LEBANON — An internal city investigation has found that employees in the Department of Public Works misused city resources for personal gain, according to a final report.

The 550-page document alleges that former Department of Public Works employee Patrick McCarthy used public funds to purchase equipment and materials for a side landscaping business and other personal expenses.

McCarthy also conspired with Public Works employees Damian Hetzel and Douglas Boisvert to charge families for work done at municipal cemeteries using city equipment, according to the report, which was prepared by an outside consultant.

The city has yet to recover about $13,620 in stolen property and materials, according to a city news release Monday morning. That primarily consists of the cost of gas and undercoating oil that cannot be recovered as well as equipment that has not been found, City Manager Shaun Mulholland said Monday.

Other equipment and materials with a value of about $8,600 have been recovered by the city.

The city and the consulting firm, Municipal Resources Inc., have been investigating the theft allegations since October, when Hetzel first reported suspicions about McCarthy to Mulholland. The city released the report on Monday.

Since 2021, the report concluded, McCarthy stole city equipment and materials for his landscaping business and used city property for personal projects during regular work shifts.

The Lebanon Police Department conducted a parallel criminal investigation. Hetzel and Boisvert were arrested in January and face charges of theft. The city placed them on paid administrative leave at the time of their arrests.

Theft of more than $1,500 is a Class A felony; if found guilty, Boisvert and Hetzel could receive seven to 15 years in state prison and fines.

McCarthy died by suicide in October before the criminal investigation was completed.

McCarthy was Hetzel and Boisvert’s direct supervisor in the Cemetery Department, where he was cemetery supervisor before moving to the position of maintenance manager in the wider Public Works Department, according to the report. Boisvert became cemetery supervisor after McCarthy’s promotion, and Hetzel who worked in the cemetery department before moving to the department of Recreation Arts and Parks.

Hetzel “first became concerned when he noticed equipment, parts, and supplies were missing from the Mascoma Street garage,” according to the report, but when he told McCarthy about the missing items “he seemed oddly unconcerned,” the report stated.

Hetzel’s complaint launched an initial human resources investigation by the city, which in turn led to the police investigation.

In a search of McCarthy’s Lebanon home and a “family camp” in Vermont, police and city officials located lawnmowers, chainsaws, a snow plow and other equipment all belonging to the city. They also found a barbecue smoker built using city equipment and material, and a trailer retrofitted with a city-owned fuel tank.

Through a review of records and interviews with Department of Public Works staff, investigators found that McCarthy had also paid for other equipment and mechanical work for his personal vehicle, and had used a city gas card to pay for fuel he used for his side business.

McCarthy also offered city employees an oil undercoating service on their personal vehicles annually for the last several years using oil purchased with city funds. McCarthy did this as recently as October when he reported working a regular shift for the department and used about $944 in oil, according to the report.

He also worked on other personal projects during regularly scheduled shifts.

The investigation “firmly established” that McCarthy was using city equipment, materials and work time “for his own personal gain,” and that he used city money to make purchases, the report alleges.

A Lebanon police officer confronted McCarthy with the allegations and he was placed on paid administrative leave from the city on Oct. 15. At the time, McCarthy denied most of the theft allegations, but admitted to taking a snowplow, a fuel tank and using scrap steel to build a barbecue smoker, all of which city officials recovered on Oct. 15.

Later that day, McCarthy’s lawyer, Peter Decato, contacted the city to report there was additional stolen equipment and arrangements were made for it to be picked up from McCarthy’s home the following day.

That day, Oct. 16, McCarthy died by suicide at Storrs Hill Ski Area. The Valley News reported on the incident at the time, but did not identify McCarthy.

“We continue to be overwhelmed by our loved one, Patrick McCarthy’s death on October 16, 2024 and by today’s release of an Investigative Report,” McCarthy’s family said in a Monday statement provided by Decato. “We are saddened by all of this.”

Through the investigation, the city discovered that in 2023 McCarthy recruited Boisvert and Hetzel to participate in a separate scheme related to cemetery services.

McCarthy informed employees that the city would no longer lay foundations for headstones at municipal cemeteries because of staffing shortages, according to the report. After this, he assigned the requests to Boisvert and Hetzel, who told investigators they had both been approached by McCarthy and agreed to do the work “on the side.” Boisvert and Hetzel then used city equipment and resources to install the foundations and charged families directly for the services.

The men installed at least three foundations, earning about $1,800 that they split three ways.

After installing the foundations, Hetzel decided he no longer wanted to participate, especially because McCarthy received one-third of the money without doing any work, according to the report.

“The more he thought about it, the less he wanted to pay McCarthy his $200 for, in his opinion, doing nothing,” the report stated.

According to the report, Hetzel “made it clear that he believed he considered himself to be a whistleblower,” and “strongly objected” to the characterization that he was “running ‘a scheme with Pat McCarthy’ to profit from foundation installations,” according to the report.

Reached Monday, Hetzel’s attorney, Alli Schwartz, declined to comment because she had not yet read the report.

In his interview with investigators, Boisvert said the cemetery work was “not an ongoing scheme to defraud the city, the families of the deceased, or the monument companies. He said that no one really wanted to install these foundations and there was a backlog of orders for foundation installs with the city,” the report says.

Boisvert did not respond to a request for comment Monday.

The city’s internal investigation determined that Jay Cairelli, Department of Public Works director, and Chris Kilmer, the department’s assistant director, were not “responsible for allowing the criminal behavior of Patrick McCarthy to go undetected,” because all of the purchases he made were reasonable. Also, when there was “occasion to review and question” purchases, McCarthy “provided reasonable, satisfactory explanations.”

In the aftermath of the investigation, all Department of Public Works equipment worth more than $500 or with an attached serial number was located, photographed and logged in an asset management system. The department is drafting procedures to log and track equipment.

Now that the city’s internal investigation into the incident is complete, Boisvert and Hetzel remain on paid leave and have 10 business days to request a hearing with Mulholland to make a case as to why the city should not take disciplinary action, Mulholland said.

Once those hearings are complete or after 10 business days if they do not choose to participate, Mulholland will “take the action I deem appropriate,” he said Monday.

Those experiencing a mental health crisis can call or text the New Hampshire Rapid Response Access Point at 833-710-6477 or NH988.com. Those outside of New Hampshire can call or text the National Suicide & Crisis Lifeline at 988.

Clare Shanahan can be reached at cshanahan@vnews.com or 603-727-3216.