PANAMA CITY, Fla. (WMBB) — Panama City leaders were still trying to explain Friday how a department head was able to allegedly embezzle nearly half a million dollars without anyone noticing.

As the criminal case against Michael Johnson, the former head of the community services division, News 13 has discovered several other issues during his 18-year-career with the city.

City officials admit the results are alarming.

“It’s disheartening you know, that we find ourselves in this situation,” said City Manager Mark McQueen. “What I thought was just gross management obviously turned into apparent illicit activity and embezzlement of funds. And that’s discouraging because we work really hard. Our citizens deserve the best. and in this particular case, it fell short.”

In his criminal case, investigators say Johnson had sole access to a fund for charitable donations to the city’s After School Assistance Program. Over a 10-year period, Johnson allegedly wrote nearly $500,000 worth of checks to himself. Meanwhile, residents, parents, and employees at the program worked to help students without realizing that they should have had access to thousands that Johnson allegedly kept hidden, officials said.

However, News 13 discovered several other issues in the city connected to Johnson’s work.

In perhaps the most questionable incident, he is accused of sending $100,000 to a local contractor by allegedly requesting four checks for under $25,000 on the same day. The checks were approved by the city manager’s office. However, if one check had been written for $100,000 it would have triggered a review by the city commission.

“It should have been caught because it would have been considered an aggregate expense over $25,000,” McQueen said. “But each of them came in under the $25,000 threshold because, I believe, he manipulated those disbursements to be able to ensure that it didn’t rise to that level of review.”

The city’s attorney also called into question Johnson’s oversight of a loan and more money spent with the same construction company. As head of all of the city’s CRAs, Johnson also allegedly violated city policy with a $13,000 dollar expenditure of CRA funds.

“It’s very difficult to do that when you have something that is being done, contrived and through fraudulent means,” McQueen said. “And when those are identified, we’re going to address them. We hold everybody responsible here, the City of Panama City, and we’re going to get into it and we’re going to find out. That’s why we immediately turned it over to the police and requested all available assets to support our police department.”

The city’s attorney even accused Johnson of practicing law without a license because he allegedly filed motions and pleadings in three evictions on behalf of the City without notifying the city’s law firm. According to McQueen these issues, along with major problems in an audit of the city’s Community Development Block Grant program, all came together at the same time.

“And with that, I approached Mr. Johnson and challenged him on what I perceived to be gross mismanagement of a program that he’s responsible for, at which time he tendered his resignation,” McQueen said. “I accepted it. In no case did we, in any document that I saw, did it ever suggest that there was any illicit activity that was taking place. It was just sloppy, gross mismanagement.”

However, city officials admit they don’t know how much money or how many different funds Johnson could have accessed during his 18-year career with the city.

“No, I have no idea,” McQueen said.

Johnson’s arrest also raises questions about the amount of property he apparently owns in Bay County. City officials say if Johnson used embezzled money to buy those homes, they are unaware of it but believe it will come out in the criminal investigation.

Meanwhile, they say the issues we discovered are not part of a criminal investigation.

“Those were not crimes,” McQueen said. “That was mismanagement.”

McQueen said he has ordered a full audit of the accounting issues and other problems that came to light from Johnson’s resignation and his subsequent arrest. This is the second time the city manager has had to investigate city practices.

In 2020 former Leisure Services Director Keith Baker was charged with bid tampering and official misconduct as part of an ongoing investigation into corruption. Also, the city faced another, similar scandal, that began before McQueen took over as city manager.

In December of 2018, Vicki Middlemas, the former executive director of the city’s Visual Arts Center was sentenced to 18 months in federal prison after pleading guilty to fraud.

And in Johnson’s case, once again, city officials claim it is one bad employee that created a problem.

“I think this was done by a single individual that made this all happen. I don’t suspect any other employees of the city that were involved in any of this type of activity,” McQueen said.

However, McQueen admits the investigation, which is being conducted by the Panama City Police Department and the FBI, is just getting started.

As McQueen was discussing the case with reporters Johnson was in court for his first appearance before a judge.

Prosecutors asked Judge Timothy Campbell for a $1 million bond and want Johnson to prove that he has not used the allegedly stolen funds to pay for his bond.

“The state’s concern is that he still has access to the funds,” said Prosecutor Calie Overstreet. “Since they were allegedly withdrawn and received by himself. So there is still uncollected cash that is out there, so that is why we are asking for the $1 million bond.”

Judge Timothy Campbell ruled that Johnson will have to show the money he used to obtain a bond did not come from stolen funds. However, he declined to set the bond at $1 million.

Johnson’s bond was set at $75,000. He is scheduled to return to court on December 9.