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Tracing Coliseum's fiscal decay

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Month after month, the financial forecasts for the Los Angeles Memorial Coliseum seemed as sunny as could be.

General Manager Patrick Lynch would tell his bosses on the Coliseum Commission that the box office from rave concerts was brisk and a lucrative deal for naming rights to the stadium could be just around the corner, records show.

For the most part, the nine-member commission took the affable Lynch at his word. And why not? As L.A. County Supervisor Don Knabe, who sits on the panel, said: "We were making money."

Despite Lynch's assurances, there was a different reality: The Coliseum had become mired in conflicts of interest, spending irregularities and loose accounting that eroded its fiscal foundation and had all but bankrupted its future as one of the nation's most-storied public landmarks.

Lynch resigned in February after The Times began a series of reports on the Coliseum's finances. He and his former events manager, Todd DeStefano, who quit shortly before the first story appeared, are the subjects of a criminal investigation by county prosecutors involving alleged kickbacks and self-dealing. State regulators and the Los Angeles city controller's office have also launched inquiries.

Three other Coliseum managers and employees have gone on leave or left the stadium's employment after The Times' investigation questioned the propriety of their financial dealings. All deny wrongdoing.

How a multimillion-dollar scandal at such a high-profile venue could go undetected for so long is not entirely clear. But the groundwork for alleged abuse lay in a history of clumsy stewardship, inattentiveness by commission members and a cozy relationship between Lynch and his overseers.

The commission was empowered to safeguard the interests of the state, county and city. But it became more of a sportsmen's club than a watchdog.

"The place was on autopilot," said mall developer Rick Caruso, who resigned as a commissioner earlier this year. He was often a lone voice in challenging Lynch, with scant results. "There was no accountability."

The Coliseum is now so broke that it is unable to make upgrades promised in its lease with USC, whose football Trojans are the stadium's main tenant. As a result, the panel is about to turn over day-to-day control of the taxpayer-owned property to the private school.

Jessica Levinson, a Loyola Law School professor who studies public corruption, described the commission's failure to spot warning signs of the scandal as a "great tragedy."

"This was below the standards of how you would run a neighborhood lemonade stand," she said.

The Coliseum, completed in 1923 when Warren G. Harding was in the White House, was heralded as a symbol of a burgeoning metropolis' ambitions to play on the global stage.

Its design by Los Angeles architect John Parkinson evoked the grandeur of its Roman namesake. When it opened, it was the crown jewel of the city.

Such a grand project, costing $800,000 at the time, required a compromise among often-competing interests -- private boosters and the city and county governments. The state, which owns the land, also had a stake.

The result was a hydra-like commission that eventually was made up of three members from each of the governments, with none empowered to take decisive action. The commission presidency rotates annually among members.

It was an awkward arrangement, but the venue's bottom line thrived for decades.

The Coliseum became the site of the 1932 Summer Olympics; it was already home to USC and UCLA football. After World War II, the stadium picked up pro football's Rams and, briefly, Chargers. It was the playing field for the Dodgers upon their arrival from Brooklyn, and would host the World Series, Super Bowl and a second Olympics in 1984.

The companion Sports Arena made its debut in 1959, the year before it staged the convention that gave John F. Kennedy the Democratic presidential nomination. It became the home of the NBA's Lakers and Clippers and the NHL's Kings.

By the late 1960s, however, the professional teams began to decamp -- in part because of their frustrations with what was viewed as the commission's inability to get things done.

The Rams took off for Anaheim in 1979, complaining that the agency had failed to improve the concession stands, parking, sound system and scoreboard. Ending its half-century stay, UCLA moved to the Rose Bowl in 1982, angered by the commission's plan to install luxury boxes for the Raiders, which would have supplanted seats for college games.

The Raiders returned to Oakland in 1995, after the Coliseum did not build those luxury boxes.

The loss of the franchises meant there were fewer eyes on the commission and a waning interest in its affairs, including by the members themselves.

It was around this time that the panel hired Lynch. With the commission's blessing, he filled the leadership vacuum.

Tall and rumpled, Lynch was recruited from a Philadelphia-based company that once ran the Coliseum under a management contract. The Massachusetts native, 55, spent his first dozen years as Coliseum general manager focused on a fruitless campaign to lure another NFL team to the stadium.

Under Lynch, the Coliseum became increasingly dependent on marginal bookings -- the occasional soccer game, and movie and television shoots.

Raves became a crucial source of new revenue, although critics said the all-night dance parties had an unsavory reputation as vehicles for drug abuse.

After a 15-year-old died from an overdose following a June 2010 concert, the Coliseum came under new scrutiny and the first hints of possible financial improprieties emerged.

In the ensuing months, citing state records and interviews, The Times reported that firms owned by DeStefano, the events manager, had been paid at least $1.8 million from two rave producers and a number of other companies that did business with the stadium, all while he helped regulate them in his government job -- an arrangement Lynch approved, despite state laws that generally prohibit such side dealings.

Lynch had informed David Israel, the incoming commission president, of DeStefano's work for one rave company before it became public.

