Phoenix City Councilman Michael Johnson's private security business is under state investigation for sending unlicensed security guards to Sky Harbor Airport and two community airports also operated by the city, New Times has learned.
The company, NKOSI Incorporated, has a $600,000-a-year contract to provide security guards at Sky Harbor, Goodyear and Deer Valley airports. The company has about 45 employees providing various security services at the three airports, city records show.
The Department of Public Safety airport investigation comes five months after Johnson was issued a citation by DPS for sending unlicensed security guards to several state office buildings and the subsequent cancellation of a $50,000-a-year state contract.
The misdemeanor citation was dismissed October 26 by Justice of the Peace C. Steven McMurry, who stated he didn't have jurisdiction. McMurry referred the matter back to DPS Director Dennis Garrett.
In addition, the Arizona State Hospital canceled a contract with Johnson's company last September after the company sent unlicensed security guards to patrol a construction site housing violent sexual predators.
In the latest probe, DPS licensing unit investigator Rudy Buck says he is investigating NKOSI's employee time sheets submitted with company invoices that indicate unlicensed guards are working at Sky Harbor.
At least one of the unlicensed guards has worked since November in a secure area at Sky Harbor, where even Buck can't gain access without special permission from airport authorities, Buck says.
State law requires that security guards must be licensed by DPS. NKOSI's security company license can be revoked for employing unlicensed guards.
NKOSI supervisor Sylvester Primous says there is nothing to the DPS investigation of the company's airport contracts.
"They are just talking to you. Those concerns don't even exist," Primous says.
Johnson says all his employees sent to the airport are licensed with the state.
The NKOSI contract raises questions over possible conflicts of interest Johnson may have when voting on airport-related matters.
Aviation department records also indicate that NKOSI may be charging the airport more than specified in its contracts.
DPS investigator Buck says Johnson's company has been warned before not to use unlicensed security guards.
"I've been through this with them before a couple times," Buck says, referring to meetings last fall with Johnson and a company supervisor to discuss the use of unlicensed security guards.
"What do you have to do to people to get them to understand that when you are working in a regulated industry that you have to comply with the statutes?" Buck asks.
Six-thirty a.m., September 11, 2001.
Election Day in Phoenix.
Before the tumultuous events of that day would stun the nation, then-candidate and now city councilman Michael Johnson had some unpleasant personal business to resolve.
Johnson arrived at the Arizona State Hospital at 2500 East Van Buren to meet with security officials who were upset about the service Johnson's private security company was providing during a 12-day, $30,000 job.
Johnson met with hospital security officials to discuss reports that his employees were failing to perform their duties and that most of the guards sent to the job site were unlicensed. The brief meeting ended with Johnson saying "that he was pulling all of his guards," according to a hospital security incident report.
By this time, there was only one Johnson guard left on site -- the others all had been kicked off the property by hospital staff because they weren't properly licensed.
State hospital security reports paint a dismal portrait of the NKOSI personnel, including one guard caught sleeping with his hat pulled over his eyes, feet propped up on the desk, and another guard caught napping with his two-way radio turned off.
On one occasion, a guard became belligerent with hospital security officials after being reprimanded for sleeping and had to be escorted off the property, state hospital records show.
The sleeping incidents prompted Arizona State Hospital Security Chief William Rhode to investigate whether NKOSI's guards were licensed.
A September 5 inspection found that five of the seven NKOSI guards did not have the required state security guard credentials.
Later that day, DPS investigator Buck discussed the situation with Johnson and warned him that he needed to make sure his guards were licensed before sending them to a job site.
Two days later, the state Department of Administration, which issued the hospital contract, sent a warning letter to Johnson notifying him that his company was in default and to take immediate corrective action.
Neither Johnson nor the company responded to the default notice.
"The conditions were just horrible," he says.
So bad, Johnson says, that a number of his employees refused to go back to the site after the first night on Friday, August 31.
Johnson says the company then decided to send out unlicensed security guards to the site for the weekend shifts with the intention of having them apply for their DPS license the following Monday, September 3.
DPS requires a security guard applicant to provide an employment history and to be fingerprinted. DPS issues a provisional security guard license when the application is submitted.
A permanent license is issued after the fingerprint screening and background check is complete, which can take several months. About 40 percent of the provisional security guard licenses issued by DPS are later revoked because applicants fail to pass the background check.
After the weekend in which NKOSI sent unlicensed guards to the state hospital, the company had two days to make sure its employees had at least DPS provisional licenses. However, the company continued to send unlicensed guards to the hospital into the middle of the week.
State hospital security officials did not check for NKOSI security guard licenses until Wednesday, September 5, and still found five unlicensed guards.
NKOSI was paid $9.25 an hour to provide the unarmed security guards to patrol a perimeter fence at a construction site at the hospital.
The Department of Administration formally canceled the hospital contract on September 18. The state paid NKOSI $8,630 for the aborted job.
By late September, Buck was investigating tips that Johnson's company was sending unlicensed security guards to three state office buildings under a separate Department of Administration contract.
On October 1, Buck and DPS Sergeant LeLand Youngberg confronted NKOSI security guard Ronald Pope, who was on duty at the Centerpointe Building on East Morton Road.
DPS records had no information on Pope applying for or receiving a security guard license.
"Pope said he had been working for about one year without a guard license because he hadn't received one in the mail," Buck's report states.
Pope was issued a citation for working as a non-licensed security guard. State law prevents anyone from ever being licensed as a security guard after being cited for working without a license.
