Tue, Nov

Greuel Investigation of Criminal Activity at LACCD: Independent or More Cover Up?

GUEST COMMENTARY - Is the Federal Bureau of Investigation reading the Los Angeles Times carefully?  

Someone is working very very hard to avoid an outside and independent investigation of how a completely unqualified person obtained a $3.25 million contract as Los Angeles Community College District’s first Inspector General.  The Inspector General is supposed to function as an independent (and therefore credible) watchdog over the $5.7 billion bond construction program.

Is the announcement that Wendy Greuel will conduct an investigation simply more evidence of an expanding cover up of criminal acts at LACCD?  Greuel used curious wording in her own statement to the Los Angeles Times that the LACCD “wanted to have an independent look at the process to make sure it was appropriate.”  Anyone doubt that Greuel’s report will assure the public that the hiring “was appropriate” even though the State Controller John Chiang has already concluded the hiring was inappropriate?
Why would the Inspector General appointment of an unqualified person be such a big deal at LACCD?  

Answer: Because the woman appointed, Christine Marez, worked for five years for Gateway Science – an engineering firm headed by Art Gastelum, a non-engineer politico of the Tom Bradley administration.  Gastelum was investigated a few years ago by the District Attorney’s office for bribery of public officials but the investigation was reportedly closed down by Steve Cooley himself.  Some Assistant District Attorneys who worked on the case have accused Cooley of protecting Gastelum from criminal prosecution.

Currently Gastelum and his associates are big contributors to LACCD Board members and the holder of large construction contracts with the LACCD.  Gastelum and associates have greased Wendy Gruel’s campaign coffers with contributions as well.                                                                                                                                                                                                                                                                                                                                                                                                                            
Now, flash back to November 2009 and consider this chronology of events:

In November 2009, the LACCD entered a contract with Capstone Advisory Group to assess the District’s bond program in response to criticism of exorbitant contract rates for consulting firms (like Gateway Science) and other allegations of problems.  

In January 2010, Capstone was to deliver its report to LACCD.

On March 10, 2010, the LACCD released only a four-page list of recommend changes to the Bond Program from the Capstone Report – including appointment of an independent Inspector General, and the opening of a Whistleblower Hotline.  The General Counsel of LACCD, Camille Goulet, continues to refuse to produce the full written Capstone Report to the public or the State Controller’s Office.

On April 28, 2010, the Van de Kamps Coalition put a resolution on the Board’s meeting agenda that, if adopted by the Board, would have instructed the District’s Chancellor to call in the District Attorney, the State Controller’s Office, or the California Attorney General to conduct an independent investigation of misuse of bond funds, including the use of bond funds to benefit pet unemployment programs funded by Antonio Villaraigosa’s office at the Van de Kamps Bakery campus.  The Board refused to take action on the Van de Kamps Coalition’s proposed resolution.

Instead, on April 28, 2010, Board Trustee Miguel Santiago offered an alternative resolution to the Van de Kamps resolution.  Santiago’s resolution states that the first task of the new Inspector General, when hired by LACCD, would be to investigate the appropriateness of bond expenditures at the Van de Kamps campus.

In October 2010, the Board announced the hiring of Policy Masters, Inc., headed by Christine Marez.  Within 24 hours of the announcement, the Van de Kamps Coalition passed to the Ron Kaye in LA news blog information and pictures taken from Marez’s Facebook and My Space pages suggesting that Marez knew she was wired for this contract despite her complete lack of qualifications as an independent Inspector General.  

In early March 2011, the Los Angeles Times issued a damning investigative news series reporting gross mismanagement of the LACCD bond construction program.  At the next Board meeting, the man who implemented Board and Chancellor construction program decisions, Larry Eisenberg, was terminated (with a one-year $212,000 severance package).

In response to the Los Angeles Times series, Chancellor Daniel LaVista formed what he called an “independent Blue Ribbon Committee” to advise him on improving the bond program.  This advisory committee is exempt from the Brown Act and therefore all meetings and discussions are controlled by LACCD behind closed doors.

On April 29, 2011, Christine Marez’s Office of Inspector General issued her first report – a report on expenditures by LACCD in the construction of the Northeast Campus at Van de Kamps.  Marez’s report failed to examine the central mission set forth in the Board’s April 28, 2010 resolution: to determine whether or not the expenditures at Van de Kamps were appropriate (lawful).  Instead she examined the sufficiency of the accounting records.

On August 10, 2011, State Controller John Chiang released his scathing audit of LACCD.  It included findings that the LACCD had misused at least $140 million of the $2.75 billion expended thus far.  This amounts to more than 5% of the money expended thus far which may result in the tax-exempt status of the bonds being challenged.  

Also, Chiang’s report found that Christine Marez’s company was newly formed just prior to the procurement of her contract, had no clients, and she had no experience as an inspector general or any law enforcement background.  The Controller opined that the award of the $3.25 million Inspector General/Whistleblower hotline contract to Marez may have been an act of malfeasance.  

Malfeasance is a public official’s willful and knowing violation of laws governing their public work. Board Trustee Mona Field sat on the committee that recommended the hiring of Marez despite her firm’s low initial rankings by evaluators of her proposal.  

