More than $2.5 million in cash was paid to union hands who worked concerts, mostly controversial raves, at the publicly run L.A. Coliseum and Sports Arena, according to sources and documents obtained by the Weekly.
On Tuesday lawyers for the Coliseum planned to amend the body's lawsuit against the rave promoters and its former managers to include allegations that this money was misappropriated, according to a statement.
As much as $600,000 in taxes could have been saved by allegedly paying International Alliance of Theatrical Stage Employees (IATSE) stagehands under the table. It's not clear if their pension contributions and other benefits were also avoided as part of this alleged scheme.
Coliseum Commission president David Israel told the Weekly:
We believe that it will be provem that the Coliseum Commission was the victim of a criminal conspiracy that manifest itself in a variety of ways, and we will do whatever necessary to make sure that we achieve restitution. The District Attorney is concurrently investigating all the allegations to see what charges can and might be filed.
D.A. spokeswoman Shiara Davila-Morales couldn't or wouldn't confirm the details of this story, but said:
The District Attorney's Public Integrity Division has a pending criminal investigation involving current and former Coliseum employees. We are unable to comment on what specific allegations are being looked into.
The D.A.'s office and the City Controller's office had been notified of the situation, we were told.
We were made to understand the cash payments were made for three or four years prior to 2011 and that they mainly involved union workers assigned to help set-up stages and equipment for the major raves that happened four times a year at the Coliseum/Sports Arena complex.
Previous documents obtained by the Weekly show that stagehands were paid $514,663.01 for 2010's controversial Electric Daisy Carnival rave. It's not clear from the documents, however, if that was in cash. The money was listed under "promoter expenses."
Former Coliseum General Manager Patrick Lynch, events manager Todd DeStefano and promoters Go Ventures, Inc. and Insomniac, Inc. were the main targets of the amended suit from the Coliseum following the cash-payment revelations.
IATSE Local 33 business agent Mark Madrigal told the Weekly:
I just took office yesterday as the business agent. If something like that was going on I wouldn't have necessarily been apprised of it.
A lack of tax payments could make the inquiry into alleged financial malfeasance at the Coliseum and Sports Arena into a federal situation. In fact the IRS and the California Franchise Tax Board have been notified of the issue.
The story of the Coliseum's woes started in June, 2010: A 15-year-old girl died of an ecstasy overdose after she attended the two-day Electric Daisy Carnival at the Coliseum.
The event saw more than 200 medical emergencies and 60 mostly drug-related arrests. Some public officials were up in arms and asked why such events were being allowed on public property.
Raves were put on notice but seemed to fly unscathed at public meetings weighing whether to let them continue.
EDC's promoter is Insomniac Events, which moved its summer festival to Las Vegas. The other major rave promoter at the complex was the aforementioned Go Ventures.
The Los Angeles Times started digging around and found that a Coliseum manager named Todd DeStefano allegedly also worked for the rave promoters on the side, apparently smoothing their way at the public venues and, in the process, allegedly pocketing more than $1.6 million.
It appears that the rave promoters were allegedly the beneficiaries of this cash scheme, sources told us.
[Added at 5:26 p.m.]: A just-released statement from the Commission says, in part:
During the ongoing investigation relating to the lawsuit, the Commission discovered that substantial, improper cash payments had been made by certain Commission employees on behalf of certain promoters, or directly by the promoters, to a union representative on the dates of their events at the Coliseum and Sports Arena. These cash payments were known to Lynch and DeStefano and appear to have been considered as wages paid to stagehands for work at the events.
The Commission is continuing its investigation of all matters pertaining to these cash payments, including, among other things, the total amount of such payments, who personally benefitted from the payments, and whether appropriate taxes and pension payments had been withheld and paid to the proper authorities.
[Added at 5:32 p.m.]: City Controller Wendy Greuel tells the Weekly that her office is aware of the allegations, which she called "outrageous at every level."
She said her audit into the Coliseum's dealings in the last few years will include this latest development:
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Not only is it looking at the fact that they didn't pay state and fed taxes, it raises a huge red flag about other instances where this may have occured.
Gruel indicated that she thinks IATSE members were victims.
"They're (investigators are) working closely with the leadership at IATSE," she said. "IATSE clearly followed the rules on so many levels."