Feb122014

Did Irvine’s city council payoff cronies with millions of taxpayer dollars?

The former political leaders in Irvine, California, squandered $200,000,000, then ordered their partners-in-corruption to cover up the details of no-bid contracts and other political largess.

I am not politically partisan; I bash corruption and incompetence from either party. Local politics often renders political partisanship meaningless; for example, political party registration strongly favors Republicans in Irvine, yet Democrats controlled Irvine’s city council for many years. When Sukhee Kang took a shot at US Congress last election cycle, the Irvine Democrats couldn’t field a replacement strong enough to keep control. Once Republicans gained control, they embarked on an investigation of the ruling Democrats activities concerning the Irvine’s Great Park boondoggle that blew $200 million. What they turned up is a portrait of corruption.

To be fair, Democrats, Larry Agran, Beth Krom, and Sukhee Kang have supporters who apparently believe the $200,000,000 was well spent (See: Great Park Forensic Audit; Politics Over Substance). Further, supporters contend the embarrassing investigations should be stopped (See: Great Park Forensic Auditor Wants Another Contract) Apparently, spending $400,000 to figure out where $200,000,000 went is a waste of taxpayer money, but I digress. After all, for our $200,000,000 we have a hot air balloon ride, a few public buildings, and a massive pile of runway rubble. Money well spent, right?

Larry Agran’s Irvine Idiots

Even after the release of a damning audit, the longtime political boss and his apologists still think all’s swell at the Great Park

By R. SCOTT MOXLEY Thursday, Jan 23 2014

In a Jan. 14 reaction to the latest scathing, independent audit of his financial mismanagement at the proposed Orange County Great Park, Larry Agran—Irvine’s legendary Democratic Party boss—played the shocked, wounded victim like only a 35-year, career politician could. Agran pouted, acted confused and tossed onto underlings all accountability for any possible “very disturbing irregularities.” …

The 50-page summary of the recently completed forensic audit by Hagen, Streiff, Newton & Oshiro (HSNO) details how Agran spent years bungling the Great Park project and diverting large sums to enrich players in his own political machine. One of the more egregious findings was that he’d handed three of his campaign operatives at least $174,500 per month—that’s not a typo: per month!—in no-bid, government contracts for alleged public-relations tasks at a park that still hasn’t celebrated a real grand opening. …

That’s a shocking waste of money — and it’s not an allegation; it’s a documented fact.

For 14 years, he has been promising “the most extraordinary park” built in the 21st century at the site of the mothballed El Toro Marine Corps Air Station, and by gosh, it’s there, Auntie Em. Just close your eyes, click the heels of your ruby-red slippers three times, and you won’t see the vast emptiness of Agran’s non-accomplishments.

Or you could open your eyes and see a $200,000,000 pile of runway rubble.

Here’s the reality: Not a single major item of Agran’s park master plan—a plan he wasted several years and $50 million to concoct—exists. And get a load of these additional facts: In 2006, the size of the project was chopped in half to 1,347 acres. It has now dwindled to a mere 220 acres. In Agran’s view, that is “progress” …”I’m proud of what we’ve achieved,” he said, and then noted the audit’s findings of incompetence, secrecy and malpractice “just don’t compute.”

(Fittingly, councilman Jeff Lalloway observed it’s time to drop “great” from the title and call it what it is: just another government park plan.)

There’s no mystery about the cause of the park’s shrinkage. Its coffers are relatively empty after Agran and Krom (and their onetime third council ally, Sukhee Kang) spent more than $133 million and somehow forgot to build the promised park.

All political spin aside, this is an indisputable fact: the people in charge of building the park spent the money, but they didn’t deliver the park.

Krom angrily defended all the wasteful contracts to the well-connected, campaign operatives as necessary, pre-park construction “community outreach.”

Community outreach? Build the damn park, the community will reach out and use it; blow money on bullshit, and the community has nothing to use.

She slammed the audit—including sworn statements that Agran secretly ordered staff to allow his buddies to convert fixed-fee contracts into lucrative, open-fee arrangements. For example, four firms offered to complete various Great Park tasks for $5.1 million, won the jobs by placing the lowest qualified bids, and then quietly filed dozens and dozens of “change orders” that inflated their pay to $14.825 million. The audit reasonably labeled the tactic both excessive and questionable.

So the work could have been done for $5M, but instead they spent $15M with no accountability. If that isn’t corruption, what is?

“Oh, my God, are we on an HBO suspense thriller?” mocked a sour-faced Krom to the auditor who’d presented the findings at the Irvine City Council session.

More like a 60 Minutes exposé.

Dan Chmielewski—a PR man by day, as well as an unrepentant defender of Agran/Krom corruption and co-owner of TheLiberalOC.com—fretted in a Jan. 13 blog post that the audit revelations might influence voters in upcoming city elections. Chmielewski opined that the real villains who emptied the Great Park coffers aren’t Agran and Krom, who unquestionably controlled spending from 2002 to the end of 2012. Instead, he wants the public to believe the people who “wasted” park funds were council members who were in the minority and powerless during the entire period, Christina Shea and Steven Choi. According to Chmielewski, the Republican majority that took control of the city in 2013 and ordered the audit should not have hired HSNO—who performed forensic auditing in the ENRON and Bernie Madoff scandals. He says they should have instead used Agran-controlled city bureaucrats to write the report because they have “objectivity.”

