Family Ties Lead to Questions About OCTA Audit

A sign for the Orange County Transportation Authority's bus service. (Photo credit: unknown)

A sign for the Orange County Transportation Authority's bus service. (Photo credit: unknown)

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Monday, May 23, 2011 | When it came time last year for Orange County Transportation Authority officials to hire an outside firm for an “independent” review of how the agency manages a $12-billion transportation improvement program, they had three bidders.

One was a Sacramento-based firm headed by former state Auditor Kurt R. Sjoberg, and another was Capital Partnerships Inc., a small San Francisco firm with extensive experience conducting management and performance audits in California.

Finally, there was a team put together by the Orange County Business Council that included Stan Oftelie, a longtime Orange County transportation official who also happens to be the father of Andrew Oftelie, the OCTA’s manager of financial planning and analysis.

They chose the Business Council’s group, which, in October, completed the analysis and found no significant problems with how the program was being managed. The elder Oftelie was one of six “key personnel” that the Business Council promised would work on the contract.

That OCTA executives would choose a group with such an obvious and deep connection to do an independent management audit of their operations has experts in ethics and good government scratching their heads.

“It creates the appearance of a conflict of interest,” said Julie Ragatz, professor of business ethics at the American College in Bryn Mawr, Pa. “And the appearance of a conflict tends to diminish confidence in our officials.”

OCTA attorney Ken Smart said no laws were violated because Andrew Oftelie did not have a direct financial interest in the $75,000 contract awarded to the Business Council.

The elder Oftelie said he told his son he would turn down the job offer if it posed a conflict.

“I said if there is any conflict to tell me and I would back out,” said Stan Oftelie. And, he said, in the course of the Business Council study he had “no discussion with him (Andrew) on any part of it.”

Andrew Oftelie said he stepped out of involvement in awarding the contract once he learned his father might be involved. “I recused myself,” said Andrew Oftelie in a brief telephone interview.

Yet there are no records in the official OCTA file showing the younger Oftelie ended his involvement in the bid process. But there are records showing he played a central role in developing the requirements bidders must meet to fulfill the contract. He named at least one person to the committee that ultimately chose the Business Council.

Smart confirmed that Andrew Oftelie told him he planned to remove himself from further work on the contract because his father was joining the Business Council team.

“I remember it clearly,” said Smart. “Andy came to me and said, ‘Gee, I’m a project manager on this assessment of Measure M [and] I just now found out my dad may be a potential'” member of the Building Council group that was planning to bid.

But exactly when the younger Oftelie might have recused himself from the decision to hire his father is beside the larger point, said Kirk O. Hanson, executive director of the Markkula Center for Applied Ethics at Santa Clara University.

It’s “laughable,” he said, to conclude a father’s judgment would be impartial when work involved his son.

David Schwartz wasn’t amused with how the bidding process worked. Schwartz is one of the founders of Capital Partnerships, which has conducted dozens of audits for cities and counties in California during the past 20 years.

Despite this record, the OCTA evaluation team rejected Capital Partnership’s bid even before inviting Schwartz, who formally worked for the state Legislative Analyst’s office, for a personal interview. He was so upset that he sent an email to OCTA officials, telling them not to contact him again.

“I find it incredible,” Schwartz wrote in the email to the OCTA executive in charge of the evaluations, “that someone with my qualifications was not even short listed. I won’t bother responding [to OCTA bid requests] again.”

‘Everyone Should Be Embarrassed’

Stan Oftelie’s history with OCTA goes far beyond his son’s employment at the agency.

In 1990, county voters approved Measure M, a half-cent increase in the sales tax to raise money for transportation projects. The following year, the Orange County Transportation Authority was created from seven regional transit groups.

The organization’s first chief executive was Stan Oftelie. Then around 1997 — shortly after the Business Council was formed — Oftelie left the Transportation Authority and became CEO of the Business Council, where he stayed until 2006.

The current membership roster of the Business Council includes dozens of Orange County’s biggest and most influential corporations and law firms. Members, called “investors,” include the Walt Disney Co., the Irvine Co., the Mission Viejo Co., the Orange County Register, PBS SoCal and Orange County GOP Chairman Scott Baugh.

In addition, numerous construction companies are members, including some that have done freeway or rail projects throughout the state. Law firms like Rutan & Tucker, which provides contract lawyers for city and county agencies, also are members.

And last year’s audit wasn’t the first time the Business Council and Oftelie were in charge of scrutinizing the Transportation Authority. When the OCTA conducted a 15-year review of its performance in 2006, the Business Council did the critique, and Oftelie was on the team that analyzed in part his own prior work.

That 2006 report suggested some improvements, such as better synchronizing of traffic signals, but concluded “overall, this OCBC assessment finds that Measure M has met or exceeded promises made to voters in 1990.”

There are several other examples that show a tangle of political and professional connections between the Business Council and the OCTA.

They include:

  • The current OCTA chief executive sits on the Business Council’s board. And the Business Council was a strong political backer of the Measure M2 sales tax program it was hired to evaluate.
  • The Transportation Authority itself is a member of the Business Council, and the council’s web site uses an endorsement from OCTA’s CEO Will Kempton in its promotions.
  • The Business Council campaigned for the 2006 ballot measure, known as Measure M2, that renewed the countywide half-cent sales tax. That is the $12 billion to $15 billion that will be used by OCTA over 30 years to pay for the projects. And it was those projects that the Business Council won the bid to scrutinize.
  • A group called OCMoves, which is a committee of the Business Council, helped draft one of the specific programs the Business Council audit team examined. “The focus of OCMoves will be to continue that collaboration of Measure M public and private stakeholders to advocate Orange County’s transportation priorities at regional, state and federal levels, as well as to provide oversight on behalf of the business community for renewed Measure M implementation,” its web page says.
  • OCTA paid $25,000 to the Business Council in 2008 to become a member of OCMoves.

“Everyone should be embarrassed about this agreement” for the Business Council to do the “independent” management study, said Hanson. “A management audit can’t be done by one of the interest groups that has a substantial stake in the outcomes of that agency,” because “it’s almost impossible to separate” the interests of the two groups.

A Promise to Voters

When the Measure M2 sales tax renewal was approved by voters in 2006, it included guarantees that the $12 billion to $15 billion would be spent properly.

In the report that the Business Council made last year as a result of winning the contract, it noted voters were promised a “safeguard calling for an independent outside performance assessment every three years.”

The report went on to say that “this assessment was undertaken by the Orange County Business Council (OCBC), an independent consultant, to evaluate the efficiency, effectiveness, economy and program results of the Orange County Transportation Authority (OCTA) in satisfying” the requirements of the ordinance.

The Business Council analysis focused on the 57 Freeway and gave the Transportation Authority managers generally high marks for finding money to widen it during the recession. But the report barely mentioned cuts in bus service that affected thousands of the county’s low-income residents.

Bob Stern, president of the Los Angeles-based Center for Governmental Studies, said it would have been better for voters if the review had been conducted by a group with no interest in the transportation projects managed by OCTA.

“It [the Business Council management assessment] really isn’t very independent, because everybody has a stake in the game,” he said.

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