The Truth about the Great Park Audit lies somewhere between Moxley and Dan C (pt 1)


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The truth about the implications of Irvine’s “Forensic Audit” — technically the “Great Park Forensic Contract Performance Review,” but I’ll call it “the Audit” — lies somewhere between what you’d glean from the story published by Scott Moxley in the OC Weekly and the story published by Dan Chmielewski in The Liberal OC.

Sadly, that sentence conveys almost nothing.  Moxley and Dan C. (as I’ll call them here) are on the far ends of the distribution of possible reactions to the Forensic Audit; Scott asserts that the Audit proves massive corruption by Councilmember Larry Agran and his associates; Dan asserts that it proves nothing — and, based on his previous writings, that there’s nothing wrong there to prove.  Unless one of them is 100% right, which I highly doubt, the truth would have to be somewhere in between their two accounts.

Where specifically does that truth lie?  I have no idea.  I do have some ideas, though, about how one might approach trying to find out.

This is going to be Part 1 of 3, 4, 5 — who knows how many?  (Remember, I do this in my spare time — or in the time that I pretend is spare.  But I’ve had requests to read and interpret the report, and I think that it’s significant enough to take up that task.)  I do have a strong request to others — from the Weekly to the Voice of OC to the blogging arm of the Registerthis is the sort of service that you journalists are supposed to be performing.

We have more than enough easy and conclusory statements about the findings of the audit — Moxley, I’m including you here (I expect nothing more from Dan C) — and not enough dispassionate grinding through the details .  People are not going to read through this almost 50-single-spaced-page document themselves; it’s tough sledding.  Those of us who are at all equipped to climb this hill and come back with explanations that people can understand should lace on our boots, because otherwise we’ll all be arguing at cross-purposes and to no good effect.

I’ll include my disclosure here: I consider myself to be a supporter of Larry Agran and Beth Krom.  I would like to believe that they did nothing less than wise and certainly nothing less than honest — let alone anything verging into being corrupt.  They have expressed the view that they welcomed the Forensic Audit — and certainly it is being used by their opponents to attack them.  I know from personal experience (doing legal investigations in New York, I mean) that a report may note lots of deficiencies without those deficiencies adding up to much wrongdoing.  In other words, a report can look worse than it really is.  However, “what is” can also look just as bad as a bad report.

Beyond that, my various confrontations with both Moxley and Dan C are a matter of public record; if I were inclined to be biased they would cancel one another out.  I often end up on the other side of intraparty disputed with George Urch, a figure in the drama.  I don’t think that any of this affected what I’ve written here.

The report is out there now.  There’s no hiding it and its results.  My hope is to read it through a lawyer’s eyes, without spinning it, and just trying to figure out what’s there and what is says rather than what, in the eyes of critics, what it suggests.  My political interests are on the table, but I’m subordinating them to my interests in the truth.

I’d like to see others —  including someone from the Weekly (or better yet from elsewhere in the larger Village Voice Media family, like LA Weekly) other than Moxley — do the same sort of analysis.  (I mean no insult towards Moxley in saying so; it’s just that he’s extremely close to the story and his mind was clearly made up even before the Forensic Audit came out.  Of course he’s going to interpret it in the most damning way possible, just as Dan C will move Heaven and Earth to find it either exonerating or discreditable.)  So let’s see others who other don’t have political axes to grind (or who are willing to set them down, as I’ll try to do) work through this thing and see what we can take from it.

Was there corruption?  Or was there something less than corruption?  Buckle in; it’s going to be a bumpy article.

Great Park Audit, Part 1

The OJB had actually thought that this could be completed in one story. Stupid, stupid Orange Juice Blog!

1. The “Interocular Impact Test” is Not Actually Conclusive

In social science, we have a concept jokingly referred to as the “Interocular Impact Test” — a result that “strikes you right between the eyes.”  That is, a research result so obvious that it doesn’t require further analysis.  Moxley’s case — and that of the audit generally — relies on such a test.  From what I can tell, the audit doesn’t really add much (if anything) to what we already know, but the presentation of the data packs some punch.  (If those on Agran’s side don’t think so — talk to more people outside your circle.)  Here’s Exhibit 9 from the Audit — a graphic depiction of boring-seeming line of figures that Moxley implies should make the reader want to cry — that summarizes the problem:

fordemollrichone.jpg

 

fordemollrichtwo.jpg

 

fordemollrichthree.jpg
Chart from the HSNO audit of Orange County Great Park funding abuses

I think that these can fairly be summarized as stating that the City of Irvine spent a LOT of money — $7.2 million over 7.5 years — on Great Park contracts with a political strategy and public relations firm called Forde & Mollrich, which had been behind both the initial ballot measures to build a commercial airport at the former El Toro Marine Base (where the Great Park now stands) and then later behind Measure W, creating the Great Park.