Additionally, Controller Chiang’s audit observed that Marez’s Van de Kamps “report bore little resemblance, if any, to an audit by an independent entity.” (Emphasis added.)

On August 17, 2011, newly elected LACCD Board President Miguel Santiago conducted a special LACCD Board meeting to review the State Controller’s recommendations.  At the meeting, the auditors from the Controller’s office recommended that LACCD do what the Van de Kamps Coalition asked the Board to do more than a year before: call in an independent investigator such as the Los Angeles Civil Grand Jury, California Attorney General, or the Los Angeles District Attorney.  But LACCD’s Board was prepared to do none of that.  At this meeting, President Santiago announced that he was forming an Ad Hoc Committee on the Controller’s Audit.   

The committee would consist of three Board members including LACCD Board Members Steve Veres and Mona Field. The Ad Hoc Committee would supposedly implement the State Controller’s recommendations and investigate the appropriateness of the hiring of Christine Marez.  Because of its composition, the Ad Hoc Committee on the Controller’s Audit is controlled by the LACCD Board and is exempt from the Brown Act.  

This was the second review committee on the bond program to be announced that would meet in secret and under the control of the Board.

On Friday, August 19, 2011, the Van de Kamps Coalition issued a press release pointing out that the Board’s Ad Hoc Committee had no credibility to essentially investigate itself.  Trustee Field could not be expected to impartially investigate her participation in Marez’s selection as LACCD’s “independent” Inspector General.

At its Wednesday, September 7, 2011, Board meeting LACCD Board President Santiago announced that at a future meeting the Board would consider a contract paying Los Angeles City Controller Wendy Greuel to conduct an “independent” review of the hiring of Christine Marez.  

In an interview with the LA Times, Greuel acknowledged that she would conduct such an investigation of LACCD.  Santiago’s announcement of the intent of the LACCD to pay the City Controller to conduct such a review is the third effort to avoid bowing to more than a year of calls by the Van de Kamps Coalition, and now the State Controller’s Office, to bring in the Los Angeles County Civil Grand Jury, the California Attorney General, or the Los Angeles District Attorney’s Office.
The Los Angeles Times news article on Friday, September 8, 2011 reported that “Yielding to outside pressure, the Los Angeles Community College District has asked City Controller Wendy Greuel to investigate allegations that its selection of a watchdog to police its troubled campus construction program was rigged.”  

The news article failed to specify whether the request was for Wendy Gruel to be hired personally by LACCD, or for the City Controller’s Office to be hired by the LACCD.  Although it is more likely that the proposal would be a contract between the LACCD and the City of Los Angeles, the Van de Kamps Coalition has analyzed both options.

The Van de Kamps Coalition begins its analysis with the provisions of the Los Angeles City Charter.

Section 218(b) provides: “The Mayor, City Attorney, Controller, and members of the Council shall devote their entire time to duties related to their offices. They shall not receive any compensation, including honoraria, for their services other than that provided in this section, except that which may be provided for their serving on governmental entities where payment is authorized for other governmental officers or employees serving in that capacity.”

Thus, Section 218(b) of the Los Angeles City Charter bans Wendy Gruel from being personally hired by the LACCD using bond construction funds to pay for the investigation.  Gruel may only conduct an investigation under contract to LACCD if it is with the Office of the City Controller, otherwise Gruel would not be devoting her entire time to duties related to her office.

Sections 260-266 of the Los Angeles City Charter set forth the duties, jurisdiction, and scope of authority of the Los Angeles City Controller.  Generally, the Controller is the auditor and general accountant of the City and exercises supervision over all of the accounting personnel employed by the various departments of the City.  Section 261(e) obligates the City Controller to conduct audits of City Departments in accordance with Generally Accepted Government Audit Standards.  The City Controller’s jurisdiction is over all of the departments of the City.

Nowhere in these City Charter provisions does the Office of City Controller have any jurisdiction or authority to enter into a contract with an outside entity such as LACCD for auditing services.  In fact, numerous critics of the Controller’s Office have pointed out that Gruel has been unable to conduct enough audits to keep up with problems the City has in keeping its own financial house in order.  Therefore, the City Charter provisions regarding the Controller’s Office do not authorize Gruel herself, without City Council approval, to accept a contract to audit an outside entity such as the LACCD.

City Charter Section 101 reserves to the City of Los Angeles the maximum power possible to a charter city of California, unless specifically prohibited in other portions of the charter.  Under this section, the City Council and Mayor do not appear to be prohibited from entering into a contract with LACCD to have the City Controller’s Office (or other City Department) conduct an investigation of the hiring of Christine Marez as LACCD’s Inspector General.  This would require an action by the City Council and Mayor at a public meeting.

Although the City Council and Mayor might possess the power to contract with LACCD under the Charter, other external matters, especially Generally Accepted Government Audit Standards would bar the City Controller or any other division of the City from accepting the request by LACCD to conduct the investigation.

