Ohio Regional

Galion’s $11 Million Betrayal and the Fight for Transparency: The High Cost of Blind Trust Reading Mode

Written by marion-watch

The Town Before the Fall

Galion was a railroad town that learned to live on less. By the 1980s the rails were no longer the engine of growth they had been; the city shifted toward a mixed industrial and service economy. The downtown’s red‑brick buildings and the Big Four Depot kept a civic identity intact, but the economic base that had built the city had weakened.

Civic life was run by long‑serving officials. The Council‑Manager form of government was supposed to keep politics out of day‑to‑day administration. That professional veneer created a culture of trust: people who had been in office for decades were assumed to be competent and honest. That assumption replaced routine verification. Over time, the city’s financial systems did not modernize to match the complexity of municipal finance.

Into that environment rose William Bauer. A Galion native, he began as an account clerk in 1985 and quickly moved into the city’s finance office. For nearly twenty years he was the steward of Galion’s money. He was trusted. That trust would be the city’s undoing. This led to the Ohio Auditor of State putting Galion in a 14 year Fiscal Emergency status, the 5th longest in Ohio history.

The Theft That Unmasked a System

In 2004 William Bauer attempted suicide and left a note admitting theft. The immediate crime — Bauer’s admitted taking of at least $87,000 — was shocking. The forensic accounting that followed was more shocking still: auditors and investigators found years of mismanagement, missing reconciliations, and a structural deficit that totaled roughly $11 million, with a treasury deficiency of about $4.3 million.

Those numbers are not abstract. They represented unpaid bills, deferred liabilities, and funds that should have been available for services. The deficit was spread across multiple funds — not a single bad check but a pattern of accounting failures and decisions that hid the true state of the city’s finances.

The human consequences were immediate. The city cut programs that mattered to families and neighborhoods. The D.A.R.E. program was defunded. Victim fees rose. About 25% of the municipal workforce was laid off. Vacation payouts were frozen. The city’s capacity to deliver basic services — police, fire, sanitation — was reduced. People who had relied on municipal programs and steady municipal employment found their lives smaller and more precarious.

Bauer’s criminal case closed one chapter: he pleaded guilty to multiple counts of embezzlement. But the legal outcome did not restore the money that had been lost to the structural deficit, nor did it repair the institutional failures that allowed the deficit to grow.

The State Takeover: Fiscal Emergency and Recovery

On August 9, 2004, the Auditor of State declared Galion to be in a Fiscal Emergency. That designation is reserved for municipalities in the most dire financial distress. It stripped the city of financial autonomy and placed it under the authority of a Financial Planning and Supervision Commission.

The Commission had broad powers: it could approve or reject city expenditures, contracts, and personnel decisions. In practice, that meant the City Council and Mayor were subordinate to the Commission on fiscal matters. The Commission’s job was to dig Galion out of the hole and to prevent a repeat.

The recovery plan combined revenue increases, structural reforms, and professionalization of financial operations:

  • Tax and fee increases. Voters approved a 0.5% income tax increase restricted to addressing deficits; the city also adopted a 0.39% levy for police and fire. The city introduced a vehicle registration tax and a cable franchise fee. These measures raised revenue but also shifted the cost of the scandal onto residents and businesses.
  • Administrative overhaul. The city joined a regional income tax agency to remove tax collection from local control and add independent verification. This reduced the risk of a single person controlling collections and reconciliations.
  • Utility rate adjustments. Enterprise funds for water, sewer, and electric were required to be self‑sustaining. The Commission mandated rate increases to stop enterprise funds from draining the general fund.

The oversight lasted a long time. It took fourteen years of supervision and strict controls before the Auditor of State certified the termination of the fiscal emergency in October 2018. By then the city had erased multi‑million dollar fund deficits and corrected treasury shortfalls. The fiscal emergency ended; the political and social scars did not.

