CU accused of constitutional violations over employee retention payments

City Utilities of Springfield has been accused of violations of the Missouri Constitution over employee retention payments in an investigation by state Auditor Scott Fitzpatrick's office.

Trevor Fox, director of communications for the state auditor's office, said an investigation was conducted after the auditor's whistleblower hotline received a submission in January. A closure letter for the investigation was sent to the CU board on July 29, said Fox, who also provided a copy to Springfield Business Journal.

The investigation found retention payments made to executive-level staff and bus operators appear to be state constitutional violations because "they were not for additional duties and appear to be for services previously rendered."

"Based on the information provided, it appears the only requirement to receive the retention payments was to remain employed with the CU for a certain time period and as the employees were already employed, this would not be an additional duty," the investigation report reads.

The board last year approved $193,677 in retention payments, comprising $76,352 for its CEO, $77,325 for three vice presidents and $40,000 for union-represented bus operators, according to the report.

Gary Gibson, CU president and CEO since late 2019, is slated to retire from the utility in February 2025. Beyond Gibson's retention pay, the investigation points to retention payments of $46,345 for the senior vice president and chief technology and people officer, listed on CU's website as Stephanie O’Connor; $17,526 for the SVP and chief financial and supply chain officer, listed on the website as Amy Derdall; and $13,454 for the SVP and chief legal and economic development officer, listed on the website as Dwayne Fulk.

Kristin Carter, chair of the Board of Public Utilities, which governs CU, said in a statement provided to SBJ that the payments were made amid an exodus of leaders at the utility.

"With the departure of almost 70 years of institutional knowledge from CU's executive leadership team, due largely to similar timing of retirement eligibility, we believe it was in the best interest of the utility to ensure continuity by retaining CEO Gary Gibson’s strong leadership through the reorganization of the executive team," Carter said in the statement.

The auditor's investigation additionally pointed to alleged Sunshine Law violations since the board's approval of the CEO's retention pay was made in closed session. According to the investigation, this should have occurred openly since "the discussion related specifically to the compensation and did not disclose performance ratings or other personnel records."

Further, the investigation found the retention pay for the vice presidents who were promoted to senior vice presidents was not discussed specifically by the CU board.

"We … believe the board properly discussed this retention plan for Gary in closed session because we had to consider his leadership capabilities for the seamless transition we were prioritizing," Carter said in the provided statement. "We fully respect the auditor’s analysis and recommendations and will review the opinion in full for guidance on any relevant future matters."

CU officials said in a separate statement that "retention payments were believed to be an available strategy to City Utilities to assist in this endeavor based on past Missouri state auditor reports, Missouri attorney general opinions and longtime use by other Missouri public entities."

The statement continues, "These were discussed, and in some cases voted on, by City Utilities’ board in closed session based on longstanding past practices and exceptions to the Missouri Sunshine Law we believed to be applicable. We will carefully review and learn from the recommendations provided and they will inform our decisions and practices going forward in our continuing efforts to innovate and improve for the benefit of our employees, customers and community."

The closure letter from the auditor's office concludes that "the board should ensure payments to employees are properly approved in open session and comply with all applicable laws and regulations."

Fox said the auditor's office is limited to releasing findings and making recommendations with its investigations and audits.

"That's the limit of what we can do," Fox said, noting a full audit may be conducted if issues persist.