Pittsburgh police Deputy Chief Paul Donaldson ordered a secret credit union account to be shut down after learning of its existence in January from then-Assistant Chief Regina McDonald, he said Friday night.
The deputy chief confirmed that he has been cooperating with federal investigators probing the flow of funds into the Pittsburgh police bureau's personnel and finance office and has been interviewed by the FBI.
In January, Deputy Chief Donaldson said, Assistant Chief McDonald, who is now acting police chief, approached him after being made aware that an officer at police headquarters had written a formal memo documenting concerns about potentially questionable financial practices involving colleagues.
The memo, obtained by the Pittsburgh Post-Gazette, was dated Jan. 18 from Officer Christie A. Gasiorowski to her supervisor, Sgt. Carol Ehlinger.
In it, Officer Gasiorowski suggests that Chief McDonald was aware of the credit union account as early as 2009.
Chief McDonald could not be reached for comment, and Deputy Chief Donaldson said he did not recall her telling him in 2009 about any such account.
Both Officer Gasiorowski and Sgt. Ehlinger work in the special events office, which coordinates moonlighting for police officers and is the initial processing point for millions of dollars in checks written by private employers to pay the officers and the city.
Officer Gasiorowski's memo detailed concerns she had that more than $31,000 in checks -- which are supposed to be deposited in authorized city accounts -- had been diverted to an unauthorized account at the Greater Pittsburgh Police Federal Credit Union.
Officer Gasiorowski wrote that she was told by Karen Palmer, an employee in the bureau's personnel and finance office, that Sandra J. Ganster, the bureau's personnel and finance manager, and Tamara L. Davis, her second-in-command, were taking the checks.
"Karen explained that both Tammy and Sandy have taken checks that were supposed to be deposited and instead are depositing them in a separate account at the Pittsburgh Police Federal Credit Union," the memo says.
Ms. Palmer has copies of the checks allegedly taken by the women for the past two years, the memo says.
Attorney William H. Difenderfer, who represents Ms. Ganster, has said that his client created the credit union account and diverted the checks under then-Chief Nate Harper's direction.
Neither Mr. Harper, who has resigned, nor his attorney have responded to that allegation.
Warner Macklin III, a spokesman for Ms. Davis, denied all accusations in the memo about his client.
"She ... has never deposited any checks in the [credit] union account," Mr. Macklin said.
Ms. Palmer was the employee who received checks from the special events office that were sent in by private employers. The checks covered both payments to police officers for their off-duty work and a fee owed to the city.
Ms. Palmer records the checks, which are supposed to go to the city treasurer's office for deposit, according to the memo.
Although Deputy Chief Donaldson said he did not see the memo -- known colloquially as a "special" -- until "after the fact," he said the information prompted him to act.
"I arranged for a meeting with some of the people who, for lack of a better word, were stakeholders in the account, and I asked for an explanation," Deputy Chief Donaldson said. "We discussed it, and I advised that the thing be closed, and it was."
Deputy Chief Donaldson said he could not discuss the explanation he was given. He also would not say whether he made Mr. Harper aware of the situation or with whom he spoke.
He said Chief McDonald, who was then his subordinate, presented additional evidence, which he would not discuss.
That occurred days, if not weeks, before Ms. Ganster told Public Safety Director Michael Huss about the secret account on Feb. 9, according to her attorney.
The FBI subpoenaed records the following week from police headquarters and the credit union.
The credit union is a nonprofit financial institution that is not an authorized city depository and is not eligible to receive funds meant for the city.
Deputy Chief Donaldson would not say whether he discussed the information about the credit union account -- specifically one labeled "I.P.F." -- with Mr. Harper or anyone else.
"I cannot say at this time who I spoke with, but I will tell you I spoke with some individuals and I advised that the account should be shut down," Deputy Chief Donaldson said.
That account had eight debit cards associated with it for Mr. Harper, the mayor's three bodyguards, Ms. Ganster, Ms. Davis, Assistant Chief Maurita Bryant and Deputy Chief Donaldson.
Officer Gasiorowski declined comment. Sgt. Ehlinger did not respond to several phone messages. Ms. Palmer could not be reached.
Officer Gasiorowski indicates in the memo that on Jan. 10 Ms. Palmer mentioned concerns to her about several checks.
"Karen explained that she is afraid to tell anyone in her department, because she thinks both of her supervisors, Tammy Davis and Sandy Ganster along with Chief Nathan Harper, are involved," the memo said.
After the conversation, Officer Gasiorowski told Sgt. Ehlinger about it, the memo states.
"Sgt. Ehlinger stated that she was also under the impression that a check was taken to pay for the promotion party of Cmdr. Eric Holmes," the memo said.
Mr. Difenderfer said this week that Ms. Ganster, after she became convinced that the credit union account was tapped to pay for the party following Cmdr. Holmes' promotion in August, decided to go to Mr. Huss.
On Jan. 11, the memo states, Officer Gasiorowski told Chief McDonald what she knew.
Officer Gasiorowski also alleged that it is "my understanding" that special events checks were used to fund a private business venture organized by Mr. Harper, Cmdr. Holmes, Sgt. Barry Budd, Ms. Davis and Officer Tonya Montgomery-Ford.
Mr. Macklin, who also represents Officer Montgomery-Ford, disputed that claim.
The memo also alleges that the city paid for training for Ms. Davis and Officer Montgomery-Ford that was not consistent with their duties but was meant instead to "give them the knowledge and training to start this consulting business."
Mr. Macklin also disputed that allegation.
The memo references a 2009 check from the University of Pittsburgh to the police bureau for $5,675.52 that was meant to pay for security services by off-duty officers.
The special events office sent Pitt a late notice for an unpaid bill. Pitt provided the canceled check. The memo incorrectly states that the check was deposited into one of the credit union accounts marked "Special Events c/o Sandy Ganster."
It was, in fact, deposited into the I.P.F. account. A withdrawal slip for $4,000 from the account that same day appears to bear Ms. Davis' signature.
"This information was provided to A/Chief McDonald at the time of the occurrence and she stated she would look into it," the memo says.
The memo says Ms. Ganster told Officer Gasiorowski and Officer Linda Gigliotti, who worked in special events, that the money was deposited to pay for police equipment for the G-20 summit in September 2009.
Officer Gigliotti could not be reached for comment.
Ms. Davis' spokesman has said he was under the impression that the bureau's command structure conducted an internal investigation of the transaction -- which did not involve questioning Ms. Davis -- and that she was not implicated or disciplined as a result of that investigation.
Public Safety Director Huss declined to say when concerns about the diversion of checks reached him, citing the ongoing investigation.
Mayor Luke Ravenstahl's administration declined to make him available for questions late Friday.
Officer Gasiorowski wrapped up her memo by expressing concerns about her own future and that of her co-workers in light of her disclosures.
"In the event that an investigation occurs and disciplinary action is taken to those involved, I am seeking protection for myself, Carol Ehlinger and Karen Palmer under the Federal Whistle Blowing act," the memo says.
"I believe that Karen Palmer, Carol Ehlinger and I, all did our due diligence in reporting this possible misappropriation of funds and fear that those in positions of ranking authority will attempt to terminate our employment or move any of us from our current assignment [as] retaliation for bringing attention to this matter."
Jonathan D. Silver: email@example.com or 412-263-1962. Rich Lord and Liz Navratil contributed. First Published March 9, 2013 5:00 AM