Members of a state legislative audit committee Wednesday shot down a request for an investigation into the multiple audits done on Irvine’s Great Park.
Assemblywoman Lorena Gonzalez (D-San Diego) requested the state investigation on behalf of Gafcon, a construction management firm based in her city and a prime target of the city’s audits. Gonzalez and Gafcon contend that Irvine’s audits were biased, didn’t follow government accounting standards, and unfairly smeared the company’s name.
The motion to approve the state investigation fell short by two votes. Under the committee’s rules, a majority of both the Assembly members and senators on the 14-member panel must approve a motion for it to go forward. While all seven of the committee's Assembly members voted in favor of the audit, only two senators voted yes, with others voting no, abstaining or not present.
In January 2014, Hagen, Streiff, Newton & Oshiro, Accountants PC (HSNO) released a preliminary audit report that suggested gross mismanagement of millions of dollars on the 1,300-acre park project. The city released two final reports earlier this year, including another by HSNO that the accounting firm says “supersedes” the previous report.
In testimony to the committee, Gafcon CEO Yehudi Gaffen said the release of the audit reports have seriously impacted the firm's business. He also asserts that the preliminary audit was "withdrawn" by HSNO because it was baseless.
“In 28 years we have never had to deal with anything like we have in the last two years,” Gaffen told the committee, adding that the company wasn’t able to win a single job in 2014 due to the findings in the preliminary audit. “This so-called audit was withdrawn 30 days ago. But the damage was done."
Certain findings against Gafcon contained in the preliminary report, like an assertion about duplicate billings, were ultimately deemed inconclusive in the final report and withdrawn, according to the final report’s cover letter.
However, the other final report by the law firm Aleshire & Wynder alleged conflicts of interest between Gafcon and Forde & Mollrich, a subconsultant that at one point had a $100,000 per-month public relations contract with the park.
City leaders are reviewing whether to file lawsuits against Gafcon and Forde & Mollrich over the findings.
The city first commissioned its investigation into nearly $260 million spent on the metropolitan park project when Republican council candidates unseated the previous Democratic majority in the 2012 general election.
Republican council members said the audit was necessary to bring fiscal accountability to a project that was supposed to rival New York’s Central Park but instead has turned into a massive boondoggle. Meanwhile, the Democrats who previously controlled the park and consultants targeted by the audit, including Gafcon, have described it as a political witch-hunt orchestrated by Republicans.
Gonzalez was specifically asking for the state auditor to investigate the activities of a two-member council subcommittee -- consisting of Republicans Jeffrey Lalloway and Christina Shea -- that was charged with receiving closed-door updates regarding the audit’s progress. Critics charge that Lalloway and Shea were actually controlling the audit, resulting in biased reports.
Gonzalez alleged that the subcommittee abused its auditing powers and engaged in a targeted attack that didn’t measure up to government accounting standards. She said Gafcon’s only recourse was to ask the state to intervene.
“Business should not be subject to these kinds of abuses,” Gonzalez said.
In its cover letter for what it termed its "Contracts Performance Review," HSNO wrote that it didn't follow accounting standards set by the American Institute of Certified Public Accountants because the city’s contracts with the Great Park Design Studio, co-headed by Gafcon, called for reviews with different sets of standards.
Aleshire & Wynder attorney Anthony Taylor, who also attended the hearing, said he was concerned that the state committee would be launching “an attack” against the city of Irvine and that if it requests an audit, it should cover everything, including the park spending.
Taylor also told the committee that the audit has multiple layers of oversight, including an ongoing criminal investigation into the audit’s findings by the Orange County District Attorney’s office, in concert with a “federal task force.” He also said the county’s grand jury is investigating the park.
“Are you implying or stating emphatically that there should be criminal charges against Gafcon?” asked Assemblyman Brian Jones.
“That is ultimately up to the federal prosecutors and the district attorney. I have provided information to the DA that I believe warrants that proceeding,” Taylor responded.
Paul Najar, Gafcon’s general counsel, responded that the DA’s investigation is based on allegations in the preliminary report that were withdrawn.
In an emailed statement, Gafcon spokesman Alan Ziegaus said that the company plans to bring up the matter to the committee again in June with the hope of securing the two additional votes needed to approve the audit.