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A compromised watchdog

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For years, the Los Angeles Community College District has relied on Gateway Science & Engineering to supervise the $450-million rebuilding of Mission College in Sylmar.

Gateway is paid to police construction quality, keep contractors on schedule and review all bills and payments.

For at least a year, however, Gateway collected consulting fees from one of the main contractors it was overseeing on the campus, FTR International of Irvine. At the time, FTR was building a 90,000-square-foot fitness center at Mission, a project beset by delays, cost increases and alleged lapses in workmanship, district records show.

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While receiving the consulting fees beginning in 2009, Gateway approved $3.4 million in district payments to FTR over the objections of architects and engineers who said the construction firm was billing for more work than it had done on the fitness center, according to documents obtained under the California Public Records Act.

During this period, Gateway also supervised the evaluation of bids for a $29-million contract to build a student services center at Mission College -- even though FTR was among the bidders, records show.

After a campus committee voted to give the job to a different contractor, a Gateway employee who was on the panel expressed displeasure with the choice and spoke in favor of FTR, witnesses said. A second vote was taken, and this time the committee selected FTR.

Gateway’s consulting agreement with FTR called for it to be paid up to $3 million for advising on construction quality and worker safety on a project at West Los Angeles College, one of nine campuses in the district. Gateway has collected about $300,000 to date, records show.

James Zack, an Irvine construction manager who is often hired to settle disputes between contractors and public agencies, said the arrangement between the two companies “does not pass any smell test.”

“There is certainly a huge appearance of conflict of interest, and I can’t imagine if anyone on the college district board knew anything about this that they’d allow them to proceed in this fashion.”

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Miguel Santiago, president of the district’s board of trustees, said no one told the board that Gateway was collecting fees from FTR on one campus while overseeing its work on another. But district records show that top managers of the districtwide construction program knew about the consulting agreement and that none questioned it.

Requests by The Times for public records about the two companies’ dealings sparked an investigation by the district’s inspector general.

As a result of that probe, the district has accused Gateway of approving a fraudulent bill from FTR for work on the fitness center. For that and other alleged mismanagement, the district is seeking to terminate Gateway’s contract at Mission College and bar FTR from campus construction work for up to five years.

Both companies have denied wrongdoing.

Gateway’s owner, Art Gastelum, a leading political fundraiser and former City Hall lobbyist, said top district officials approved the consulting deal in advance. The payments from FTR, he said, had no influence on his firm’s supervision of the company’s work at Mission.

“There was no quid pro quo here,” he said in an interview.

“No matter what relationship I have with FTR on another campus, if they don’t do their work on my campus, I’d fire them,” Gastelum said in another conversation.

He said it was standard industry practice for a construction management firm overseeing a contractor on one project to accept fees from the same contractor on another.

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“Why is it OK for the big guys to do it, and it’s not OK for a small minority firm to do it?” asked Gastelum, who is Latino.

FTR’s owner, Nizar Katbi, declined requests for an interview.

In a recent letter to the trustees, Katbi said FTR made “full disclosure” to the district about its consulting payments to Gateway.

“FTR has done NOTHING unethical,” he wrote.

Ambitious program

The Mission and West L.A. projects are part of the district’s $5.7-billion, taxpayer-funded rebuilding of its nine campuses -- one of California’s largest public works programs.

Lacking expertise in construction, the district’s elected trustees hired one construction management firm to run the overall program day-to-day and nine others to supervise projects on each campus.

For Mission, they chose Gateway, which is based in Pasadena. Gastelum, now 62, founded the firm in 1993. A top aide to Los Angeles Mayor Tom Bradley from 1973 to 1990, he is a prodigious campaign fundraiser and a leading source of donations to district trustees.

Katbi, too, has been a top donor to the trustees. FTR, which he founded in 1984, has built school buildings, police stations and athletic facilities across Southern California. Overall, it has won $232 million in contracts with the district construction program.

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It was hired to build the Mission fitness center in 2007 after submitting a $34-million bid, the lowest of five.

