Sucker Among the Sharks
Never give a sucker an even break.
--W.C. Fields, 1926
Moments after the release last week of Los Angeles Unified School District auditor Don Mullinaxs latest 600-plus-page report on the Belmont Learning Complex shipwreck, cynics were digging in their claws.
This, one said, was exactly what you get when you give a bean counter subpoena power. Our own Howard Blume, who practically broke the Belmont story in this paper, correctly noted that most of Mullinaxs more sordid accusations had already been reported. And indeed, that some of the misdoings well reported in the press didnt even make it into Mullinaxs report.
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But the sourest comment was from the downtown wight who said that compiling the auditors phone-book-size tome probably cost more than the $2 million in overruns reported. And at this point, I have to step in and say, maybe so. But this time around, it was money well spent.
After all, established and self-isolated bureaucracies like the LAUSD resemble superior landfills, in that they are founded on impermeable membranes designed to keep out the corrosive seepage of negative media reports. So its one thing for us nattering nabobs of the news repeatedly to expose the corruption and dysfunction of our school district. Its quite another for the districts own internal-auditor hireling to do so at unassailable length and in precise, almost novelistic detail.
And what a fine and novelistic saga it is, but at heart an extremely simple one, as pithy as a tale from Washington Irving or the Brothers Grimm. Its the parable of the gullible, shifty bumpkin who, coming to town with a pocketful of cash, is fleeced by the local sharks with whom he attempts to deal.
The major difference in Mullinaxs version is that the collective LAUSD rube, instead of waking up, appropriately naked, on the local manure heap, as per the fairy tale, still sits in a Grand Avenue office or well-pensioned retirement. While the lost money was not his own to lose, but ours: the districts, the states, the taxpayers.
The tales been told, again and again, of how the Los Angeles Unified School District, short of both cash and senior-high classrooms, elected to solve both shortages with one project that would combine commercial real estate -- in which the LAUSD lacked any experience -- with a new vast school complex.
Of how, starting in 1989, the district began to acquire the first portion of land for this project, which covers some three dozen acres west of downtown -- with an ever-increasing disregard for the sites past as a working oil field. Here, the story focuses on one particular LAUSD rube -- Dominic Shambra, the veteran bureaucrat who became both project director and chief promoter -- who bears the ultimate responsibility according to the Mullinax report. And cites Bill Anton, Sid Thompson and Ruben Zacarias -- the three district superintendents who let Shambra and the project swing out of fiscal control. (In fairness, Shambra retired in 1998, on Zacarias watch.) Plus eight or nine attendant bureaucrats whom Mullinax recommended be disciplined up to and including termination for their alleged accessory roles in the disaster. And the districts chief financial officer, Olonzo Woodfin, who had little idea where all the Belmont funds went and hence got demoted.
These people are, collectively, that bumpkin with all the egg money. As to the sharks who lay in wait at the local tavern, we have quite a list of suspects here. Those alleged to have overbilled the LAUSD some $2 million include some relatively minor fry -- one of whom, Queen City Glass, as I recall (in case this itself is an interest conflict), used to sell me replacement windows for my car -- but they werent the major operators. Those seem to have included the names of some of the revered local stakeholders of Los Angeles business world: accountants Ernst & Young, for instance, who knew or should have known that Belmonts environmental situation posed a clear and a present danger at least to the financing of the project. In last weeks Weekly, Howard Blume detailed Ernsts other interest conflicts with the projects lead developer, Kajima. And OMelveny & Myers, Southern Californias best-known and biggest law firm, whose partner, David Cartwright, among much other dubious counsel, advised the flaccid LAUSD Office of Planning and Development to relax its project accounting procedures, just when it should have been doing the exact opposite.
Of course, as Blume and Mullinax noted, OMelveny allegedly had its own constellation of interest conflicts. Which the districts current malpractice suit against the firm might single out. Maybe. OMelveny has enlisted the other L.A. legal titan -- Gibson, Dunn & Crutcher -- to defend itself. But Gibson is so notoriously expensive a firm (lawyers used to say: Even Gibson, Dunn & Crutcher cant afford Gibson, Dunn & Crutcher) that OMelveny will likely find its LAUSD misadventure a costly mistake even if it prevails in court.
But the Ernst & Young and particularly the OMelveny role in Belmont make it a little too obvious how things have changed in L.A.s Downtown Stakeholder World in the past decade. It used to be that the citys most precious nonprofit institutions -- the ones responsible for the citys future, like the museums, the cultural entities, the universities and, most of all, one would think, the school district -- could not just trust, but count on, indeed depend on, firms like OMelveny to perform as their guiding lights. OMelveny used to be one of the, if not the, primo stakeholders, along with Atlantic Richfield and Times Mirror -- preaching the city beautiful and mindful of our childrens future.
But the majority of the big, old-time business bodies are gone from downtown. ARCOs about to be merged away to England, and the Times is doing front-page back flips to apologize for its own Staples Center interest conflict. And now the big O, Ernst & Young and Lord-knows-who-else seem to have been following W.C. Fields advice to the letter, gently shaking down the school district by gulling it along in a $200 million project the most ordinary paralegal could have spotted for a loser. The big downtowners appear in the Mullinax report to have played the district for a sucker.
And even if, as Fields said elsewhere, you really cant cheat an honest man, honesty never seems to have been a factor with the overseers of the Belmont Learning Complex.
Dont Go There
One of the least-publicized findings of the Mullinax report is at the very beginning. That it has nothing to do with who-done-what may be why it was so widely overlooked. To wit:
The internal auditor believes that, notwithstanding the following findings, the policy goal was correct [and] that if the Belmont Learning Complex can be finished in a manner that achieves the twin goals of public safety and educational excellence, it should go forward.
In other words: Lets get to work and try to move ahead if we can. Words to the wise, but lost on some key LAUSD participants.
Instead, LAUSD Chief Operating Officer Howard Miller has just veered from that objective by picking a fight with the Proposition BB Oversight Committee on the administration of BB funds, which, as you may recall, arent being used to build Belmont. The BB Committees Steve Soboroff had questioned Millers proposal to get the Army Corps of Engineers to build schools. So the real issue here may just be boardroom road rage.
Miller called the BB Committees reported 19.2 percent administrative cost on the bond money distributed since 1997 far too high. He even proposed that auditor Mullinax vet the volunteer committee. It gets complicated after that. Lets just say that Soboroff denounced Millers math. Then Miller accused Soboroff of running for mayor, which is actually true.
The Daily News seemed to take Millers part here. Its reporter cited an informed source in the construction industry as saying the oversight ought to have cost 2 percent.
But an equally informed and anonymous source in the nonprofit arena tells me that when public money builds a project, the controls are more elaborate: Hence normal oversight cost might easily have exceeded 14 percent. Thats less than 19 percent, but not so much so that Miller couldnt have handled his query with a phone call instead of public outrage.
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