept hush-hush even within City Hall.

In an email,  Nutter wrote that he had decided that Johnson's expenses "were not inappropriate or improper," but that some of her purchases were "unnecessary, and reflected poor judgment."

Johnson did not reply to several written requests for comment. A reporter visited her home on a cold, windy morning in Overbrook last month. When asked to discuss the Mayor's Fund, she said only one thing before shutting her front door: "I'm not interested."

Johnson's name might not be instantly recognizable, but she was part of the city's political circles for two decades, working in then-Mayor Ed Rendell's press office in the early to mid-1990s and then serving as Nutter's spokeswoman when he mounted his long-shot mayoral bid in 2007.

"I worked with her on the campaign," said longtime political consultant Neil Oxman. "She was a nice person. Very good, very professional."

Nutter tapped Johnson to serve as city representative, a post that put her in charge of events like the Wawa Welcome! America Festival and the Philadelphia Marathon.

The nonprofit has a troubled history. It began in 1979 as the Council for Progress, a vehicle for raising money for a bicentennial celebration of the Constitution. Five years later, it was renamed the Fund for Philadelphia, and the city representative was appointed the chair under then-Mayor W. Wilson Goode Sr.

Its mission changed shape in the years that followed, but it excelled at attracting donations. It also proved to be a source of temptation. In 1988, the Daily News reported that about $271,000 from the fund had been spent on parties, and a year later the city controller demanded that it give back $133,000.

During Nutter's tenure, the fund developed loftier goals of promoting tourism, business and economic development, and cultural events. Its revenues surpassed $7 million a year, thanks to a unique arrangement: The city operates the marathon, and directs a chunk of registration fees to the fund, which distributes some of the money as grants to organizations like Project HOME.

An alarm bell was first sounded in the spring of 2012.  The Bureau of Administrative Adjudication flagged a parking ticket that Johnson had paid with a check from the Mayor's Fund, according to two sources familiar with the matter.

A number of higher-ups were notified, including Chief Integrity Officer Joan Markman and Finance Director Rob Dubow. Markman suggested the Mayor's Fund board members review several years' worth of expenses, which revealed that Johnson had spent some of the fund's money on a membership to the Forum for Executive Women, a stay at the Four Seasons Hotel with her family, and other parking tickets on her city vehicle.

Nutter and his chief of staff, Everett Gillison, were soon clued in, and the matter was referred to Kurland. Then-Managing Director Rich Negrin, a member of the fund's board, also alerted Gillison that he had heard rumors that Johnson had allegedly misspent money.  (Gillison has not responded to numerous calls for comment. Negrin, a candidate for district attorney,  declined to comment.)

Detailed records released recently by the Mayor's Fund as a result of Right-to-Know requests show that Johnson piled up hefty expenses in bunches, like restaurant bills in 2011 of $1,687 at Cuba Libre, $589 at Maggiano's, and $368 at Wolfgang Puck -- all of which lacked any written explanation. A $611 bill from a florist in Norristown and $559 from the gift basket company Harry & David also went unexplained.

The fund shelled out $960 on food and alcohol for a 2010 holiday party at Chima Steakhouse in Center City, records show. The fund also paid $248 to send two pounds of chocolate-covered pretzels and a gift basket from the Pennsylvania General Store to Johnson's home for a family funeral. That purchase was oddly categorized as an Office of the City Representative event.

As city representative, Johnson approved sending $122,500 a year in city money to the Mayor's Fund for administrative services. According to documents obtained by the Inquirer and Daily News, the Controller's Office considered the transaction "an apparent conflict of interest," and requested a "special audit." When it learned that Kurland was investigating Johnson, it didn't pursue the audit.

Kurland's team found many of Johnson's expenses were simply labeled as "business meetings" related to the marathon.

According to multiple sources familiar with the case, Johnson  defended her spending by noting that no one had told her she couldn't use the fund's credit card on meals and other big purchases.

