Middletown Borough Council asking AG’s Office to investigate suspected improper use of funds by previous council

DAUPHIN COUNTY — The Middletown Borough Council is asking the state’s Attorney General’s Office to conduct an investigation into the suspected improper use or misallocation of public funds and the destruction of governmental records by the former council, according to a letter sent on behalf of the council to Chief Deputy Attorney General Brian Zarallo — head of the Public Corruption Unit — on January 2.

The request follows a forensic audit of funds that were received by the Borough Authority — a municipal authority that leased the wastewater system to the borough — after it and the council agreed to lease the wastewater services to Middletown Water Joint Venture in September 2014 as well as financial transactions thereafter.

As a result of the lease — a term of 50 years for $43.2 million — the council voted to terminate the authority effective December 30, 2014.

In December 2015, just two days prior to the end of the council’s term, the council called a last minute meeting where members moved to ratify all expenditures for that year, including a $1.3 million check written out to the authority.

“There was, however, no public discussion as to why a $1.3 million check was written from the borough’s general fund to the authority on teh day before a majority of the former borough council were to leave office,” Middletown Borough Council President Angela Lloyd wrote in the letter.

A review of the system audit trail revealed the check was created by Linda Houser on December 30, 2015 but she was on medical leave that day and the day prior and according to the letter, did not discover the issuance of the check until she returned to work on December 31.

On January 4, 2016, a check for $241,062.67 was issued by the authority — which was approved to be terminated in 2014 — to a law firm in an attempt to challenge the dissolution. The retainer was funded by the million dollar check  allocated by the council.

“In authorizing the payment to the authority, the former borough council was, in essence, funding the legal defense against its own effort to dissolve the authority,” Lloyd claims in the letter.

In total, $940,000 was issued to the law firm. However, the lawsuit filed on behalf of the authority against the council was dismissed as moot on September 27, 2016.

The letter also notes that the council attempted to locate documents pertaining to the former council’s action to approve the $1.3 million allocation of funds to the authority or an expenditure list that was going to be ratified. No documents were located.


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