Sweetheart Deal: Suspended City Employee Collects Pay for Months and Vests for Retirement

by P.D. Lesko

Download a copy of Ralph Welton’s Separation Agreement here.

While City Administrator Steve Powers announced Welton’s “resignation” in Jan. 2015, the Separation Agreement signed by Welton and city HR Director Robyn Wilkerson states his resignation would not be effective until May 7, 2015 “for the purposes of retirement.”

ANN ARBOR OFFICIALS investigated the work conduct of the city’s development manager Ralph Welton in July 2014 and then again in Dec. 2014. In Jan. 2015, Ann Arbor officials confirmed that Welton had resigned. City Administrator Steve Powers informed City Council of Welton’s resignation as head of the city’s building department, and recommended that the city’s contract with a consulting company hired to do Welton’s job, be extended.

Multiple City Council members contacted said that it was their understanding that Ralph Welton’s employment with the City had ended in Jan. 2015. However, documents turned over in response to a Freedom of Information Act request show that Ralph Welton continued to be paid for months after his “resignation.” A Separation Agreement turned over in response to a FOIA request revealed that Ralph Welton was offered a sweetheart deal under the auspices of which his “resignation” would not become effective until May 7, 2015—to allow him to vest in the city’s employee retirement system.

Had he not been offered the option to delay his effective retirement date, he would not have been eligible to collect either a taxpayer funded pension or health care benefits.

The Separation Agreement states: “If Employee executes this Agreement and applies for and is approved by the Pension Office for retirement, Employee’s employment will terminate by voluntary resignation for the purposes of retirement effective May 7, 2015.”

Council members were not told of this offer when informed of Welton’s “resignation” in Jan. 2015.

At least one Council member is suspicious that Welton’s sweetheart deal may be related to the Footing Drain Disconnect (FDD) litigation that has been ongoing.

It was the responsibility of Welton’s department to inspect  portions of FDD installations that allegedly have resulted in damage, including mold, in the homes of residents who were required to participate in the program or face stiff fines.

Sources say City Attorney Stephen Postema has assured Council members that the FDD litigation could be dismissed prior to a jury trial. However, at a recent hearing concerning allegations of unethical behavior  on the part of the City Attorney and Asst. City Attorney Abigail Elias, Judge Timothy P. Connors indicated the FDD case will be heard by a jury.

One clause in Ralph Welton’s Separation Agreement states, “He also agrees to cooperate with an assist the City Attorney’s office in any legal proceedings.” The Separation Agreement also provides Welton with reimbursement for expenses should his assistance be required after his resignation “in the event the City is a party to any litigation, threatened litigation of grievance arbitration, relating to events within Employee’s knowledge which occurred during the time of his employment.”

Fueling speculation that Welton was allegedly silenced with an overly generous “resignation” agreement is a clause in his Separation Agreement that calls for him to agree that he will “never disclose or otherwise divulge, furnish or make accessible to anyone any confidential knowledge or data of the city, or that of its customers, contractors or suppliers….”

This would include all information about Welton’s involvement with the city’s FDD program during the time just prior to and during the ongoing litigation.

Under pain of being liable for the repayment of all of the money dispersed under the terms of the Separation Agreement, Welton agreed, in essence, to help the City Attorney should it be necessary, and to refuse to divulge any information to anyone else about the past four and a half years he spent in the city’s employ.

The Separation Agreement even imposed a gag order on Welton concerning the terms of the agreement itself. The gag order allows Welton to discuss the terms of the Separation Agreement with his lawyer, spouse and accountant but then goes on to tell Welton that his spouse, lawyer and accountant should “maintain the terms of the Agreement in strict confidence except where disclosure is compelled” by law.

Plaintiffs in the FDD lawsuit against the city allege that since the program began in 2001, officials unlawfully forced residents to disconnect from the city’s stormwater sewer system and forced them to allow city-paid contractors to install sump pumps. Plaintiffs also allege that the Building Department neglected to properly inspect FDD work done by contractors. An attorney for the plaintiffs has suggested  contractors being paid by the city to perform the footing drain disconnects, including a former city employee, have their own multi-million dollar sweetheart deal.

It’s a legal quagmire that has the potential to cost Ann Arbor half a billion dollars in damages should the current litigation go to a jury trial and be decided in favor of the plaintiffs. Such an outcome could result in a flood of claims or a class action suit as thousands of the FDDs have been completed since 2001.

“This keeps me up at night. It really does,” said Council member Jack Eaton (D-Ward 4). Eaton, a labor lawyer, can’t discuss the specifics of the case, but he is clear that the FDD program—which has impacted neighbors in the Ward which he represents—has been the source of numerous complaints for years. Residents allege the FDD disconnects have resulted in flooding and even raw sewage backups into homes.

“We’re also talking about radon now,” said Eaton.

Irv Mermelstein, an attorney for the plaintiffs suing the city over the FDD program, has said that he’s looking closely at the possibility that the FDDs disturbed natural radon deposits  beneath homes and caused significant increases in radon levels. Radon is a naturally occurring radioactive gas, but high concentrations of radon in homes and buildings cause between 15,000-22,000 lung cancer deaths each year according to EPA officials.

“We’re talking about the kind of radon levels that can increase the incidence of lung cancer,” said Mermelstein.

It’s a high stakes legal game. One Council member said that should the city lose the FDD litigation, City Attorney Postema could very well lose his job, as a result.

With the stakes so high, then, it may come as no surprise that not only is Ralph Welton being paid for the six months between Jan. and May 2015, the Separation Agreement reveals that, “following Employee’s resignation, effective May 7, 2015, the city agrees to pay Employee all remaining accruals earned prior to Employee’s resignation.”

Welton will be paid for 190 hours of sick time accrued. In addition, the payout to Welton under the terms of the Separation Agreement is payable to his estate, should he die.

In total, Ralph Welton’s “resignation” is expected to cost taxpayers upwards of $100,000, including cashed out hours, pay, benefits and taxes. Allowing Welton to resign and providing him with an agreement that permitted him to postpone the resignation’s effective date so he could become eligible for a city-funded pension and health care for the remainder of his life, the sweetheart deal could cost taxpayer’s hundreds of thousands of dollars over the next 30 years. Under the auspices of the city’s employee pension program, after an employee’s death, paid health care is still provided to a spouse.

In Dec. 2014, it was announced that Ralph Welton had been placed on paid administrative leave. City Administrator Steve Powers would not say why Welton had been put on leave or why his work conduct was being investigated. Welton, one of the city’s highest paid employees, was being paid $94,887 as of Nov. 2014, plus benefits.

In Jan. 2015, it was announced that Welton had left the employ of the City of Ann Arbor. No mention was made to Council members of the fact that he’d been put on paid administrative leave with an end date calculated to allow him to reach the five-year retirement vesting period.

The Separation Agreement states that “Employee will be placed on a paid administrative leave of absence through May 7, 2015.” That leave includes “paid holidays” and 136 hours of “vacation, floating holiday and personal time.” The agreement also granted Welton health insurance while he was “not expected or required to be present at the City nor expected or required to perform any duties.”

City Administrator Steve Powers did not return an email message seeking a comment about Welton’s Separation Agreement. While Powers did not sign the Separation Agreement offered to Ralph Welton, Powers supervises the Director of Human Resources who did oversee the agreement.