Let’s stake out the middle ground right away, in this dialogue form:

Q. Does that graphic itself prove that Agran & Co. did anything wrong?

A. No, not as long as there’s a possible benign explanation for it.

Q. Does it give one reading the audit reason for concern?

A. Sure.  I want to know what happened to that money and what the City received in return.

Q. But does it PROVE that there was corruption?

A. No, not really.

Q. But does it suggest that there MIGHT be some corruption?

A. Well, given the lack of progress on the Great Park, it invites the inference that money was misspent, but that’s only an inference.

Q. How do we figure out whether there was corruption?

A. That’s what the Forensic Audit was supposed to do.

Q. Did it work?

A. Doesn’t seem like it, but I’m still digesting it.  It will likely depend on what constitutes “corruption.”

Q. What now?

A. I don’t know.  I’m going to start by writing an article about it.

Q. About the whole report?

A. Well, that’s what I thought I’d do today before I started — and I got as far as I could….

2. What Does the Audit Say?

The Audit is available in a nice scrolling box on page 2 of the Weekly’s article.  Here are some items that it highlights, with my initial comments beneath each point in bulleted italics.

  1. Agran has a close working relationship with Arnold Forde (co-principal, with Stu Mollrich, of Forde & Mollrich, or “F&M”), who was with Agran when he interviewed Mike Ellzey for the Great Park Deputy CEO position.
    • It seems unusual, but this close working relationship is not itself proof of corruption.
  2. The Great Park Design Studio (a joint venture of Landscape Architect Ken Smith and Gafcon, Inc., a San Diego Program and Construction Management firm) received payment of $11 million for the Master Plan and $36 million for the Schematic Design.  The Audit repeats criticisms of the choice of Ken Smith as Architect, citing his need to use subcontractors rather than in-house experience.
    • Even if this was a bad choice, which I’m sure is disputed, his doesn’t impress me as showing corruption.
  3.  Forde & Mollrich was a key subcontractor of the Design Studio.  The Audit states:
    • “The involvement of Forde & Mollrich as a subcontractor to the Design Studio seems inappropriate.  The task of strategy and communications appears inconsistent with a master plan design.  … Furthermore, Forde & Mollrich’s invoices were excluded from the review performed by the Program Manager, who was hired by the city to manage the project and recommend invoice payment.  The invoices were instead reviewed by Marsha Burgess, a Great Park employee.”
    • This is more unsettling.  The role of F&M here seems unusual — not necessarily inexplicable, but something demanding explanation and justification, as its consistent with (even if not proof of) contentions of corruption.  (But note that there doesn’t seem to be allegation of kickbacks to elected officials or staff, the form of corruption with which this would be most consistent.)  The different procedure for reviewing F&M invoices also demands explanation — though one should not presume that it is necessarily inexplicable.
  4. Gafcon’s attorney stated that neither Gafcon nor Ken Smith would speak to the auditors, although they would provide written responses to written questions.  Forde & Mollrich also refused to be interviewed, but was willing to respond to written questions.  (Marsha Burgess, though unrepresented, refused to be interviewed at all.)  The Audit states that written questions are no substitute for personal interviews, that these refusals made it pointless to present written questions, that this non-cooperation violated the Cooperation Clause of the contract, and urges the City to compel Gafcon, Smith, and Forde & Molloch to submit to interviews.
    • What one thinks about this depends largely on whether one thinks that the Audit is a fair and proper exploration of what happened — or (and I’m using the nastiest possible language here, which I don’t know that even Dan C would endorse) the work of a carefully chosen character assassin undertaking a hatchet job for political gain and possibly to obtain free discovery of possible use in future litigation. The necessity of in-person interviews is something that I’d leave to a reviewing court to determine; as an attorney, I’m not surprised that such persons would not want to submit to a hostile interrogation that may be used as the basis for a lawsuit against them.  If this is headed towards litigation between the City and the Design Studio people, including F&M, then there are proper procedures to follow.
    • Note also that this seems to be what Dan C is referring to in this dialogue of his, reproduced below:
      • What this boils down to is the auditor is complaining to the city that they can’t get the information they need from a key contractor when they refuse to submit thequestions for the information they need for that contractor to the contractor themselves.  Incompetence or negligence?  Here’s how it looks:
      • Auditor: “I don’t have the answers to the questions I need to finish my work?”
      • Client: “Why not?”Auditor: “The contractor hasn’t answered my questions.”

        Client: “Why haven’t they?”

        Auditor: “Because I haven’t sent them yet.”

        Client: “When were you supposed to send the questions?”

        Auditor: “Two months ago.”

