By Marc Perrusquia
The Memphis Commercial Appeal
When the city of Memphis awarded a $2.1 million contract last year to buy high-tech gadgetry to detect stolen cars, police Lt. Ken Shackleford worked diligently on the project.
He assembled bid specifications, identified potential bidders and helped select the eventual winner.
Yet bid records don’t reveal another side of Shackleford’s work: He holds a personal business interest in Memphis-based ESi Companies, the firm picked to build the Memphis Police Department’s computerized license-plate recognition system.
Shackleford is a partner with ESi in a royalties contract, signed in 2006, that pays him for sales of another ESi product, the SkyCop video surveillance system.
Both ESi and Shackleford, a 21-year MPD veteran, contend that the deal is ethical because Shackleford is paid only for sales outside Shelby County.
ESi executives say Shackleford, who co-developed the patented pole-mounted SkyCop cameras now monitoring criminal activity around Memphis, insisted on ethical language in the royalties agreement that exempts him from pay involving any sales to Memphis or Shelby County governments.
But as ESi showcases its Memphis success while pursuing a national market, the firm’s unusual arrangement with an MPD employee raises thorny legal questions. In response to questions by The Commerical Appeal, City Atty. Herman Morris has launched his own inquiry and said the city may need to revise disclosure policies to avoid any appearance of conflict and write a policy addressing ownership of intellectual property.
Since signing the royalties contract in November 2006, Shackleford has helped develop bid specifications, evaluated bids or played other roles in awarding at least three city contracts worth $2.3 million to ESi, records show.
Two public-interest authorities say such an arrangement is poisonous to public confidence.
“I don’t know if it technically violates the law, (but) I would say from a common-sense point of view, it is a conflict. And at a minimum he should have disclosed it upfront,” said Dick Williams, chairman of Tennessee Common Cause, which advocates transparency and ethics in government.
By the accounts of ESi executives, Shackleford first approached the firm in about 2005 searching for technology to match his vision of improved police video surveillance. The partnership between Shackleford and ESi not only helped fight crime, it also helped grow a local business, said John Osteen Sr., ESi’s chairman.
“He’s one of the squarest-shooting fellows I’ve ever known. ... This is a success story in my judgment because it’s a case of a bureaucrat affecting the local economy and affecting local jobs,” Osteen said.
Shackleford declined an interview but wrote in response to a reporter’s written questions that “my relationship to ESi is a friendly, arms-length, business relationship,” describing himself as both “a consumer of SkyCop products for MPD” and “a co-inventor on a (patent) application for the SkyCop product.”
Morris said Friday that he’s leaning toward viewing Shackleford’s conflict as “not fatal or significant” given that MPD officials told him that Shackleford co-developed the SkyCop system because there were no products on the market that met MPD’s specific needs. The Orwellian world of technical policing, where high-tech street cameras keep a constant watch for criminals and terrorists, is a developing field.
While other companies are making similar products, ESi believes it has a unique system that includes cameras with gunshot-recognition technology that transmit images by wireless, compressed signals and are housed in shock-resistant, weatherproof boxes, said John Osteen Jr., vice president of sales and marketing.
The firm applied for a patent in 2006 and received final approval last month.
“Ken gave us his vision of this product,” Osteen Jr. said. He “came to us with an idea to produce a product good for the city.”
Policies guarding against conflicts typically require employees to disclose outside business interests, yet Morris said it’s unclear whether the policy in place in 2006 would have required Shackleford to disclose his ESi contract.
Morris said he has been told that Shackleford orally reported his ESi contract to a supervisor “in 2007 or 2008,” but he has found nothing in writing.
In 2009, Shackleford played a critical role in preparing a $2.1 million competitively bid contract awarded to ESi for 108 mobile license-plate recognition cameras now mounted atop numbers of squad cars to help nab car thieves, gang members and other ne’er-do-wells.
Records show that Shackleford was the contact person for bidders. E-mails show he helped solicit potential bidders, passed on a file containing bid specifications to a supervisor and recommended giving the contract to ESi after the only other bidder dropped out.
Representatives of two national companies making similar products didn’t respond to requests for interviews.
David Robinson, owner of Delta Surveillance, a local firm that dropped out, said he had no idea about Shackleford’s involvement but now questions its fairness.
“That would raise my eyebrows,” he said.
Osteen Sr. said Shackleford has received just $8,200 through the royalties agreement, which pays a fee split among him and four ESi executives.
Supervising MPD’s video security operations, Shackleford has seen his city pay mushroom. City records list his pay at $63,951, yet he was paid nearly $96,000 last year through a combination of overtime, a retroactive promotion and out-of-class pay.
Morris said he hopes the city learns from the incident and develops better policy.
“The best cure for all of it is transparency; that way the decisions are made in broad daylight,” he said.
Copyright 2010 The Commercial Appeal, Inc.