Great Park Forensic Audit; Politics Over Substance

political-mud1I’ll say this to Council member Christina Shea and Jeff Lalloway: mission accomplished.  The forensic auditor delivered exactly the sort of document you wanted for the upcoming November elections.  It’s loaded with the sort of editorial comment against Larry Agran you sought and charges of non-cooperation against Great Park contractors and it republished a bunch of numbers that have been covered in the multiple compliance audits already.

There’s a small problem with the central theme from the auditors — that Ken Smith and the Great Park Design Studio and the public relations firm of Forde & Mollrich refused to cooperate with this investigation.  It’s a complete misrepresentation of the facts.

christinashea.jpg

Irvine Councilwoman Christina Shea

I’ll note that HSNO was supposed to provide regular updates to the city and city council at 25%, 50%, 75% and 100% status of the audit; they failed to provide a single one.  I’ll note that it appears Christina Shea’s finance commissioner, Allan Bartlett, is credited with leaking the document (both OC Weekly and OJ had the file) before the full city council had received an electronic copy and that reflects poorly on Ms. Shea’s actions as a member of the city council.  I’ll also note that what’s missing from the audit is the status of votes taken on each contract.  We’ll note that for much of Ms. Shea’s initial time on the Great Park board, she missed quite a few meetings (while collecting the full payments for being a board member) but offered a number of votes with the Great Park Board majority.

The auditor clearly doesn’t grasp the function of public relations, public affairs, marketing, marketing communications or government relations.  The public relations industry wants that seat in the boardroom next to the CEO or the chairman; we seek that sort of clout and that sort of influence.  It’s taught in colleges.  It’s advocated by PRSA.  It’s referenced by every successful PR pro that organizations who place PR at the C-suite get it and typically benefit from PR counsel.  Larry Agran does understand that which is why Forde & Mollrich were present at so many Park planning sessions.  The auditor does not get it but then no one on this council majority understands the value of marketing or communications either, which is evidenced by how much they cut the budget for the 2013 Solar Decathlon (and the bad marketing dollars were reflected in poor promotion and low attendance for the first weekend of the event).

The numbers in the audit on their own without context and without detail are stark, but the suggestion that getting answers in written would be too time consuming given that the auditor didn’t contact Smith and the Design team or F&M until nearly four months had passed, promised to submit questions in writing, and then failed to do so.  Smith basically told the auditors where to look to find every record.  They clearly didn’t.

That all said, the audit’s most successful endeavor for the Republican majority is that it raises questions that will take significant time to clarity and answer.  The longer this draws out, the more material they have for campaign fodder — all funded by taxpayer dollars of course.

The Great Park spent a lot of money on design, planning and PR/marketing.  None of that is criminal.

It’s going to be interesting to see how the auditor will defend themselves when their report is presented at the Irvine City Council meeting Tuesday, January 14th.

What is most notable about the audit is how little information it provides about what one might expect a forensic audit to produce: what actions enabled contracts to be let, what were the terms of the contracts, were those terms met and did the work come in on time and under budget.

The motivation behind this audit is purely political. Choi, Shea and Lalloway routinely opposed whatever Larry Agran and Beth Krom (and when he was on the council, Sukhee Kang) supported when it came to the Park. They have surrendered the vision of the Great Park reflected in the Ken Smith Master plan to a new plan devised by private developer FivePoint Communities which stands to profit handsomely to the tune of nearly $1 billion (let’s see where the pro-Republican IE money comes from this year). If the money for the master plan was wasted, Choi, Shea and Lalloway were the one’s who wasted it.

Jeffrey Lalloway, Irvine City Councilman

Jeffrey Lalloway, Irvine City Councilman

I found that report challenges not so much the work of contractors who were tasked with planning, designing, constructing and marketing the Great park, but their interactions with staff and their allegiance to Agran’s vision about the Park.  This entire audit process has been controlled not by staff who might bring some objectivity and professionalism to the process, but by two members of the City Council — Christina Shea and Jeff Lalloway who were appointed by Mayor Steven Choi.  Shea said she had no interaction with the auditors but was telling anyone in earshot that many vendor’s weren’t cooperating and in doing so reminded me of NJ Governor Chris Christie who claimed he was misled an aide who was “obviously lying.”  It’s obvious Shea knew what the auditors were doing.