"When you get to a certain level of responsibility on an executive level, you're responsible for your judgment. Not everything is going to be written down for you," said David Thornburgh, president of the good-government group Committee of Seventy.

"I can envision a circumstance where it might seem like a strategic decision to spend $1,000 on a dinner for a potential sponsor who might spend $1 million on a sponsorship. But you have to be responsible. If the records aren't there, that could be a problem."

At the end of the investigation, Kurland did not make a written report, which was unusual. She briefed Nutter orally instead.

According to the 1994 executive order governing the Inspector General's Office at the time, it was supposed to "submit a report" at the conclusion of a noncriminal investigation to the appropriate department head or, in the case of an agency head under investigation, the mayor. Two years after the Johnson case, Nutter issued updated rules for the Inspector General's Office that, among other changes, said the office "may submit" a report at an investigation's conclusion.

On Jan. 7, 2013, Dubow, the finance director, told Johnson in an email to "repay the city $733 for costs you charged to the city for professional memberships, meals, catered meetings, parking tickets and miscellaneous other items." In a subsequent email, he thanked her for paying.

Last month, a reporter asked Dubow, who is finance director under Kenney, why he told Johnson to repay only $733, since the credit-card records suggested the actual figure was much higher. "That's a very good question," he said, repeating the phrase three times as he stood outside the mayor's office. Dubow, who was clutching a binder,  said he had a meeting to attend.

"Unfortunately, I don't remember a lot of those details," Dubow later wrote in an email. "As you can see, the e-mail [to Johnson] was from over four years ago. I seem to remember that Joan [Markman, then chief integrity officer] and I talked about what would be appropriate amounts of repayment, but I don't remember the details."

Markman died in 2015.

In late March 2015, Nutter stood next to Kurland at the front of the Mayor's Reception Room, the grand, gilded space on the second floor of City Hall.

He preached to a group of newly installed city integrity officers about the importance of ethical conduct, and heaped praise on Kurland for turning the Inspector General's Office into a watchdog with real teeth. In a report compiled later that year, the office touted its record during Nutter's tenure: investigations that led to $70 million worth of financial savings, 328 administrative actions, and 89 arrests or indictments.

By rooting out dozens of corrupt municipal workers, Nutter said, Kurland and her team had showed "our other 20-plus-thousand public employees that there's really only one way to function in this city government. It is with integrity, it is with transparency, it is with just doing your job and getting the pay that you get. ... The idea that somehow you can rip off the city government, or get extra somewhere, is completely unacceptable."

They were stern words, meant to remind the new officers that he'd ushered in an era of higher standards for city employees. And yet when Kurland had urged him to fire Johnson, he apparently blinked.

Kurland declined to discuss the Johnson case during a recent interview, saying her office's investigations were confidential.

"When we have an administrative investigation, it always works the same way: We make a recommendation to the supervisor of the individual. Whether that be a commissioner, a cabinet member, or the mayor, that's our procedure," she said. "Sometimes the supervisor accepts the recommendation and sometimes not."

Nutter's reaction was limited to this statement, which he asked to be reprinted in its entirety:

"About 5 years ago, the Mayor's Office provided information to Inspector General Amy Kurland regarding various expenditures by then City Representative Melanie Johnson that were incurred in the course of her work.

"The Mayor's Office requested that Inspector General Kurland review and analyze these expenditures. The Inspector General subsequently provided me with her review and briefed me on her findings.

"While I determined that the expenditures in question were not inappropriate or improper, I did decide that some of the expenditures in the approximate amount of $700 were unnecessary, and reflected poor judgment by Ms. Johnson. I directed Ms. Johnson to personally repay the approximately $700 in expenditures and the matter was concluded. As this was a personnel matter, I have nothing else to say or report."

A reporter asked Nutter to explain the inherent contradiction in that explanation: How could Johnson's purchases have reflected poor judgment if they weren't improper?

He has yet to respond.