    • The way the Audit states it sounds a lot different from the way that Dan C lampoons it.  If you buy the arguments in the Audit — about which I express no opinion — about the major deficiencies of relying on written questions alone, then this is not just a matter of their failing “to send the questions” like some dumb jerks, but their refusing the be party to what they think might be a whitewash.  I don’t know who’s right here, but Dan C’s characterization is unhelpful and unfair.
  5. The report cites CEO Mike Ellzey, in a declaration from last Monday (Jan. 6, 2014), that:
    • The Great Park has previously requested documentation of payments from the Design Studio to its subcontractors, and this request was denied from the Design Studio.
    • I find this troubling.  Why would they do this?  Maybe there’s an explanation; it’s not apparent to me.  Even if it’s legally permissible, politically it is very troublesome — “leading with one’s chin.”
  6. Disagreement over “IRP 24″: Lennar Corporation purchased the 3700-acre El Toro Marine Base from the Navy for $649.5 million.  Lennar contributed 1,347 acres to the City for the Park, $200 million towards constructing the Park, and $201 million towards constructing joint infrastructure for the area.  Under the agreement, the Navy would transfer to the City each one of the 24 parcels requiring environmental mitigation (presumably detoxification) only after the mitigation for that “IRP” was complete.  For 23 of the IRPs, this was relatively easy; IRP 24, stretching across the lower part of the Park, was very large.  The Great Park staff said that they had assumed that the Navy would modify its plans to accommodate the Master Plan; the Design Engineer reported disagreed.  The Navy did not agree to alter substantially its policy and make the accommodation.
    • This information is new to me — and it seems huge.  If this is true, then it explains much of the failure to develop the Great Park.  Is it really the case that IRP 24 has not yet been transferred to the City and that the Navy has no plans to mitigate it to the point where it can be transferred?  Does the burden fall on the City to complete the mitigation process if it wanted to implement the Master Plan?  This may have been someone’s mistake — or their reasonable but losing gamble — but how does this affect arguments about what we’re going to do with the Great Park?  We need much more info!
  7. [That takes us to the bottom of page 10, when the report begins to address development fees, the demise of the Redevelopment Authority, etc.  I'll leave that for someone else to summarize; the upshot is this:] the Lennar portion of the development was postponed, a 10-year plan ordered by Ellzey determined that less could be spent on the Park than had been thought, and so efforts were directed to improve a 200-acre portion of the Park that opened last September.
    • I think that the argument that delay was necessary under the circumstances of recession + elimination of RDAs — which proponents of the Master Plan have argued in general terms — makes sense.  I don’t think that this qualifies as “corruption” rather than “bad luck.”   I don’t even know whether Moxley asserts that it does.
  8. [As I'm trying to keep this to no more than about 2,500 words, I'm skipping an important but technical part of the report, middle of page 13 to middle of page 15, to get to the findings.]  First finding: “The vast majority of the tax increment revenue received by the RDA, a key component of the Great Park financing, was not remitted to the Great Park funds.” Specifically, the Great Park received only $5.5 million out of $43.5 million, leaving $38 million unaccounted for.  The auditors tried to determine where the other $38 million were spent, but were told by Irvine’s Manager of Fiscal Services Donna Mullaly on December 19, 2013 that that was not within the scope of the contract for the audit.  The auditors disagree with that assessment.
    • While this makes me want to scream — “WHERE IS THE $38 MILLION???” — I’m not concluding that it shows that something is amiss.  CLEARLY the city should want those expenditures audited — right, everyone? — but given that they asked the question just a bit more than two weeks before the audit report was due, Mullaly may have been concerned about not further complicating their task than with hiding anything.  (And if it truly was outside of their contract, she couldn’t authorize their being paid for it out of City funds anyway.)   Still — this needs to be explored and nailed down.  Right?  RIGHT?
  9.  The Audit also questions whether the revenue model was appropriate.
    • It certainly wasn’t appropriate in hindsight; that’s a different question from its prospective appropriateness.
  10. You may have heard that $212 million was spent on the Great Park from 2005 to 2012.  Table 1 of the Audit contains a summary of that spending.
And that will have to do for now.  If anyone from the OJB Community — HELLO, RYAN AND VERN! — wants to help to really explain this thing, grab a shovel and dig in!


About Greg Diamond

Worker's rights attorney now moving into "good governance" litigation. North Vice Chair of Democratic Party of Orange County and occasional candidate. Proud to be prolix. Unless otherwise specifically stated, his writings never speak for the Democratic Party at the local, county, state, national, or galactic level. He tries to either suppress or openly acknowledge his partisan, issue, ideological, and "good government" biases in most of his writing here. If you have a question about any particular writing, just ask him about it and (unless you are an pseudonymous troll) he will probably answer you at painful length. He lives in Brea but generally doesn't blog about it. A family member works as a campaign treasurer for Wendy Gabriella in AD-73; he doesn't directly profit from that relatively small compensation and it doesn't affect his coverage. He does advise some campaigns informally and without compensation, although in 2014 he may receive some compensation for campaign consulting and fundraising for the campaign of Jorge Lopez for Orange County Assessor.