The Freese Foundation Bailout: Rescue and Resentment

When private credit was unavailable in 2004, city leaders turned to the Egbert M. Freese Foundation. The city issued $3.5 million in general‑obligation bonds to cover immediate cash flow needs, and repayment of those bonds was secured by a pledge from the Freese Foundation.

That move saved the city from default. But it also created a political and ethical dilemma: a charitable trust intended for parks and scholarships was effectively leveraged to bail out municipal operations. The foundation’s assets and grant history show it is a multi‑million‑dollar trust that has since provided recurring capital to the city.

The Freese funds have been used for visible projects — park renovations, athletic facilities, and other capital improvements. Critics argue that the foundation’s money has been used for “pet projects” while basic needs were neglected: park restrooms remained unrepaired, daycare centers were denied heating equipment, and other community priorities were sidelined. Supporters say Freese grants have preserved amenities and leveraged outside investment.

The political reality is that using a private foundation as a de‑facto capital budget blurs lines of public accountability. Foundation boards, not voters, decide which projects receive Freese dollars. That dynamic has fueled long‑running disputes about fairness and priorities.

The Utility Wars: PCA, Rates, and the Politics of Billing

The city’s electric fund became a battleground. The Power Cost Adjustment (PCA) was designed as a variable charge that would rise and fall with the city’s actual cost of purchasing power. Between 2009 and 2012, critics alleged, the city froze the PCA at a fixed rate instead of allowing it to fluctuate as the ordinance required. That freeze, they argued, produced a surplus in the electric fund that amounted to an overcharge of ratepayers.

A citizen coalition led by former law director Roberta Wade, former council president Don Faulds, and resident John Smella investigated the billing practices and alleged a multi‑million‑dollar overcharge. The administration disputed the larger figure and offered a much smaller reconciliation, defending the surplus as necessary for infrastructure and to stabilize the enterprise fund.

This dispute was not merely technical. In a community still raw from tax increases and service cuts, the idea that ratepayers had been quietly charged millions felt like a betrayal. The PCA fight turned technical accounting into a referendum on trust: without transparent, independent reconciliation, both sides could present plausible numbers and neither side could definitively close the dispute. The absence of an independent audit of the PCA calculations allowed the controversy to fester and to shape local elections and civic activism.

Environmental Liabilities and Infrastructure Decay

Galion’s environmental and infrastructure problems are not background noise; they are active liabilities that carry public‑health and fiscal consequences.

  • Water and wastewater compliance. The city has faced regulatory scrutiny for permit renewals, pretreatment requirements, sanitary survey findings, and other compliance items. Notices of Violation and enforcement actions require remedial plans and capital investment. These are not one‑off fixes; they are ongoing obligations that will require sustained funding and competent project management.
  • Brownfield remediation. The Southside Plating site and similar industrial legacies required federal and state remediation for heavy metals and cyanide contamination. Cleanup is expensive and time‑consuming; it diverts administrative attention and capital away from other priorities.
  • Debt and refinancing. To manage costs, the city has engaged in bond refundings and refinancing to secure lower interest rates on water and sewer debt. Refinancing can reduce near‑term pressure but does not eliminate the need for capital investment. Without a funded capital plan tied to regulatory milestones, the city risks future rate shocks or penalties.

Infrastructure investment is not optional; it is a legal and public‑health imperative. The combination of aging systems, deferred maintenance, and regulatory obligations means Galion faces a multi‑decade bill unless it adopts a disciplined, transparent plan.

Patterns of Misconduct Beyond City Hall

The Bauer scandal was the most dramatic example of financial failure, but it was not the only one. Auditor reports and local audits have produced multiple “Findings for Recovery” and other adverse findings in Galion and neighboring institutions. These include illegal expenditures, overpayments, and thefts in quasi‑public bodies.

Investigations into organizations such as the local Chamber of Commerce uncovered alleged misappropriation that later produced criminal referrals and, in some cases, indictments. These incidents underscore that the problem is not a single bad actor but a regional pattern of weak internal controls and lax oversight.