The bigger picture here, this is the first city audit conducted by the city council members and not staff.  I guess it’s OK for Shea and Lalloway to control the audit process (with no oversight whatsoever), but it’s not OK for Agran to have used his position as Great Park Chair to advance the planning, design and construction of the park.

The biggest loser from the audit report is Great Park CEO, Mike Ellzey, who is called out for sole sourcing contracts to several northern California based consultants and firms. Ellzey’s interview and statement look like it was completed last week (way to go HSNO).  I’m assuming that those contracts, and all others being reviewed were approved at public meetings per city protocol. When you consider Irvine was just named the “Best Managed City in America,” the auditor’s complaints seem more like political sour grapes than substantive analysis with meaningful findings.

In typical fashion, the release of the audit was orchestrated to coincide with the first City Council meeting of the year. Can we assume that Shea gave the audit report to her finance commissioner Allan Bartlett who leaked it to the press (thanks OJ Blog for that fact) and it was out before Krom and Agran saw it.

HSNO will get a quarter million and looks like they are asking for more. At this point it is unclear what value the city is getting for that “investment.”

Now the auditor wanted to do an interview in the form of a “roundtable discussion.” And when they ask a question about an item on an October invoice from 2007 and there’s hesitancy to answer because you want to make sure it’s correct, the auditor’s note would say “…was unable to provide detail to the question.”  Which is why Smith, Forde & Mollrich and everyone the auditor is trying to interview deserves the opportunity to see what questions they have to provide appropriate and truthful answers.

In fact, the auditors excuses for why submitting questions in writing as a detriment to the audit is laughable. If you expect folks to have photographic memories, I’d like to know what Christina Shea’s bar tab was for her fact finding trip to Charlotte, NC 10 years ago when she wanted to put an NFL stadium on the Great Park site (extra points for the name of the bartender).  The answers the auditors want require access to records.  If you asked me about a meeting I had with a client in October 2006, I’d have to go open my files to be able to tell you what was discussed.

Stu Mollrich offered this statement to local media; we reprint it in full:

The “Orange County Great Park Forensic Contract Performance Review” prepared by Hagen, Streiff, Newtron & Oshiro Accountants (HSNO) for the City of Irvine lacks objectivity and credibility.  It is a biased report written to bolster the political agenda of the City Council majority at a cost to Irvine taxpayers of $240,000. 

Unlike all previous audits conducted by the City of Irvine and the Great Park Corporation, the HSNO audit was not independent.  It was managed and controlled by a subcommittee of the Council majority, consisting of Councilmember Jeff Lalloway and Councilmember Christina Shea.  These two Councilmembers have long standing political grievances against our firm, which are reflected in the HSNO report. 

The accusation that Forde & Mollrich did not cooperate with the auditors is, simply put, a lie.  Forde & Mollrich was not contacted by Jeff George, an employee of HSNO, until October 9, 2013 with a request to “sit down to go over the process” for “a few hours.” 

I wrote a letter the same day to Mr. George expressing my view that a full, fair and accurate documentation of the facts could only be achieved by a written exchange of questions and answers.

Mr. George responded via email the very next day, October 10, and agreed to provide written questions.  On the same day, I received an email from City Manager Sean Joyce thanking me for my prompt response to HSNO.  We never received questions or any further communication from HSNO. 

One week later, our firm was falsely accused by Councilmember Shea in an Orange County Register story of “not cooperating or responding to the auditors.”

The two primary reasons given by HSNO for their failure to produce written questions are: 

  • “A significant portion of a forensic performance review is a dialogue between the reviewer and all relevant parties.  The process of submitting questions in writing eliminates the opportunity for a free dialogue and inhibits the discovery of all relevant facts.  This is because the process of follow-up, comparison of statements with documents, and independent corroboration of facts and other statements is severely restricted.”
  • “A written dialogue would be extremely expensive and time consuming and could not have been completed in the time frame allowed.”

