Police chief was an ‘independent contractor,’ judge rules. It could save his pension

Lewis Velken was the interim police chief and then interim manager of North Bay Village for a brief stretch starting in 2018. But does that mean he was a government employee?

Technically he wasn’t, an administrative judge ruled Friday. Instead, an unusual arrangement meant Velken was an independent contractor employed by a third-party staffing agency, according to Judge June C. McKinney of the Florida Division of Administrative Hearings.

That means Velken may be able to keep more than $690,000 in payments from the Florida Retirement System that state officials had demanded he return, while also continuing to receive monthly pension checks.

Officials had argued that Velken voided his retirement benefits from the state’s Deferred Retirement Option Program — which allows some employees to start getting retirement benefits five years before they retire — when he accepted the interim police chief position in North Bay Village less than six months after he retired. The village participates in the state-run pension.

“Due to your employment with ... North Bay Village on April 18, 2018, you never satisfied the [Florida Retirement System] termination requirement of ceasing all employment with [Florida Retirement System] employers for six calendar months,” Shirley Beauford, the acting state retirement director, told Velken in a March 2019 letter. “As a result, your [Florida Retirement System] DROP retirement is voided.”

Judge McKinney disagreed, citing the arrangement Velken struck with village officials to be paid by a temporary staffing agency — which was run by his longtime friend, Stephanie Leon, and where Velken was the only client — in a concerted effort to maintain his retirement status in the eyes of the state. Velken had already been working for Leon’s property management and maintenance company as an independent contractor.

Under the deal, the village agreed to pay Leon about $130,000 per year. Leon passed on about 32% of that money to Velken. As an “independent contractor working for a private employer,” McKinney wrote, Velken “did not violate the terms of the DROP agreement and should maintain his pension.”

The judge pointed to Velken’s loosely regulated daily routine to support her argument that he wasn’t a municipal employee. The village didn’t provide training or set work hours, she said, and Velken did outside work beyond his role as chief without seeking permission from village officials.

Plus, he only wore his uniform “at the most twice,” the judge said, and he “dressed daily in street clothes or a shirt and tie, which he purchased, putting himself out to the public as a regular citizen, not police chief.”

McKinney concluded: “The credible evidence above demonstrates that Velken had greater control than the Village over the way he carried out his work.”

H.B. Stivers, an attorney for Velken, told the Miami Herald the decision is “vindication” for Velken, a former longtime officer in the Miami-Dade Police Department.

“As much as Mr. Velken’s name was dragged through the mud, it is some vindication for that and [shows] he did nothing wrong,” Stivers said.

Now, it’s up to the Department of Management Services, which oversees the state-run pension, to decide whether to heed the judge’s recommendation or continue pursuing repayment. Department officials did not immediately respond to a request for comment on what they plan to do next.

If they do follow the judge’s lead, it would be a win not only for Velken, but also for the tiny village tucked between Miami and Miami Beach. Velken has vowed to hold the village liable for full repayment of his benefits if he’s ordered to return them.

“If it comes down to that, we would want as much as possible from North Bay Village,” Stivers said. He added that, if state officials do keep pursuing repayment, Velken could file a new appeal in district court.

Brent Latham, the mayor of North Bay Village, said from the dais when the investigation first came to light last year that the situation “stinks,” calling it an “ethical and moral issue.” But on Tuesday, he said he was pleased with the decision because it could eliminate the village’s liability. Latham said he would wait until the state’s final ruling comes down to comment further.

How Velken got hired

Velken was hired as the village’s interim police chief in April 2018 and then as the interim manager a few months later. He resigned last February after the revelation that he was under investigation by the Florida Retirement System.

Finger-pointing followed. A village commissioner, Andreana Jackson, suggested former manager Marlen Martell had committed fraud while hiring Velken. Martell, in turn, blamed Village Attorney Norman Powell, who is now the attorney for the village of El Portal, saying he approved the plan. And Powell called the accusation that he was involved in the process “a complete fabrication.”

McKinney tried to sort through it all at a hearing this past November, listening to testimony from Velken, Leon and Martell, among others. Martell had fired the previous police chief, Carlos Noriega, and was under pressure to find a replacement as quickly as possible in April 2018, the judge said.

Martell offered Velken the job on April 16, but Velken learned the next day that the village participated in the state-run pension. He told Martell he couldn’t accept the position because he would lose his retirement benefits.

Next, Martell recommended that Velken meet with the village’s human resources coordinator, Ana DeLeon, which he agreed to do on April 18. DeLeon called a Florida Retirement Services hotline to ask how the village could bring Velken on board without him losing his benefits. But a Florida Retirement System representative told them Velken couldn’t work for the village without violating state rules.

After the phone call, Velken again told Martell he had to turn down the job. That’s when Martell suggested that Velken become a contracted employee, saying this “would not interfere with his retirement because he would not be a Village employee” in the Florida Retirement System, according to the judge’s ruling.

Martell then brought Velken upstairs at Village Hall to Powell, the village attorney, to discuss a potential arrangement. Powell told them he “did not see any problems” with the idea but would research it further. Soon after, according to the judge, Martell told Velken that the village attorney had given his blessing to contract out Velken’s job as chief.

That’s when Velken approached Leon, his longtime friend, about expanding her business to include a temporary staffing service and “making the service available to the village to help increase her bottom line.” When Leon learned a license wasn’t required to run such a service, she amended her company’s articles of incorporation to include it, the judge said.

Velken didn’t contact the Florida Retirement System again to review the arrangement, “because the village attorney, Powell, had approved the legality of his employment relationship as an independent contractor. Velken followed his advice,” McKinney said.

Powell told the Herald on Tuesday that the ruling “clearly evidences that the horrible treatment and character assassination tactics [Velken] was unfairly subjected to was simply wicked.”

The Department of Management Services now has 60 to 90 days to enter a final order, said Stivers, the lawyer for Velken.

“The way the administrative law judge reached her conclusion and entered her order, defying that order is going to be extremely difficult,” he said.