A forensic audit of the Great Park project has taken another twist with Stu Mollrich of Forde & Mollrich -- the consulting firm at the center of the ongoing scandal -- refusing to disclose finances related to the firm's former $100,000 per-month public relations contract with the park.
Mollrich, appearing for a July 30 deposition under a legislative subpoena, was threatened with a contempt charge after refusing to answer questions about Forde & Mollrich's overhead, employee salaries and profit margins. He argued the company didn’t have to disclose that information because it’s a private business.
Yet this information goes to the heart of questions that for years have surrounded the public contract. Park critics allege the company’s services were not worth anything close to $100,000 monthly, and that the no-bid contract meant overinflated profits for the politically connected firm.
The park’s defenders, meanwhile, argue that the audit is nothing more than an attempt by the Irvine City Council's Republican City Council majority to smear the council’s Democrats, who, until 2012, controlled the council and therefore the park project.
Over $1 million has been spent on the investigation.
So far, depositions and an initial report by Newport Beach-based auditor Hagen, Streiff, Newton & Oshiro Accountants have carried a narrative of waste, abuse and dysfunction between the park’s top management and the consultants that were supposed to answer to the city.
But to longtime critics of the Great Park project, the Forde & Mollrich contract holds special significance as the symbol for years of mismanagement and alleged corruption at the park. While initially envisioned to be Orange County’s rival to New York’s Central Park, the 1,300-acre project has fallen short of expectations.
In his deposition -- which ran over eight hours and as transcribed totals 263 pages – Mollrich flatly refused to answer a question about the salary for then Forde & Mollrich employee Sam Allevato, who is also mayor of San Juan Capistrano.
That sparked a contentious back-and-forth between Mollrich’s lawyer, who attended the deposition, and Anthony Taylor, the deposing attorney from Aleshire & Wynder, LLP, which was brought in to help with the investigation.
Mollrich’s attorney David Elson -- from the firm Manatt, Phelps, & Phillips, LLP – argued that the consultant’s profits under the contract are irrelevant. What is relevant, Elson argued, is whether the city received the services promised in the contract.
“So you think it’s perfectly acceptable if a public agency is overcharged?” Taylor asked Elson.
Responded Elson: “Overcharged – why are they overcharged if there’s a public process, and at the end of the public process, they received all the deliverables they’re – they’re promised?”
Taylor said he wants to measure the city contract with other Forde & Mollrich contracts to see weather the city was being charged commensurate with the fair value of the services it received.
Taylor noted that “every day” there are lawsuits under the False Claims Act whereby companies are sued for marking up something like a pipe, “ten times what it should have been.”
It isn’t just the park auditors who want to know Forde & Mollrich’s profit margins under the contract. Before the audit, park CEO Mike Ellzey asked the same question, but was rebuffed.
Ellzey – who has described Forde & Mollrich partner Arnold Forde as having a “mafioso” personality – said in a statement submitted to auditors that Forde threatened to oust Ellzey if he attempted to adjust the contract amount.
Mollrich said he couldn’t recall that statement being made, but generally characterized Ellzey as “the star of his own movie, one that exists mostly in his mind,” and dismissed Ellzey’s criticism as being pejorative simply because he didn’t like or get along with somebody.
After it became clear redevelopment – the primary mechanism for funding the park long-term – was going to be axed, Ellzey negotiated the public relations contract down to $50,000 monthly.
Councilwoman Christina Shea, who along with Councilman Jeffrey Lalloway sits on the subcommittee overseeing the audit, said she and Lalloway would likely authorize pursing a contempt hearing against Forde & Mollrich for not providing a whole range of documents.
After subcommittee approval, the hearing would go to a vote of the full council.
There are other indications that the City Council majority will carry out the threatened legal action.
In an Aug. 15 letter to Mollrich signed by Taylor, the firm issues a final demand for financial documents and claims that the council could order a court hearing within the next few business days.
At that point, a judge could then have an Orange County sheriff escort Mollrich to court, Taylor writes. The letter demands a response by Monday, 5 p.m.
Shea said the only consultant still not cooperating in the audit is Forde & Mollrich.
“They should be in contempt, they’re not participating. I think they’ve got something to hide,” Shea said. “I guess they think they’re above the law. They think they’re invincible.”