- Source: HSNO – Orange County Great Park Forensic Contract Performance Review Page 9

As to the first point, I strongly believe that it is impossible to intelligently discuss and document five years of work and thousands of transactions performed by a large number of consultants in a “roundtable discusion.”  Providing written responses to written questions allows for information to be adequately researched and questions accurately answered.  It also provides a clear and unmistakable public record.  HSNO has been unable to provide even one example of a question that they would ask verbally that they cannot ask in writing.

Their second point, “a written dialogue would be extremely expensive and more time consuming” is more telling.  Despite being given an extension to complete the report and a fee of $240,000, HSNO did not want to take the time to provide us with written questions as promised on October 10.

HSNO has also provided no factual support for their assertion, “It is our opinion that the refusal to speak in person with us is not in keeping with the cooperation clause of the contract between the City and the Design Studio…” 

The contract between the City of Irvine and Forde & Mollrich was terminated, without cause, by a 3-2 vote of the Irvine City Council effective January 15, 2013.

Section 4.1 of that contract required that Forde & Mollrich must “…maintain all records and reports related to this Agreement for a period of three (3) years following termination of this Agreement, and City shall have access to such records in the event any audit is required.”

We have always provided records upon request by the City and will continue to do so.

I have been involved in several audits in the course of my 35-year business career and never before have auditors refused to provide request for information in writing or disclose the information they are seeking in advance of an interview as HSNO has done. 

The findings presented in the HSNO report demonstrate a shallow and shoddy work product.  This is evidenced by the principal finding of the report as it relates to the work of Forde & Mollrich: 

“For the period July 2005 to December 2012, Forde & Mollrich received from the Great Park over $7.2 million for services related to Strategy and Public Relations.  Of this amount, $6.3 million was included under contracts for design.  Strategy and Public Relations do not appear to be consistent with design functions.”

- Source: HSNO – Orange County Great Park Forensic Contract Performance Review Page 39

This finding is not supported by any facts and it ignores the role of public relations, communication and strategic planning in the Great Park’s Community Based Planning Process that was detailed in the 2010 Great Park Annual Report page 44-59, which begins “Public participation created the Great Park and the public has been intimately involved in the planning process.” 

Sam Rayburn, the legendary Speaker of the House of Representatives once said, “Any jackass can kick down a barn, but it takes a damn good carpenter to build one.”  This so-called “performance review” is an attempt to rewrite history to conform to the political agenda of the current Council majority by tearing down the reputations of those who dared to believe that an abandoned military base could become the first great metropolitan park of the twenty first century.

Mollrich sent PDFs proving the auditor promised to submit questions in writing and he never heard from them again. You can read three of them here, here, and here.

Shea is going to move to give the auditor more money, more time and subpoena power to stretch this exercise until November’s elections.  But as far as Great Park contractors not in compliance with their contracts, I sure hope she points to the auditors themselves.

  11 comments for “Great Park Forensic Audit; Politics Over Substance

  1. Allan Bartlett
    January 13, 2014 at 11:11 am

    I didn’t leak anything Dan. The document was delivered to city hall Thursday night and by Friday morning it was in electronic form and that’s when I received a copy and started reading it….Friday morning. I’m sure Beth leaked you a copy Thursday night. Her staff at the city is like a sieve. All council members received their copies Thursday night.

  2. henry lipton
    January 13, 2014 at 11:30 am

    You seem to be putting a lot of stock into the costs of public relations and the work that needs to be done to accomplish the tasks of PR work. At 200 Million, the lowest citizen in Siberia should know every single details about whats going on at the park. It doesn’t seem that even the guys running the thing (Agran, Krom et al) know whats going on there.

  3. Dan Chmielewski
    January 13, 2014 at 11:46 am

    Allan — I was in Vegas until Friday night and didn’t see it until late Friday night posted on the OJ blog which credited you. I still don’t have an electronic copy but you do know the city has a very good PIO that does this sort of thing. Perhaps you ought to let them do their job while you stick to whatever it is you do.

  4. Ltpar
    January 13, 2014 at 12:22 pm

    Nice attempt at trying to spin the information Dan. You continue to be a credit to the “past glory,” of the Agranistas. However, I stress “past glory” because that is where they are now and will be even more “past” after the 2014 election.

