Mired in financial problems and on the heels of a scathing state audit, Island Transit officials are looking at a new interim director with controversial baggage of his own.

Board members unanimously voted Friday night to authorize the chairman to enter into contract negotiations with Kenneth J. Graska, former assistant general manager of MV Transportation.

Graska was executive director of Community Transit in Snohomish County in 1993 when it was investigated by the FBI over a bribery and kickback scandal.

Graska resigned after receiving “blistering criticism” in a management audit that described an “‘often autocratic and intimidating’ treatment of employees, resulting in ‘very thin’ support for him at all levels of the organization,” according to a 1993 story in The Everett Herald.

The Herald did a series of investigative pieces on Community Transit and Graska at the time.

In one story, Graska admitted that he was told about possible kickbacks in his maintenance department, but did little to follow up. Another story states that federal investigators subpoenaed Graska’s “personal business records, including credit card slips and company cellular telephone bills.”

Federal court records show Graska was not indicted.

Graska could not be reached for comment.

Oak Harbor Mayor Scott Dudley, a member and critic of the transit board, was out of town and didn’t attend the meeting; Councilman Joel Servatius sat in his place.

Dudley said Tuesday he hadn’t received any information about who the board chose; he said getting information from the board is an ongoing problem for him.

Dudley said he is disappointed in the choice of a candidate, but he said the only solution is for the other board members to resign.

“They could have chosen Mother Teresa,” he said, “and the community would question the selection because of their history.”

Trouble for the transit board erupted this past summer after the severity of financial problems came to light, necessitating layoffs of 24 employees and the elimination or alteration of five routes.

Then-director Martha Rose resigned in September. She received a severance payout of more than $100,000, including unused vacation and sick leave; Washington state auditors found that she may have taken vacation without deducting it from her vacation balance.

As a result of the state audit, Island County Prosecutor Greg Banks asked the Washington State Patrol to investigate the agency; the investigation is ongoing.

A transit employee, speaking on condition of anonymity, said IT staff members are “aghast” after learning about Graska’s background.

Coupeville Councilman Bob Clay, chairman of the board and current interim IT director, said there’s no reason for people to be worried. He said the board members were aware of Graska’s history and that Graska didn’t try to hide it.

“I think we felt that the situation was explained to us and we felt comfortable with it,” he said.

Clay said seven people applied for the job and three were interviewed during an extensive process over more than six hours Friday. He explained that key members of staff had one-on-one meetings with the three candidates and even went through an exercise in which each candidate held a staff meeting.

Other staff members and the public got a chance to meet the candidates and give their input to board members before they entered into a closed session to discuss the candidates’ qualifications.

Problems at Community Transit happened 20 years ago, said Clay, and the Community Transit board at the time expressed confidence in Graska.

News stories show Community Transit’s board approved Graska’s severance package of about $38,000 in additional salary, continued medical insurance and car allowance for the next six months, in addition to financial assistance in his job search.

The Community Transit board, however, had authorized an audit of the agency’s management by Moss Adams Consulting in response to the federal grand-jury investigation of kickbacks and bribes involving bus-transmission repairs, the Everett Herald reported.

The audit reported that Graska’s management style “paralyzes people into inaction for fear of making mistakes,” according to The Herald.

The Community Transit maintenance director resigned after admitting to accepting gifts from the owner of a transmission shop. The shop owner was convicted on 15 counts of mail fraud for overbilling, The Herald reported.

The Seattle Times reported that Graska accepted a transit job in Vermont.

A biography provided by Island Transit describes Graska is “an accomplished transit executive who has been in the industry for over 35 years,” with expertise in policy development, capital development programs, paratransit services, and creating and managing annual operating budgets.

Graska, who lives in Valencia, Calif., was assistant general manager with MV Transportation, assisting in the development and management of the Microsoft employee commuter bus and transportation services.

Island County Commissioner Helen Price Johnson said Monday that she’s excited to move forward with an interim director.

Each of the candidates had strengths in different areas, she said.

“I think it’s important in each step on the way forward that we build trust in this vital agency again,” she said. “And I believe we are doing that.”

The board may consider approving a contract with Graska during a meeting this Friday, Clay said.