New Controversy Raises Questions About County Investigations

A secret ongoing review of potential discipline against one of the Orange County government's highest ranking executives -- ordered up almost six months ago -- appears to be stalled with Internal Audit Director Peter Hughes last month protesting the lack of interviews with auditors by private attorneys as well as the fact that key documents hadn’t been reviewed.

As a result of the controversy, incoming Board of Supervisors’ Chairman Todd Spitzer says the county’s use of outside attorneys to conduct investigations of top executives and elected officials needs review.

Following a botched internal probe in 2011 that protected former OC Public Works executive and Santa Ana City Councilman Carlos Bustamante (now facing charges on a dozen felony sex crimes), county supervisors devised a system whereby private lawyers – hired and paid by the county - would be assigned to conduct sensitive investigations of top county officials.

“We’re hiring outside counsel to give the sense of impartiality without any interference of anybody else at the county,” Spitzer said in an interview Sunday with Voice of OC.

“These will not be witch hunts,” said Spitzer, echoing his long standing concern about the lack of clear guidelines on use of private lawyers for government probes into fraud, waste and abuse.

Conversely, “we will not drag these things on forever,” Spitzer said.

Yet, as more and more issues are handled by the County Counsel’s office, nagging questions remain over the process for launching these independent counsels as well as how updates and disclosures are being handled.

“I’m not sure I’m comfortable with some of the reforms we’ve put into place,” Spitzer said. “I’m not sure this is working...there are significant glitches.”

Attorney Debra Reilly was hired last October to review Internal Audit Department findings submitted in March to propose legal and/or disciplinary remedies regarding the granting of nearly $1 million dollars in questionable contracts inside the OC Parks Department back when county Chief Operating Officer Mark Denny was in charge of the agency.

Supervisors’ Chairman Shawn Nelson ordered the review- with the aim of receiving suggested disciplinary measures - back in August.

With CEO Mike Giancola preparing to head out on a medical leave on Jan. 21 for back surgery, Denny was slated to take over as acting CEO until Giancola returns.

But that’s been complicated by Denny’s role in the parks scandal. Spitzer has said that if the investigation isn’t complete by the time Giancola goes out on leave, Chief Financial Officer Frank Kim would take over as acting CEO instead of Denny.

According to sources, when Hughes, who declined comment for this article, saw a Voice of OC story detailing that Reilly had been officially hired back in October to review his own department’s work, he wondered why the attorney had not contacted Internal Audit nor picked up any relevant documents.

Hughes reached out to the County Counsel overseeing the case, Wanda Florence, last month asking why his department had not been contacted.

That apparently triggered a tense exchange between Hughes and Giancola, who contacted him privately and challenged him for asking questions about the private attorney’s investigation.

“Peter, since when did Internal Audit staff reach out to be included in an HR investigation? I have never heard of such a thing. Please advise,” read a Dec. 23 email from Giancola to Hughes, released to Voice of OC under the state’s Public Records Act.

County officials are keeping Hughes’ immediate email response to Giancola secret, citing attorney-client privilege.

This might be a violation of the California Public Records Act, say Voice of OC attorneys. They question how an attorney-client privilege can be cited between two people who aren’t attorneys.

County officials did disclose a written response to Hughes from Giancola, one that came later that afternoon, which read “Peter, I want to thank you for the frank discussion as I better understand your effort and the reasons behind it.”

Reilly and Hughes have both declined comment.

The arguments between the county’s Internal Auditor and the CEO comes just as county officials find themselves locked in a tense debate over who should be the county’s chief internal watchdog.

County supervisors find themselves with an Internal Audit department under significant political pressure in the midst of the parks audit, similar to the Bustamante affair.

It’s exactly the type of situation that moving the office from the Auditor Controller was meant to avoid.

Meanwhile, Auditor Controller Eric Woolery is himself locked in a battle with county supervisors, arguing that the department should be moved back to the Auditor Controller’s office to avoid politicization.

Spitzer admits that having the county’s Internal Auditor feel the need to reach out to a private attorney and demand to be interviewed and have documents reviewed is not ideal for the integrity of investigations.

He also notes the pace of the review has been slow.

The relevant audit was completed last March, and only referred for disciplinary review after press coverage by Voice of OC in August. Nelson asked for a referral later that month and a contract was signed in October. By January, key witnesses like Hughes are complaining about not being contacted or even have source documents reviewed.

Spitzer noted that Giancola is under pressure from county supervisors to get the issue finalized.

“He feels pressed to get something done before he leaves out on medical leave,” Spitzer said.

Yet Spitzer underscored that county supervisors are in no way trying to rush an outcome. He believes Giancola erred in scolding the Internal Auditor for reaching out for a status update, admitting it creates the impression of wanting to quash a thorough probe.

“None of these communications should have occurred,” Spitzer said.

“Peter Hughes should not have to reach out to an investigator to have them come get documents,” Spitzer said.

“This should have been provided from day one,” Spitzer added. “Michael (Giancola) needs to ensure anytime in the future there’s an investigator looking at HR, they will be delivered the complete set of all relevant documents.”