    I am confident the Forensic Audit run by a mild mannered accounting firm only scratches the surface of what really transpired both at the Great Park and in other City Operations for many years under the Agran reign. Some of the violations will have run the Statute of Limitations gamut, but others will not. Hopefully, this report will generate enough public outrage to force the U.S. Attorney to unleash the FBI to do a real investigation. When that happens, no one will be refusing to turn over materials or talk to investigators. If they lie, it is a Federal Crime and who is going to want to go to prison to protect the Agranistas? Wonder how many developers and contractors are out there who were forced to pay to get their contracts approved and/or expedited? Dan, keep spinning and tap dancing and if my gut feeling is right, you are going to have more than enought material to work with in the future.

  5. henry lipton
    January 13, 2014 at 12:51 pm

    Am I wrong to state that there is a lot of stock being given to the costs of public relations work? I mean seriously if that’s the case why are so many people in the dark about whats going on at the Great Park? It would seem even the simple act of informing the public of whats going on there isn’t done by the contractors.

  6. January 13, 2014 at 4:18 pm

    Henry — there are plenty of materials and websites to read about the park, what was going on, and activities planned for it. If you don’t know, you weren’t paying attention.

  7. Noclib1
    January 13, 2014 at 6:48 pm

    The audit raises some major concerns (to say the least) about the propriety of soul source contracting. However, as a government auditor myself, I must agree with Dan on at least one issue. If you read the US government audit standards, verbal testimony is considered the weakest form of audit evidence. Documentary evidence, something that can be checked and verified, is strongly preferred. To say it takes too long or costs too much to get written responses contradicts audit standards. It’s perfectly acceptable to put a timeline on a written response, put documented responses are always preferable.

  8. tylerh
    January 17, 2014 at 8:03 pm

    Dan,

    I am curious what your experience with audits has been. A financial audit, which the Great Park has passed with flying colors multiple times, is a different beastie than a forensic audit. A financial audit rigorously assesses, “does the paperwork correspond to reality.”

    The paper work say $19.7 million went to F & R for PR work. Did it?

    The paper work say George Urch did over 300 hours of work for individual council members. Did he?

    A financial audit would verify those facts and be done.

    A forensic audit adds an additional dimension: by what process did this paper work come to be? and was the actual process used to generate this paperwork consistent with the stated process, if there was one?

    Whatever the political motivations of Shea and her Newport Beach auditor pals, those forensic auditors did find some curious process issues.

  9. Jason
    January 23, 2014 at 12:55 pm

    This verbal audit is clearly fake and politically motivated. Any accounting teacher would give it an F. The republicans could never win a majority in universtiry-town Irvine without these kind of shenanigans.

    As for the legitimacy of PR spending, it depends on your perspective. If you think park = grass, then there is no need for PR. If you think park = culture and community, then spending on PR is part of it. Also, keep in mind that legitimate info about the GP had to be louder than Shea’s competing politically-motivated BS all along.

  10. Lee from Irvine
    January 28, 2014 at 11:36 am

    I actually live in Irvine, once back in the day voted for Larry, Beth et al because they at one time seemed to truly care about the citizens of Irvine as opposed to their own political agenda (hello Ms. Shea!). Unfortunately the Great Park ruined everything. They so mis-managed and bungled everything that 10 plus years later we have nothing but a hole and ugly balloon. The current mayor is an idiot and Shea and Lalloway are totally into themselves but I will applaud the effort to try to get to the bottom of the Great Park. Unfortunately it is costing way too much ($400k more, really? Why are Lalloway and Shea not finding fault with that?). My feeling is the entire Council should resign or be removed from office. They are all tainted. But they are all too self-absorbed to do the right thing. I’ll just vote to replace them like everyone else in Irvine, it will take time but will get done. From reading the comments here there are so many apologists and blinded folks who clearly care nothing about the city or citizens. It would be nice to hear just ONE apology from someone! No worries, the voters will act if Council and its cronies won’t.

    • January 28, 2014 at 12:41 pm

      welcome to the blog Lee. Thanks for your comment

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