Two days later, Buck met with NKOSI supervisor Primous to discuss the Pope case.
Primous said he didn't know that Pope was unlicensed. Primous said his sister handles the licensing paperwork and "blamed" her for not keeping copies of guard licenses in employee files, Buck's report states.
Buck asked Primous if the company employed other non-licensed guards and Primous said no. Buck then confronted Primous with information that showed another NKOSI employee had been working without a license that morning at another state office building.
"Syl was speechless," Buck's report states.
Later that afternoon, Buck met with Johnson, who also said he didn't know that Pope wasn't licensed.
Buck said he told Johnson that "it was his job to make sure that all his employees are currently licensed if they work as security guards."
He also reminded Johnson that they had just discussed this issue a month earlier after the same problems turned up at the Arizona State Hospital.
Buck warned Johnson that NKOSI's files need to reflect that all employees were licensed prior to job assignment.
The October 3 meeting ended with Buck issuing Johnson a citation.
The citation was dismissed on October 26 by Judge McMurry. A spokeswoman for the judge says it appeared to the judge the violation was an administrative matter rather than criminal.
DPS Lieutenant Larry Burns, who oversees the licensing division, says several judges have expressed confusion over whether the offense is a criminal matter. Burns says DPS is taking steps to clarify the law. A bill pending in the House would increase the penalty for a security company dispatching unlicensed security guards to a felony.
The state Department of Administration canceled its contract with NKOSI to provide security services to the three state office buildings on November 1.
A list of all NKOSI employees at Sky Harbor Airport was obtained by New Times under the state public records law. The names of the employees were then cross-referenced with licensed security guards at the state.
Records indicate that Johnson's company is sending employees to work at the airport who are not licensed.
"There are at least a couple of them who don't show up at all in our records," DPS officer Buck says.
"If NKOSI has security guards that are not licensed working for the City of Phoenix Aviation Department, then that needs to be corrected," says Phoenix Aviation Department director David Kreitor.
"However, all of their employees that have been fingerprinted as part of the new federal requirements for airport employees have passed," Kreitor says.
To date, 16 NKOSI employees have been fingerprinted and all were cleared. The airport has until December 6 to finish screening it employees. Before September 11, the security company had about a half-dozen employees assigned to Sky Harbor. After the attacks, the number jumped to 39.
NKOSI supervisor Primous says the company has a "perfect record" at the airport and that all guards are licensed.
NKOSI, which is a commonly used name in Africa, won its first security guard contract at Sky Harbor in February 1998. The contract called for security guards to work various shifts at the airport patrolling the terminals and securing gates and elevators.
The company was paid $10 an hour to provide the guards.
The contract was renewed in June 2000, with the fee increased to $10.50 an hour. By early September 2001, the Sky Harbor contract was worth about $10,000 a month to NKOSI, while the Goodyear and Deer Valley airports were each generating about $3,000 a month for the company.
The value of NKOSI's contract with Sky Harbor skyrocketed after the September 11 attacks to between $40,000 and $50,000 a month because the company had to quickly dispatch more employees to the airport.
Aviation department records indicate that the security guard company may be overcharging the airport.
Bids submitted for the 1998 and 2000 contracts stipulated that the company would give the airport a discount if paid within 20 days. The 1998 bid offered a 2.5 percent discount and the 2000 bid offered a 2 percent discount.
In both cases, the company was required to post on all its monthly invoices that the company had offered "prompt payment terms" to the city.
Invoices for the last 18 months obtained by New Times reveal the company never included the prompt-payment clause on its invoices submitted to the city worth about $520,000. If the airport had made the payments within 20 days, it would have saved about $10,000 on the contract.
Airport spokeswoman Luber did not know why the company submitted invoices without stating the prompt-payment terms as required in the company's contract.
NKOSI's $600,000-a-year contract with the city's aviation department presents a potential conflict of interest for Johnson.
The city's conflict-of-interest laws prevent a council member from voting on any matter in which the council member or his immediate family have a direct financial interest.
During one of Johnson's first council meetings on January 16, Johnson joined the rest of the council in voting to approve a financial settlement with Worldwide Security, the only other private security company under contract at the airport.
City Attorney Peter Van Haren says he wasn't aware of the Worldwide Security vote until told about it by New Times.
"Frankly, I didn't see that coming through or I would have talked to him [Johnson] about it," Van Haren says.
Van Haren says Johnson doesn't appear to have had a conflict of interest on the vote because it didn't involve his company.
It's not unusual for a council member to declare a conflict of interest.
Council member Phil Gordon bowed out of the Cardinals stadium debate because a relative has a contract with the Cardinals. Former city councilman Calvin Goode -- who once held Johnson's District 8 council seat for 21 years -- used to abstain from votes involving the city's sanitation department because his brother worked there.
Johnson will probably face a conflict of interest later this year when the contract at the airport expires on July 31.
The company can legally bid on the new contract, as long as there is competitive bidding, says assistant city attorney Larry Felix.
But Felix says the company should probably step aside because at least two of NKOSI's employees are Johnson's close relatives, including his daughter and brother.
"I would think he wouldn't want to do any more contracts at the airport," Felix says.
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Johnson says he has every intention of bidding on the airport contract when it comes up for renewal.
"Why shouldn't I?" he asks.
"I have had that business and that contract long before I ran for city council," he says. "I don't see a conflict of interest in doing that."