The firm broke ground that summer and submitted bills once a month. They were scrutinized by the architects who designed the project and by a district building inspector, who reported their findings to Gateway.

It was Gateway’s job to resolve any disagreements over FTR’s work and decide how much the district should pay. With rare exceptions, the district followed Gateway’s recommendations.

Disputes erupted early on, records show. In December 2007, Katbi sought speedy payment of a $1.4-million bill for concrete and steel framing work, along with installation of water pipes, air ducts and electrical cables.

Architects from Cannon Design said the bill included $979,000 for concrete work that FTR had not yet performed.

Gateway took FTR’s side.

Nick Quintanilla, Gateway’s project manager for Mission College, turned to a leader of the construction program in downtown Los Angeles, asking if he could break with the district’s practice of requiring that an architect and inspector approve all payments to contractors.

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In the email, Quintanilla said he had “done my due diligence” and was satisfied that FTR had completed the work for which it was billing. “Is there any way that we can process it without their signature,” he wrote, referring to the architect and inspector.

“Yes,” responded James D. Sohn, then a vice president of URS Corp., the overall construction manager for the program. “Your signature is fine with me. Send it through ASAP.”

Larry Eisenberg, the district official overseeing the program, also approved the payment, records show.

Sohn declined to be interviewed. In an email, he said he could not recall details of FTR’s work on the fitness center.

Eisenberg, who was removed from his job in March after a series of Times articles described widespread problems in the construction program, declined to comment for this report.

By early 2008, construction of the fitness center had fallen weeks behind schedule, district records show. Cannon Design demanded that FTR produce a plan for getting back on track. At one meeting in a construction trailer, architect Curtis Bywater called it “an extremely urgent matter,” according to minutes of the meeting obtained under the California Public Records Act.

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Gateway promised to obtain an updated schedule from FTR, the minutes show. Months went by, and none materialized.

In January 2008, Bywater began putting a disclaimer next to his signature on FTR’s monthly bills.

“Based on my experience and observation at the site, Cannon Design takes exception to the percentages [of work complete] indicated on this payment application and will not recommend approval,” Bywater wrote.

Month after month, Sohn, Eisenberg or Eisenberg’s then-deputy, Tom Hall, joined Gateway in approving and at times expediting payments to FTR over the opposition of the architects.

Several times, Gateway approved FTR’s bills without a signature from either an architect or an inspector. Those, too, were approved by Sohn, Eisenberg or Hall, records show.

On one bill, for $1.28 million, someone wrote “Juan” on the signature line for the design team. Cannon Design said it had no one by that name working on the project. District officials said it is unclear who wrote “Juan.”

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By the summer of 2008, the inspector, architects and engineers had sent Gateway scores of reports detailing alleged shortcomings in the work of FTR and its subcontractors.

The concrete slab beneath the fitness center’s ground floor was not flat, they reported. Elsewhere, bolts were loose and welding was insufficient, according to the reports. Steel beams were warped or bent, and engineers rejected the repairs as inadequate, the reports said.

In some cases, FTR disputed the findings; in others, it corrected deficiencies.

In March 2009, Cannon Design and project inspector Chris McCarthy tried to block payment for plumbing, electric wiring, insulation and other work, saying FTR again was overstating how much had been completed.

Katbi, in a letter to Quintanilla, accused McCarthy of “overinspecting the work” and practicing “extortion.”

At a meeting at the Mission campus, Katbi, who is of Middle Eastern descent, screamed at the inspector, called him a racist and threatened to sue him, according to a complaint McCarthy filed with the district and written reports from witnesses.

The project was more than 300 days behind schedule, McCarthy wrote in his complaint, but FTR had failed to produce a revised schedule “with a real delivery date and details that can be monitored.”

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“At this time there is no tool of accountability,” he said.

Extra work

Amid the contention over FTR’s bills, Gateway used its authority as campus project manager to give the contractor nearly $2 million in additional work at Mission.

The work was unrelated to the fitness center, so the district was required under state law to put it out to bid. Nevertheless, with the consent of URS and district officials, Gateway awarded the work to FTR, classifying it as a change to the fitness center contract.