One of the central controversies in the expanding scandal at LACCD is the refusal of District officials to turn over to public records requesters and the State Controller’s Office the routine construction and financial records of the Northeast Satellite Campus at Van de Kamps.  Chiang’s auditors reported that they were unable to complete an audit of Van de Kamps because the District withheld Van de Kamps documents.

On the LACCD Board agenda of September 7, 2011, our attorney by himself placed an item of business that, if adopted by the Board, would have ordered the LACCD’s Chancellor, Daniel La Vista, and LACCD’s General Counsel, Camille Goulet, to turn over the Van de Kamps records and invite the State Controller’s auditors back to complete the previously thwarted audit.  The Board flunked this test of its commitment to meaningful reform and transparency by refusing to adopt the resolution.

The Van de Kamps Coalition turned over to the State Controller’s Office last fall LACCD documents showing that approximately $7 million of bond monies were improperly spent to destroy classroom designs and instead construct office space for unemployment programs championed by and funded through the Office of Mayor Antonio Villaraigosa.  

On May 26, 2010, the LACCD leased out the Van de Kamps Bakery Building to none other than the City of Los Angeles through its Community Development Department.  Wendy Gruel, in her capacity as City Controller holds the financial accounting records of the Mayor’s scandalous grab of the $86 million Van de Kamps college campus and conversion of it into office space for his pet economic stimulus projects funded by the Obama Administration.

Government Auditing Standards 3.11 to 3.19 establish that the prospect of the City Controller conducting an investigation of the LACCD’s procurement of its Inspector General, whose first assignment was to investigate the appropriateness of monies spent at Van de Kamps to benefit the City of Los Angeles and unemployment bureaucrats championed by Mayor Antonio Villaraigosa, would violate principles that an auditor have no “personal, external, or organizational impairments.”

Audit Standard 3.13 is particularly relevant given the circumstances: “3.13. Auditors should consider not only whether they are independent and their attitudes and beliefs permit them to be independent but also whether there is anything about their situations that might lead others to question their independence. All situations deserve consideration because it is essential not only that auditors are, in fact, independent and impartial, but also that knowledgeable third parties consider them so.”  The Van de Kamps Coalition does not consider any City auditor independent and impartial to conduct this investigation.

The State Controller’s Office has reported to the public that LACCD is refusing to turn over records related to the construction of the Van de Kamps campus, a campus now alleged by the Van de Kamps Coalition and others as improperly in the hands of the Mayor’s favorite charter school, the Alliance for College-Ready Public Schools, and the City of Los Angeles’ unemployment programs.  

Because the City Controller’s Office possesses relevant financial records of the City’s possession of the Van de Kamps site, Wendy Greuel cannot put herself in a position where she is supposedly “independently” investigating matters where she may be called as a witness holding financial records of the City’s lease of the Van de Kamps campus.

Additionally, Wendy Greuel has another potentially serious personal impairment that would disqualify her from conducting the investigation of LACCD.  Government Audit Standard 3.16 states: “Personal impairments may include, but are not limited to, the following:  a. official, professional, personal, or financial relationships that might cause an auditor to limit the extent of the inquiry, to limit disclosure, or to weaken or slant audit findings in any way. . . .”

As reported in the Los Angeles Times, Christine Marez worked for five years for Art Gastelum, owner of Gateway Engineering.  Gastelum previously worked 18 years for the administration of former Los Angeles Mayor Tom Bradley, a period during which Wendy Greuel herself worked in the same Mayor’s office.  

Gastelum, closely linked to the hiring of Christine Marez as LACCD’s Inspector General, is a former co-worker of City Controller Wendy Gruel, which constitutes a personal impairment of Gruel herself that may cause her to “limit the extent of the inquiry, to limit the disclosure, or to weaken or slant audit findings.”  This is not a situation which Wendy Greuel, who herself has ambitions to run for Mayor, should place herself.
There are other personal and organizational impairments associated with the entire proposal by LACCD that the City Controller’s Office conduct an “independent” review of the procurement of Christine Marez as LACCD’s Inspector General.  

We need not detail all of them here because those cited above are ample reason for Wendy Greuel to immediately withdraw from this proposed audit contract with LACCD and publicly support the conduct of an investigation by someone more independent and free of disqualifying audit impairments  -- such as those originally identified by the State Controller’s Office – the Los Angeles Civil Grand Jury, the California Attorney General, or the Los Angeles District Attorney’s Office.  

These independent civil and criminal investigative entities have jurisdiction over this matter under the authority of Education Code Section 78218 which obligates them to immediately investigate and prosecute any alleged abuse of bond funds approved by voters under Proposition 39, and that should include any corruption of procurement laws in order to install someone easily controlled by the LACCD Board or Art Gastelum.

(Laura Gutierrez and Miki Jackson are members of the Van de Kamps Coalition. More info: Miki Jackson (323) 855-0764)

Tags: Wendy Greuel, Controller, Controller Greuel, Van de Kamps, LACCD, Los Angeles Community College District, Gastelum, Art Gastelum, District Attorney, DA’s Office, Steve Cooley, State Controller, John Chiang, State Controller John Chaing

Vol 9 Issue 73
Pub: Sept 13, 2011