But Israel did not report the matter to law enforcement, telling The Times later that he did not know the legalities. Instead, he instructed Lynch to have DeStefano choose between his Coliseum post and his work for the rave companies. DeStefano elected to go with the better-paying producers.

The lack of further action over DeStefano's dealings was a sign of the commission's diminished appetite for hands-on management.

Their schedule called for meeting once a month, but they had trouble making that commitment.

In the two years before Lynch's resignation, the four elected officials on the commission were frequent no-shows. Supervisor Mark Ridley-Thomas missed at least 18 of 24 meetings, according to commission minutes. City Councilman Bernard C. Parks skipped eight sessions; Knabe, seven; and Supervisor Zev Yaroslavsky, five.

Caruso, an appointee of former Gov. Arnold Schwarzenegger, did not show up for 11 meetings, which routinely were brief and short on public questions from the panel.

The commissioners receive no pay for their service, but the posts came with perks that were more fun than the typical government grind. The collegial atmosphere Lynch fostered sometimes made the commission and its management staff seem like a family.

Lynch signed a policy that gave commissioners an allotment of free tickets to events at the Coliseum and Sports Arena.

When Ridley-Thomas wanted tickets to a 2009 Carolina Panthers game, invoices show, the commission's finance director bought them and billed the Coliseum. Ridley-Thomas did not reimburse the commission until about three months ago, after The Times inquired about the $560 pair of tickets. He said he had been waiting for a bill that Lynch never sent.

At USC games, Lynch's staff set up a VIP tent under the Coliseum's stately columns for the commissioners and their guests. There was beer and wine, barbecue chicken and rice pilaf, cake and ice cream, according to invoices. The commission picked up the tab.

As the commissioners enjoyed the little extras of office, they apparently had not noticed how loose the operation had become.

Coliseum managers spent tens of thousands of dollars in government money on luxury car expenses, charges on the Coliseum gas card, massages, snoring treatments, country club golf outings and steakhouse meals.

The finance director, Ronald Lederkramer, put hundreds of thousands of dollars in Coliseum equipment purchases on his personal Chase Visa to earn reward points for himself.

In July 2010, Israel said, a contractor approached him with vague allegations that a Coliseum manager had stadium employees do work on his house. Again, Israel said he did not tip off authorities, nor did he tell the full commission.

He referred the allegations to the commission's attorney.

The Times later reported that a Coliseum janitorial contractor had been making regular payments to Lynch for about five years, with most of the money going to a Miami bank account. Lynch received a total of nearly $400,000, according to records and interviews.

The commission, according to a review of the minutes in recent years, rarely questioned Lynch seriously. The panel majority didn't balk at his refusal to install cash registers at most of the Coliseum's concession stands. Crews kept track of the money like moms and dads selling candy at Little League games.

Yaroslavsky said he brought up the lack of registers several times, to no avail.

Last September, grilling the finance director, he said that without registers it's hard to know "how much you're making and how much you're losing -- how much people are pocketing."

But the scolding was too late. By then, the Coliseum was no longer profitable, its annual financial statements showed.

As the Coliseum slipped deeper into the red, Lynch stuck to his rosy earnings predictions. The commission rewarded him and other managers with bonuses. Lynch received a $125,000 bonus in each of the last four years. His 2010 pay was more than $277,000.

Israel is among those who now feel betrayed by Lynch. He said he twice asked Lynch and DeStefano why the Coliseum was not making more money from the raves.

They responded that if the commission had demanded better terms, the promoters would have taken their concerts elsewhere, an explanation that later proved false, Israel said. "We were lied to."

Lynch's attorney responded that his client "never misrepresented himself."

Like other commissioners, Ridley-Thomas conceded that the panel had erred in not watching closely enough. "It's the honor system gone awry," he said.

"The ultimate responsibility rests with the commission."

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paul.pringle@latimes.com

ron.lin@latimes.com

Times staff writer Andrew Blankstein contributed to this report.

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BEGIN TEXT OF INFOBOX

The Coliseum Commission

The Los Angeles Memorial Coliseum Commission oversees management of the stadium and adjacent Sports Arena. It is a joint authority of the state and the city and county of Los Angeles; each government appoints three members.

APPOINTED BY THE GOVERNOR

David Israel, President since Feb. 2011

William J. Chadwick

Rick Caruso*

APPOINTED BY THE COUNTY BOARD OF SUPERVISORS

Don Knabe, Supervisor. Vice president since Feb. 2011

Mark Ridley-Thomas, Supervisor

Zev Yaroslavsky, Supervisor

APPOINTED BY THE CITY

By the Board of Recreation and Parks Commissioners, who are appointed by the mayor and confirmed by the City Council

Barry A. Sanders

Johnathan Williams

Bernard C. Parks, Appointed by City Council president

* Nominated by USC, confirmed by the governor. Submitted resignation in September; not valid until replacement is confirmed. Alternate Fabian R. Wesson, a former commissioner, fills in.

Source: Coliseum Commission, Times reporting.

Copyright © 2014, Los Angeles Times
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