The firm responsible for conducting two controversial Great Park audits surrendered its accounting license Monday after settling a complaint with the California Board of Accountancy.
Hagen, Streiff, Newton & Oshiro (HSNO) allegedly didn’t follow accounting standards, misled the Irvine City Council and lied about cooperation by Great Park contractors in two separate audits, according to the March 2019 complaint filed by Patti Bowers, executive officer of the California Board of Accountancy.
“The reports prepared by Respondent HSNO contained misleading statements and failed to meet minimum professional standards that required due professional care, objectivity, and sufficient relevant data to support many of its findings and opinions. Respondent HSNO’s findings and conclusions included falsely portraying that certain parties had failed to cooperate with Respondents HSNO’s engagement, and that one party had double billed the City,” reads the complaint.
The Board of Accountancy is responsible for regulating over 97,000 accounting licenses of both firms and individuals. The board also sets statewide industry standards.
The accounting firm’s lawyer, Randal Dean, issued a statement on behalf of the firm Monday, indicating the firm still stands by its audits.
“Nothing in the settlement invalidates any of the findings by HSNO. The reports are an important part of the history of the development of the Great Park. HSNO settled with the Board only because it no longer required its accounting license, it desired to avoid the ongoing tremendous costs of litigation, and the Board’s Accusation was dropped against HSNO’s individual accountants,” reads the statement.
Bower’s complaint was originally filed in January 2018, but she expanded on her complaint in March 2019.
“For the purpose of resolving [Bower’s complaint] without the expense and uncertainty of further proceedings, [HSNO] agrees that, at a hearing, [Bowers] could establish a factual basis for the charges in the First Amended Accusation and that those charges constitute a cause for discipline. [HSNO] hereby gives up its right to contest that cause for discipline exists based on those charges,” reads the Accountancy Board’s order.
It wasn’t the first time the auditing firm was criticized by state officials.
State Auditor Elaine Howle issued a critical review of the Great Park audits in 2016, and largely pointed to the same issues Bowers’ report did.
Howle’s report also found Irvine didn’t follow its policies when choosing the accounting firm and found “little evidence that the subcommittee that oversaw both phases of the performance review of Great Park contracts added value. As a result, Irvine spent about $1.7 million related to the park review in a manner that compromised the review’s credibility.”
HSNO withdrew the first audit in May 2015 and replaced it with a second report. The city initially paid $240,000 for the first audit, but the costs climbed to roughly $1.7 million — including money spent on outside lawyers — to examine why more than $250 million was spent to develop 88 of the Great Park’s 1300 acres.
The Great Park has been plagued by controversy over numerous consultants employed and questions about spending have haunted the park’s development and the audits of the development. A major roadblock hit when former Gov. Jerry Brown axed redevelopment agencies statewide in 2011 and the Great Park lost hundreds of millions of dollars in funding. The state also denied Irvine’s request in 2012 for a $1.4 billion tax stream that would’ve helped build the park.
Bowers’ complaint also examined the firm’s claims against San Diego-based Gafcon, a former Great Park contractor.
“Respondent [Christopher] Money stated that Gafcon ‘wouldn’t even provide us [HSNO] documents. We had to subpoena them.’ This statement was false and misleading, in that Respondent HSNO never issued a subpoena for documents to Gafcon or even asked for documents prior to the issuance of Report 1 despite Gafcon repeatedly offering to produce documents,” reads Bowers’ complaint.
In her complaint, Bowers said the audits caused Gafcon to lose “millions of dollars in damages, including lost profits…”
Disciplinary action against Money and another auditor was halted because HSNO agreed to surrender its accountancy license, according to pending settlement documents. The firm has to pay the board $550,000, including an administrative penalty and $400,000 to reimburse investigation costs.