Kyle Green | The Roanoke Times

Valley Metro is Roanoke's bus system, managed by Greater Roanoke Transit Co. A contract for furniture and artwork for the bus maintenance garage has been called into question.

Roanoke police are investigating a possible case of bid rigging at the city's bus system, where a manager is suspected of steering funds for an office renovation project to his wife's interior design business.

According to a search warrant filed Tuesday, fabricated bids were used to obtain a contract for furniture and artwork for the city's bus maintenance garage at 1108 Campbell Ave. S.E.

The investigation centers around William "Chip" Holdren, assistant general manager at Greater Roanoke Transit Co., and his wife, Diane Holdren, the owner of Holdren's Interiors, according to the warrant and a memo sent to city council members.

Diane Holdren was the dealer for the furniture manufacturer involved in the renovation, which cost $223,301, Municipal Auditor Drew Harmon wrote in the memo.

No charges have been filed. Chip Holdren was suspended from his job Tuesday.

Authorities believe the Holdrens "prepared fake bid proposals and had these fraudulent proposals delivered to the City of Roanoke in order to win bids" for the project, a search warrant filed in Roanoke County Circuit Court stated.

The warrant authorized police to seize computers, telephones and documents from the Holdrens' Roanoke County home, which also houses Holdren's Interiors. Another search was conducted Tuesday at the maintenance garage and administrative offices for the city's bus system, Valley Metro, which is operated by the transit company.

Vice Mayor Sherman Lea, who is chairman of the city's audit committee, said suspicious activities at Valley Metro were discovered during routine audits by city officials.

"It's another mess. It's another black eye for the city," Lea said, citing similar cases in recent years, including a conflict-of-interest scandal at the Roanoke Redevelopment and Housing Authority and the ongoing investigation of Alfred Dowe, who resigned from the city council earlier this year amid questions about his spending on meals and travel.

"There seems to be a prevailing attitude that people can make money improperly, if not illegally, and get away with it," Lea said.

"These are people who are in a position of trust, and it's frustrating, and it's something that we as a city council need to think about," he said. "We need to send a message that this kind of activity is not going to be tolerated in Roanoke.

"With the cloud of distrust and deception that's hanging over this city, everything ought to be audited."

According to the search warrant, Harmon and his staff first became suspicious about the bidding process at Valley Metro because it appeared that one person -- Diane Holdren -- was winning most of the bids.

An investigation by city auditors found that bids from at least four other furniture companies had been fabricated to make it appear that there was competition for the renovation project, when in fact the only real bid was from Holdren's Interiors.

The same format and lettering -- even the same typographical mistakes -- appeared in the text of each bid. "The only difference is the company's logo that appears on the top of each proposal," the warrant stated.

The logos were distorted, as if they were copied and pasted from an Internet site, the warrant continued.

Late last month, Harmon met with authorities to discuss his concerns, and his audit expanded into an investigation by the Roanoke Police Department, with assistance from the Roanoke County Police Department and Virginia State Police.

Lea said the contract for $223,301, awarded in August 2007, was about $50,000 more than the fair market value for the furniture.

"That's big money," Lea said. "That's not chicken scratch."

Valley Metro staffers are not city employees. Valley Metro is operated by the GRTC, which is managed by First Transit, a Cincinnati company. But the city maintains some oversight of the system, with council members serving on its board.

Nicole Jones, a spokeswomen for First Transit, said Chip Holdren was suspended Tuesday, pending the outcome of the investigation. First Transit officials are cooperating with the investigation, Jones said.

Meanwhile, Diane Holdren released a statement through her attorney, Matthew Broughton of Roanoke:

"Due to the fact that this is an ongoing investigation, my attorneys have instructed me not to comment at this time.

"I have cooperated with the investigation. Once the investigation is complete, I am confident there will be logical answers to any questions that might remain."

About 80 percent of the money used to buy the furniture came from federal transportation funds, Harmon wrote in his memo. Federal regulations require competitive bidding for purchases that exceed $100,000. The rules also forbid Greater Roanoke Transit Co. from doing business with related parties, such as spouses.

In his memo to the city council, Harmon wrote that his office will continue to investigate financial operations at the bus system, based on "items noted during the investigation."

Those findings will be reported to the council separately from the investigation into the furniture purchase, the memo stated.

At a news conference Tuesday afternoon, Mayor David Bowers joined in Lea's call for greater oversight of city agencies -- and for a heightened awareness of possible misuse of taxpayer money.

"When you have to deal with scandal after scandal, sure, it hurts," Bowers said.

"I'm very disappointed. I want to try to say to the people of Roanoke that we are going to run a government, and a bus company, that does not run afoul of the law. That's my pledge.

"But we're dealing with human beings here, not saints."

Bowers stressed that no charges have been filed, and that the investigation has yet to reveal how much money -- if any -- was misappropriated. But, he added, "one dollar stolen from the people of Roanoke is one dollar too much."

Even though Chip Holdren was not a city employee, Bowers said that does not absolve the city of responsibility for monitoring operations at Valley Metro.

"Does the buck stop here? Yes," he said. "Do I have to answer to the public on this? Yes. Do I have to say I'm sorry, yet again? Yes."

Staff writer Mason Adams contributed to this report.