Metra: Pagano took $475K in improper vacation pay

May 14, 2010 (CHICAGO)

He allegedly improperly took nearly a half million dollars in vacation pay, which is much more than previously thought.

This latest information surfaced Friday morning at a Metra board meeting.

Pagano committed suicide when he stepped in front of a Metra train in northwest suburban Crystal Lake last Friday.

As Metra's highly regarded boss, Pagano's salary was nearly $270,000 a year. Few would dispute that Pagano was a hard worder, a respected leader, and an accomplished railroad man.

He had 11 weeks of vacation. He did go on vacations. In fact, he was in Florida for a week just before this story first broke.

However, even if he did take time off, Pagano would still ask to be paid cash in exchange for vacation time.

Only in extraordinary cases does Metra allow any employee to get money in exchange for unused vacation time, but in Phil Pagano's case, it was a regular practice - so much so that in recent years Pagano would ask to be paid in advance for all of his annual 11-weeks of vacation time, and he would still take some vacation.

He got the compensation until red flags popped up earlier this year. Investigators say that was the point when Pagano turned to forgery.

"He viewed his vacation pay as an additional form of compensation with regard to pay, without regard to whether he used the vacation days or not," said Jim Sotos, special counsel to Metra.

The internal investigation shows that from 1999 to 2006, Pagano obtained $250,000 in cash for vacation time, and that from 2007 through this year, another $225,000.

"As a result of that not thinking the unthinkable, we did not have the procedures and protections in place that we should have," said Metra board member Jack Shaffer.

He had claimed that he was able to do that because the previous Metra Board Chairman Jeff Ladd had said it was all right.

"While there were times that people would question him from time to time, ultimately nobdy wanted to say no to the boss," said Sotos.

Pagano was challenged to verify the vacation pay arrangement arrangement last year. Metra board members were told Friday morning that in January 2010, Pagano had forged the signature of Board Chairman Carole Doris in order to get cash for two years worth of vacation.

"There was no indication, nothing brought to our attention, nothing to connect the dots, so to speak, to let us know that there had been this practice," said Davis.

On May 5th, two days before he stood in front of a Metra train and ended his life, Pagano admitted to the forgery, and apologized but would not explain his actions. He said he felt he was entitled to the money.

"The only thing he told me was that that he very much needed the money, and he didn't want to bring anybody else into it, but that the money was not for anything illegal - the money was not for anything immoral - and he declined to further elaborate," said Sotos.

Board members today created new positions - a financial oversight panel, an inspector general.

They say Metra policies have always been sound, but everybody trusted Phil Pagano, so the usual levels of accountability simply did not work.

"The idea of cashing out vacation time was something that never came to me both as a member prior to my time as chair [and as chair]," said Board Chairman Carole Doris. "It was never something on anybody's radar."

"We have to make sure this never happens again I know this board is totally committed to it, and I know this board will," said Shaffer.

Pagano had an executive compensation package and an insurance plan through Metra together worth just less than $1,000,000. He was borrowing extensively against them, and at this point, his estate technically owes Metra $127,000.

It is unclear whether or how Metra would attempt to collect that money.

Sotos says there is no evidence of wrongdoing on the part of any other Metra employees, but both the Illinois Attorney General's office and U.S. Attorney's office are continuing their own investigations.

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