YOUNGSTOWN — City officials don’t plan to even consider transferring $1 million from the city’s business development fund to its water and wastewater funds until next year, despite a state audit saying the money was improperly moved through a 2009 scheme devised by David Bozanich, its former finance director.

The $1 million finding for adjustment against the city is part of a special state audit released Thursday that called for $7,866,389 in findings for recovery against Bozanich as well as developer Dominic Marchionda; several of Marchionda’s companies; his wife, Jacqueline; and his business partner, James Pantelidis, co-founder and principal at Pan Brothers Associates in New York City.

The audit details improper use of city money and the failure to pay back state loans by Marchionda, his businesses, his wife and Pantelidis for the Flats at Wick student housing complex, and the Erie Terminal Place and Wick Towers, both downtown apartment buildings.

In an Aug. 22 Vindicator article about letters sent to the various people and companies listed in Thursday’s audit seeking the findings for recovery, Marchionda and David Rizzuto, Pan’s director of management, said they disagreed with the findings.

Rizzuto added: “We are working on a timely response” because “we don’t feel we owe this money.” Marchionda said at the time: “It has to be reviewed.”

Attempts Thursday to reach Marchionda and Rizzuto for comment were unsuccessful.

But Allison Dumski, a state auditor spokeswoman, said the office never received a response to the audit report from any of the parties named.

Also, Bozanich couldn’t be reached Thursday to comment on the audit. He was asked in August about the findings before they were finalized and said, “Leave me alone” and hung up on a reporter.

The largest finding for recovery in Thursday’s audit is $6,576,378 against Marchionda, Pantelidis and Wick Properties LLC — which has the two men as managing members — for an unpaid Ohio Development Services Agency energy loan from Sept. 25, 2013, to help fund the construction of Wick Towers.

An aggravated theft charge against Wick Properties LLC was dismissed Aug. 7, 2020, as part of a plea deal related to the initial $5,008,400 loan in order to make it easier to pay it back.

But $6,576,378 was owed on the loan — increased because of interest and collection costs — as of July 9.

In addition to that, there is an ODSA brownfield loan for Wick with an unpaid balance of $161,326 as of July 9 and an ODSA brownfield loan for Erie Terminal Place with an unpaid balance of $294,077, also as of July 9.

The loans are in default and given to the Ohio attorney general “as bad debt for collections,” according to the audit.

WAITING TO PAY

The special report said state auditor officials met privately Oct. 7 with numerous city representatives and gave them five days to respond to the report.

“A response was not received by the city,” the audit states.

Finance Director Kyle Miasek, who attended the Oct. 7 meeting, said the city won’t transfer the money this year.

“We’ll look to re-evaluate in 2022 with city council’s input and approval,” he said.

The $1 million the audit wants the city to transfer from the business development fund to the water and wastewater funds stems from a 12-year-old Bozanich scheme.

Based on Bozanich’s recommendation, city council gave $1.2 million, half from the water fund and half from the wastewater fund, to Marchionda on Nov. 19, 2009, through U.S. Campus Suites, which developed the Flats at Wick.

The money was deposited into Marchionda’s bank account on Dec. 7, 2009. In return, Marchionda gave $1 million back to the city’s general fund to buy the former Madison Avenue fire station. The check back to the city was issued two minutes after the $1.2 million was deposited into Marchionda’s bank account that had just been opened and had no prior balance, according to the audit.

That illegal transaction allowed Bozanich to balance the city’s ailing general fund that year. The city isn’t permitted to transfer money from the water and wastewater funds to the general fund.

Among the four convictions against Bozanich, who served 11 months in prison for his crimes, is a felony count of tampering with records related to the transaction.

“The remaining $200,000 was kept by the developer for his participation in the money laundering scheme perpetuated by” Bozanich, according to the audit.

A finding for that $200,000 was issued against Marchionda, Bozanich and U.S. Campus Suites LLC.

A charge against Marchionda related to the fire station issue was dismissed when he pleaded guilty Aug. 7, 2020, to four felony counts of tampering with records after admitting he used false invoices to get money from the city for the Erie Terminal project to pay bills he owed for the Flats at Wick.

While the city sold the fire station for $1 million — and leased it from Marchionda’s company until closing it in December 2019 when the rental deal expired — it was actually worth $411,388 at the time of the purchase, the audit states.

There’s a finding for that $411,388 to be paid to the city’s fire fund by Marchionda, Bozanich and U.S. Campus Suites. The two men and the company also would need to pay $3,220 to the city’s business development fund for the closing costs for the station sale.

AT CITY HALL

The special audit came after a criminal investigation into illegal financial transactions at city hall.

In addition to Marchionda and Bozanich, former Mayor Charles Sammarone and Raymond Briya, a former MS Consultants Inc. chief financial officer, were found guilty of various crimes. The state accepted plea bargains from the four that were significantly reduced from the 101 criminal counts in an indictment unsealed Aug. 30, 2018.

A criminal case against attorney Stephen Garea, who was to be a key prosecution witness, is still pending, according to the state audit.

During a January 2020 pretrial hearing, Garea testified he told a contractor to talk to Bozanich on behalf of Marchionda. The contractor, Phillip Beshara, testified he gave $20,000 in an envelope to Bozanich. Also, Garea testified he waived about $10,000 in legal fees Bozanich owed him. An unlawful compensation of a public official conviction Bozanich pleaded guilty to was for those unpaid legal fees.

Because the $1 million was improperly moved between accounts, the audit calls for the finding for adjustment against the city. The business development fund is largely subsidized by the general fund.

In April, at the behest of state Auditor Keith Faber, the city transferred $4,415,332 from its general fund to its water fund ($2,653,169), wastewater fund ($1,612,163) and environmental sanitation fund ($150,000).

In 2017 and 2018 state audits, both released in 2019, Faber questioned the legality of using that money from the three funds mostly for economic development projects. That money, Faber said, should have come from the general fund.

After a lengthy disagreement with Faber’s office, city officials decided to transfer the money. That was primarily done because Youngstown received or will receive about $88 million in federal COVID-19 relief funds and had the money in the general fund while the water fund had financial issues.