Metra Board: Pagano improperly took almost $500,000

CHICAGO – Former Metra Executive Director Phil Pagano took at least $475,000 in unauthorized vacation payments since 1999, an outside investigation has concluded.

A report released Friday at the Metra Board of Directors meeting also concluded that Pagano likely violated state and federal law by forging Chairwoman Carole Doris' signature on two documents to obtain the most recent payments.

The revelations are in far excess of the $57,000 payment that prompted the Metra board last month to put Pagano on paid leave and hire Itasca attorney James Sotos to investigate. His findings come a week after Pagano, 60, committed suicide by stepping in front of a Metra train about a mile and a half east of his rural Crystal Lake home.

The 14-page executive summary released by Sotos concluded that Pagano's position as head of Metra, which he held for 20 years, put him in the best position to commit financial abuses. It said the "rigorous control" that Pagano had over the agency, combined with the trust and loyalty he commanded through his many accomplishments, curtailed any hope of accountability.

"Our error was trusting too completely and too deeply," Doris said after the meeting.

The summary concluded that no Metra employee other than Pagano appears to have been involved. Sotos said most of his investigation was included in the summary, but the complete work is being withheld until U.S. Attorney Patrick Fitzgerald's office reviews it. Illinois Attorney General Lisa Madigan's office also plans to investigate.

The mystery remains as to why Pagano needed the payouts on top of his $269,625 salary – he had explained to investigators that he "was badly in need of money for personal reasons," but did not elaborate further, except to say that it was not needed for "anything illegal or immoral."

Pagano improperly collected about $250,000 between 1999 and 2006 by cashing out his vacation time at the beginning of each year, the report concluded. He collected another $225,000 between 2007 and 2010. Sotos said Pagano did so without regard as to whether or not he used the vacation days.

The report also states that Pagano owes Metra about $127,000 from loans taken against his executive compensation package. After taxes, Pagano had $711,500 available upon turning 60, but he could borrow against it, and did so. The report stated that Pagano borrowed $838,816, meaning he owes Metra about $127,000.

Sotos said the board will look into whether it can recover the $127,000 shortfall through Pagano’s retirement accounts. Sotos and Doris said they are unsure whether the board will look at trying to recover money from Pagano's estate.

<subhed>"This is very serious"</subhed>

The end apparently began for Pagano last June, when he submitted a memo requesting a payout for his full 11 weeks of 2010 vacation time.

Pagano was told he would need Doris' authorization for such a requests. He assured Metra's chief financial officer that the authorization would be forthcoming, and the CFO authorized the $57,000 payment.

Pagano did not provide the documentation until January, at which time he produced a second memo signed by Doris authorizing a payout of his 2011 vacation days. The CFO then authorized a second $57,000 payment.

Doris became aware of the memos in late April, she said. She had no memory of signing the memos, and she did not have copies in Pagano's personnel file. Doris met with Pagano on April 27, at which time he said that he had signed her name. Doris said that Pagano was very contrite.

"I said, 'This is very serious, and we have to take serious action, and I think he understood that," Doris said.

Board members held an emergency meeting April 30 in which they put Pagano on paid leave and authorized Sotos to investigate.

Sotos said he had uncovered enough by the following week to justify recommending Pagano's firing. The board scheduled another emergency meeting for 10 a.m. May 7.

Two hours prior, Pagano walked in front of a Chicago-bound Metra train, about 30 feet north of the Hillside Road crossing just northeast of Sterne's Woods Park, and died instantly.

<subhed>Moving forward</subhed>

Following a two-hour executive session, board members took several votes aimed at restoring the public's trust and preventing a future occurrence.

Board members created a financial practices committee to examine policies regarding compensation of senior management and other employees. They also created an executive committee to review the board's governance and its oversight of the executive director's office.

The board then appointed Metra's acting chief internal auditor, Eric Fernandez, as acting inspector general to expeditiously handle complaints about Metra's business practices.

Jack Schaffer, a longtime friend of Pagano and McHenry County's representative on the Metra board, quoted Shakespeare to sum up his feelings about Pagano: "The evil that men do lives after them; the good is oft interred with their bones."

"I don't think that's fair," Schaffer said. "As we've heard, Phil Pagano had some problems. He did some things he shouldn't have, but I think it would be totally unfair to not think about what he did good and right."

Schaffer, like Doris, laid some of the blame for the tragedy on the board and Metra, saying that members did not give him sufficient oversight.

Schaffer said he will always think of Pagano whenever a Metra train rolls by.

"I'll feel a little sad, but I’ll also feel very proud," he said.


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