The Galion Public Library offers a contrast: its 1988 levy and independent taxing authority insulated it from the city’s general fund and helped preserve its operations. That separation shows how structural independence can protect civic institutions from municipal failures.

This above case, Wade v. O’Leary, is a public records dispute brought before the Ohio Court of Claims.

The key details of the case include:

  • The Request: In June 2022, requester Roberta Wade asked Thomas M. O’Leary, the Mayor of the City of Galion, for records regarding all marriages he performed under his authority as mayor. This included records of the marriages themselves and any payments or donations associated with performing them.
  • The Dispute: After receiving no response to her initial request or a follow-up fax, Wade filed a complaint alleging a denial of access to public records and a failure to produce them in a timely manner.  
  • The Legal Issue: The case centers on the Ohio Public Records Act (R.C. 149.43), which requires public offices to make copies of requested records available at cost and within a reasonable timeframe.
  • Current Status: The Mayor moved to dismiss the case, claiming he eventually produced the records. However, the Special Master recommended denying the motion to dismiss because “mootness” (the idea that the issue was resolved) was not conclusively shown on the face of the complaint.

The Human Cost and the Politics of Recovery

Numbers tell one story; people tell another. The fiscal emergency meant fewer jobs, fewer programs for kids, and a city government that could not respond as it once did. Families lost services they had counted on. Municipal employees lost livelihoods and benefits. The city’s political life became consumed by fights over rates, grants, and the use of Freese money.

Recovery brought stability but not reconciliation. The city emerged from state supervision with balanced books, but the social contract between citizens and government remained frayed. Political battles over utility rates, Freese grants, and personnel decisions continued to dominate local discourse. Lawsuits and personnel disputes kept the wounds open. Environmental compliance issues kept the pressure on budgets and on public health.

What Must Be Done Now — Clear, Non‑Negotiable Steps

Galion’s recovery cannot rest on balanced ledgers alone. It must rebuild trust through concrete, enforceable reforms:

  1. Independent, recurring external audits. Commission annual external audits of all major funds, with public reconciliations of contested items such as the PCA. Publish the audit reports and require management responses.
  2. Transparent Freese governance. Require the Freese Foundation and the city to publish grant minutes, criteria, and annual accounting for all allocations to municipal projects. If the foundation’s funds are used for municipal projects, create a public memorandum of understanding that clarifies restrictions and oversight.
  3. A funded five‑year water/sewer capital plan. Adopt a capital plan tied to Ohio EPA compliance milestones, with clear funding sources and public reporting on progress and expenditures.
  4. Strengthened internal controls. Implement dual signatories for disbursements, rotation of duties in finance, mandatory external tax collection and reconciliation, and whistleblower protections with independent reporting channels.
  5. Civic restoration. Create citizen oversight committees for major funds and capital projects, hold regular public forums, and require transparent procurement for all large contracts.

These steps are the minimum to convert fiscal solvency into civic legitimacy. Without them, the same governance failures that produced $11 million in deficits can recur.

Timeline (Key Dates)

  • 1985–2004: William Bauer rises to Finance Director; financial control consolidates.
  • Aug 9, 2004: Auditor of State declares Fiscal Emergency for the City of Galion.
  • 2004: City issues $3.5M in general‑obligation bonds secured by the Freese Foundation pledge.
  • Apr 2005: William Bauer pleads guilty to embezzlement.
  • 2006–2008: Tax and fee measures enacted (income tax increase, vehicle registration tax, cable fee).
  • 2009–2012: Period of PCA rate management that later becomes the subject of citizen complaints.
  • 2012: City joins Regional Income Tax Agency (RITA) for tax collection.
  • Oct 4, 2018: Auditor of State certifies termination of the fiscal emergency.
  • 2020s: Ongoing Ohio EPA compliance actions; local litigation and quasi‑public indictments surface.

Works Cited (Click Here)

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