Back in reality, the willingness of key city bureaucrats and contractors to keep the public in the dark is alarming. The audit cited staff-approved, public notices as misleading or dishonest about park finances and contracts. Krom wasn’t bothered by the cheating or by the lack of cooperation the auditors received. For example, Stu Mollrich ordered investigators not to ask any questions of employees at Forde & Mollrich, the biggest recipient of Agran’s questionable PR contracts. Marsha Burgess, once a government employee involved in the PR contract shenanigans and a Krom pal, refused to field a single question. Bureaucrats working for Sean Joyce—the $369,000-per-year city manager hired by Agran’s council majority in 2004—blocked auditors from accessing city records that might explain money flowing through various accounts.

“I think you’ve gone out of your way to make people’s actions appear more sinister than they are,” complained Krom, … “I think facts need to be understood as how important and significant they are.”

It looks like the Republicans in charge in Irvine now understand how significant and important these charges are…

Irvine city leaders order O.C. Great Park audit, may issue subpoenas

By Paloma Esquivel, January 30, 2014, 3:00 p.m.

Civic leaders in Irvine have authorized the use of subpoenas to help auditors delve deeper into an investigation of the financial management of the Orange County Great Park.

The City Council voted 3-2 Tuesday to move forward with a forensic audit after a preliminary report raised questions about spending, contracts and oversight of the 1,300-park, which has been in the works for more than a decade.

Council members Larry Agran and Beth Krom, who helped steward the project from its beginnings until they lost the council majority in the city’s 2012 elections, denounced the decision, which Krom called a “witch hunt.”

“What I fear we are witnessing here tonight is the apex of a campaign of lies, distortions and misrepresentations with respect to the Orange County Great Park,” Krom said.

Mayor Pro Tem Jeff Lalloway said Irvine residents want to know how money earmarked for the Great Park money was spent.

“The most important question I get,” said Lalloway, “is what happened to all that money for what we have out there.”

About $215 million has been spent on the ambitious park plan, but only 230 acres have been developed. When the park plan was pitched to voters in a countywide election, proponents said it would someday rival San Diego’s Balboa Park or even Central Park in New York City.

Last year, the council majority abandoned part of the park’s grand design and instead approved a developer’s proposal to build a golf course, sports complex and other amenities on 688 acres in exchange for the right to build 4,600 additional homes along its perimeter.

To help clean up the mess left over from an unconscionable waste of taxpayer money, Irvine’s Great Park will be covered with 4,606 more homes, a deal made necessary because so much was blown to obtain so little. At least now the developer will spend the money on improvements and won’t waste it on paying off political cronies.

The first audit, which was approved by the council last year and presented earlier this month, faulted Great Park leadership for allowing contractors to use excessive change orders, not fully vetting major vendors and paying a communications and strategy firm $6.3 million under contracts for the park’s design.

The report by the accounting firm of Hagen, Streiff, Newton & Oshiro also found that about 38% of all contracts for amounts more than $100,000 were awarded without competitive bids.

Auditors told the council that the investigation was hamstrung because several key players, including the park’s primary contractors, refused to talk with them.

This week, Gafcon Inc., one of those firms, issued a statement saying it had contacted the city’s special counsel overseeing the audit to say it will cooperate with “all reasonable and appropriate requests” though it faulted the audit for containing “numerous factual inaccuracies, incorrect assumptions and speculative preliminary conclusions.”

The first report said Gafcon declined an in-person interview, which was not in keeping with a cooperation clause in the firm’s contract. The firm did offer to respond to questions in writing.

Given that the consultants who received the money refuse to cooperate with the investigation, and given that we have so little to show for the money spent, which story seems more plausible to you?

1. The development of the park was managed well, there was no corruption, and the entire investigation is a witch hunt. Or,

2. The political leaders squandered $200,000,000, and ordered their partners-in-corruption to cover up the details.

I’m inclined to go with scenario #2 on this one.

For more details, see Auditor Details Waste and Abuse in Great Park Development.

Two Minutes you will enjoy [Hat tip to Woody]

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$759,900 …….. Asking Price
$386,000 ………. Purchase Price
12/13/1995 ………. Purchase Date

$373,900 ………. Gross Gain (Loss)
($60,792) ………… Commissions and Costs at 8%
============================================
$313,108 ………. Net Gain (Loss)
============================================
96.9% ………. Gross Percent Change
81.1% ………. Net Percent Change
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Cost of Home Ownership
——————————————————————————
$759,900 …….. Asking Price
$151,980 ………… 20% Down Conventional
4.29% …………. Mortgage Interest Rate
30 ……………… Number of Years
$607,920 …….. Mortgage
$156,648 ………. Income Requirement

$3,005 ………… Monthly Mortgage Payment
$659 ………… Property Tax at 1.04%
$0 ………… Mello Roos & Special Taxes
$158 ………… Homeowners Insurance at 0.25%
$0 ………… Private Mortgage Insurance
$225 ………… Homeowners Association Fees
============================================
$4,047 ………. Monthly Cash Outlays

($712) ………. Tax Savings
($832) ………. Principal Amortization
$236 ………….. Opportunity Cost of Down Payment
$115 ………….. Maintenance and Replacement Reserves
============================================
$2,854 ………. Monthly Cost of Ownership

Cash Acquisition Demands
——————————————————————————
$9,099 ………… Furnishing and Move-In Costs at 1% + $1,500
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$219,957 ………. Total Savings Needed
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