LA Coliseum Scandal and Wendy’s Taste for Cash & Carry Accounting
- 03 Feb 2012
- Written by Paul Hatfield
PERSPECTIVE - CACA: that’s my unofficial abbreviation for what I call cash and carry accounting. It’s the dark flipside of GAAP (Generally Accepted Accounting Principles).
I watched Goodfellas for the umpteenth time the other night. CACA worked well for the wise guys; maybe for the wise guys who run our city, too.
The Los Angeles Times reported that Coliseum officials paid cash to a representative for the International Alliance of Theatrical Stage Employees union, usually in straps of $100 notes stuffed in suitcases. Give the officials credit – at least the cash was not tucked into their waist bands.
These payments, totaling at least $1 million over several years, were to cover wages and benefits for services performed by union members for rave and other events.
Whether the cash was used for the intended purposes may never be known, even with an audit.
The LA Weekly reported some extra details the Times either missed or failed to disclose: City Controller Wendy Greuel told the Weekly before the facts surfaced that “IATSE clearly followed the rules on so many levels.”
I guess large cash payments must be part of the rules.
I am not suggesting Greuel would condone such a practice. However, by openly stating her trust in an organization that could play a major role in her mayoral campaign without really knowing how it conducts business, she displayed her lack of judgment and blatant disregard for the public good.
It is fair for us to ask just who Greuel represents.
An article in an IATSE publication quoted an official as saying. “The locals here have worked side-by-side to help elect pro-labor candidates like Mayor Antonio Villaraigosa and Wendy Greuel [LA City Controller-elect and President Pro Tempore of the LA City Council, who has been a strong advocate for the entertainment industry in Los Angeles].”
Knowing the scandal-plagued history of the Coliseum, she should have been auditing payments to the organization and reconciling them back to bank records. Such an audit would also have involved requesting independent confirmations from the union verifying the receipt and application of all payments. If the union had failed to provide confirmations, it would have raised a red flag much earlier.
Instead, Greuel has wasted too much of her staff’s time on performance audits, the benefits of which have not been substantiated.
It is apparent that the city condones a culture of corruption. That alone should dictate an audit strategy that focuses on operations at risk for significant fraud.
But Greuel is a friend of the city’s establishment, so her avoidance of a full-scale attack on fraud should not come as a surprise.
Other elected officials may have to come clean as well.
The Times reported there were no reports of the payment activity provided to the Coliseum’s nine-member board, including County Supervisors Yaroslavsky (a possible candidate for mayor), Ridley-Thomas and Knabe. City Councilman Bernard Parks also sits on the board.
Commission members have the same responsibility as CEOs and boards of directors. They must insure that there are adequate internal controls in place to identify suspicious activities. Certainly, a system that permits large cash payments in this day and age would fit the tag of suspicious.
It is time we question the capabilities of officials appointed to commissions. Experience from serving as an elected official or mayoral appointee does not necessarily constitute the right skill set for managing an operating entity.
Didn’t we learn that lesson from our experience with the DWP?
(Paul Hatfield is a CPA and serves as Treasurer for the Neighborhood Council Valley Village. He blogs at Village to Village, contributes to CityWatch and can be reached at: firstname.lastname@example.org) –cw
Vol 10 Issue 10
Pub: Feb 3, 2012