Chick Urges Inquiry Into City Airports

City Controller Laura Chick said Monday that she has asked local, state and federal law enforcement agencies to investigate “potential illegal acts” she found while conducting a routine audit of the Los Angeles airport department.

She declined to expand on what the acts were or who was involved, saying the release of that information could compromise any investigation.

Chick sent letters Monday to state Atty. Gen. Bill Lockyer and the inspector general’s office at the federal Department of Transportation, asking the agencies to open an investigation into how Los Angeles World Airports awards contracts. She also called on the city’s Ethics Commission to look into the matter.

Spokesmen for the attorney general and the Department of Transportation’s inspector general said they had not seen Chick’s request and could not comment.

The controller also met with Dist. Atty. Steve Cooley on Oct. 24, and turned over the results of a preliminary investigation conducted by her office that she said raised “concerns about potential conflict of interest, fraud, misuse of power and inappropriate award of contracts.”

The district attorney’s office is reviewing the audit findings, and “an investigation will ensue if warranted,” Assistant Dist. Atty. Peter Bozanich said in a statement.

Chick also declined to elaborate on the information she presented to Cooley, but in a statement said her audit was intended to address the question of whether Los Angeles government is “clean and honest.”

“There are rumors, increasing rumors, about a pay-to-play environment in the city of Los Angeles,” she said, referring to a practice in which contractors make contributions to political campaigns in exchange for preferential treatment. “Let me say this very frankly.... I have been looking at the awarding of contracts because of, in part, the rumors about pay-to-play.”

The city’s airport agency acknowledged that Chick raised some valid points in her audit, but took issue with other findings.

“Los Angeles World Airports enjoys an excellent reputation for its contracting practices, and we have implemented checks and balances to help us maintain the highest standards with our contractors,” said airport spokesman Paul Haney.

Fernando Guerra, director of the Center for the Study of Los Angeles at Loyola Marymount University, said that Chick was “a politician before she was an auditor, and she certainly sees a lot of political mileage in being anti-corruption and being vigilant and looking out for the taxpayer’s dollar. There is no cost to her politically to do that, and a lot of potential gain.”

Added Guerra: “As to how constructive it is ... one will only see when we get the details.”

Chick said that after conducting more than 60 audits, this is the first time she has forwarded information to law enforcement agencies. The 51-page audit of Los Angeles World Airports, conducted for Chick’s office by the Sacramento-based firm Sjoberg-Evashenk, does not lay out specific evidence of wrongdoing, Chick said. The allegations, she added, “were clearly beyond the scope of a performance audit.”

“That has to wait for the results of investigations that go beyond what I looked at,” she said. “The findings of my audit talk to the environment there and the absence of good business practices. It paints a picture of an environment that’s ripe for problems. The details of those problems remain to be seen in the further light of day.”

Los Angeles World Airports operates Los Angeles International Airport, Ontario International Airport and Van Nuys and Palmdale airports.

The audit found that the agency does not have a formal process for evaluating and selecting bids on lucrative airport contracts. The airport agency also does not keep adequate records documenting decisions to hire one firm over another, auditors wrote.

For example, auditors found that the airport staff recommended to the Airport Commission in January that it award a $930,000 contract to a firm it found “most qualified.” The board took no action at the time, but decided in June to award the contract to another firm. The audit didn’t name the specific companies or services involved. Auditors said they found no documentation to support the change from one firm to another.

The city attorney’s office has raised the same concerns with the agency, the report said, and has been told by airport officials that the law does not require them to document their decisions on contracts or to keep records of contractor evaluations.

Chick said that she was particularly concerned about a resolution adopted by the airport department’s seven-member Airport Commission that allows two commissioners to sit in on interviews with companies that have submitted proposals for airport contracts.

The auditors found that when commissioners participated in the interviews, there was typically little documentation available to show why a decision was made to award a contract to a certain company, the report said. “Board member participation on contract evaluations is inconsistent and increases the potential risks for conflicts of interest to arise,” auditors wrote.

By not documenting its reasons for choosing a particular company, the airport agency risks awarding contracts to less-qualified firms, or not receiving the best price on airport concessions or leases, auditors wrote. It also risks losing federal grant money by not complying with federal standards on how to award airport contracts, the report said.

The city’s airport department is in “full compliance” with the city’s contracting regulations, airport officials said, and the city attorney’s office has verified many of its contracting processes, including the practice of commissioners sitting in on company interviews.

“This audit will provide us with further guidance for reforms that are already underway,” Kim Day, the airport agency’s interim executive director, said in a statement. “LAWA will look to this audit for insight as part of our commitment to continuous improvement.”

The airport agency is continually fine-tuning its contracting process and has made several changes this year to ensure that contracts comply with city regulations, said Haney, an airport spokesman.

The airport agency took issue with auditors, however, saying that “while we agree with most recommendations, LAWA believes some are without merit and paint a misleading picture of how contracting business is done at LAWA.”

Airport Commission President Ted Stein refused to comment on Chick’s findings.

Auditors chose 25 contracts that were active during the last three years, and analyzed how the airport staff and commissioners evaluated bidders and arrived at a decision. The airport administers 434 revenue-generating contracts valued at about $346 million each year. Airport commissioners participated in the selection process for 10 of these contracts.

The practice of airport commissioners sitting in on interviews with potential airport contractors is not new, airport officials said. Commissioners have participated in the contract award process for the last decade, and have been involved in about 2% of contract awards during that time, they added.

The audit also found that some leases at Van Nuys Airport are more than a decade old, and that the airport department’s failure to renegotiate leases to reflect fair market value led to a potential loss of $15.6 million from 1990 to 2003. If the leases aren’t updated, the airport could lose an estimated $4 million annually, the report concluded.

Airport officials said they are working to update the leases.

“Now that the department is firmly back on solid financial footing after 9/11, we will work to collect retroactive lease rate increases so there will be no loss of revenue to the department,” Haney said.

Chick made several recommendations, including that the airport department establish a “code of conduct” regarding contracting for airport officials, and that commissioners stop sitting in on interview panels with potential airport contractors.

City Council members called for further investigation into Chick’s findings.

“We’ve got to do something,” said Councilwoman Cindy Miscikowski, whose district includes neighborhoods surrounding LAX. She added that she believes Chick also should turn her information over to the U.S. attorney’s office.

Miscikowski, who has been critical of Hahn’s $9-billion plan to modernize LAX, said she is considering proposing rules that could regulate commissioners’ actions.

Councilman Bernard C. Parks said that rumors have been circulating for months that there is a “pay-to-play” environment at LAX. Some business people have complained that “they felt uncomfortable as to being imposed upon ... or feeling pressured,” he said.