The first assignment, in June 2008, was to relocate a water main that ran beneath the site of a planned classroom building. Later, Gateway hired FTR to dig trenches for a study of an earthquake fault beneath the same site.

In both cases, records show, Katbi negotiated a price directly with Gateway’s Quintanilla: $960,000 for the pipeline work and $1 million for the trenching.

“Ideally this work should have been bid out, but due to the time constraints [Gateway] negotiated a lump sum price with FTR and requested them to perform the work,” Quintanilla said in an email to a district construction manager, referring to the trenching.

By state law, the increase in FTR’s contract required advance approval of the fitness center architect. But Gateway, again with the district’s consent, skipped that step.

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In August 2008, FTR sent Gateway a bill stating that it had finished most of the pipeline work.

Cannon Design withheld its approval, saying its architects had not consented to adding the work to the fitness center contract and could not verify that it had been completed. McCarthy also refused to sign.

Gateway nevertheless approved payment of at least $782,000.

Nine months after FTR received the money, Katbi acknowledged that his firm had actually performed just $30,000 in survey work for the pipeline, according to a summary of a meeting attended by Katbi and Gateway managers. The document was released to The Times under the state public records act.

In August 2009, FTR returned the $782,000 payment in the form of a credit on its fitness center contract.

Not until June 2010, nearly two years after submitting the bill, did FTR begin digging up and moving the pipeline.

In its proceedings against FTR and Gateway, the district contends that FTR’s 2008 bill was “fraudulent.” It also says Gateway “falsely certified” that the job was nearly done at that time.

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The Los Angeles County district attorney’s office is investigating the allegations.

In an interview, Gastelum said Gateway staff members approved the payment because Katbi had been threatening to pull construction crews from the project until he was paid for unrelated extra work on the fitness center. Gastelum called the approval a “mistake.”

A report by the district’s inspector general quotes Katbi as saying Gateway told FTR to overstate the work done on the water line as a way to get paid for the fitness center work.

Gastelum said a district official, whom he refused to name, authorized the arrangement to keep construction moving.

Disputed payments

In the summer of 2009, Gateway began collecting consulting fees from FTR for its work at West L.A. College.

The project was a classroom and theater complex. FTR had been one of 11 bidders for the $75-million contract. Its winning proposal mentioned prominently that Gateway would serve as a consultant on worker safety and construction quality.

Asked how his company came to be involved, Gastelum said he had known Mark Rocha, then president of West L.A. College, for years. Gastelum said Katbi included Gateway in his proposal in the hope of improving FTR’s chances of getting the job.

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From July through October 2009, Gateway billed FTR $160,915 for its work on the project. Of that figure, $68,700 was for Gastelum’s personal services, at $300 an hour.

Over the next 12 months, FTR paid Gateway an additional $139,482.

During that time, Gateway continued to approve millions of dollars in disputed payments to FTR for the Mission College fitness center.

FTR, meanwhile, was competing for a new project at Mission: the $29-million student services center.

A committee of construction experts and college officials was convened to evaluate proposals from FTR and 23 other contractors. Gateway supervised the process.

In January 2010, the seven committee members -- including three Gateway managers -- narrowed the field of bidders to FTR and two others. In June, another committee met to rate the bids.

Hensel Phelps Construction Co. of Colorado finished with the highest score.

Some members of the committee were dissatisfied, including Bill Corneli, a Gateway project manager.

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Corneli expressed concern about Hensel Phelps’ failure to fit the building into the “footprint” specified by the college, according to committee member Walter Bortman, Mission’s facilities director.

In an interview, Corneli said he could not recall what he said.

Karen Hoefel, then a Mission vice president on the committee, said in an interview that she also voiced a preference for FTR during the meeting because she considered its design superior. At the time, a company co-owned by Hoefel and her husband was a Gateway subcontractor, district records show.

After discussion of the bidding results, Bortman said, “we were allowed to change our scores if we wanted to change our scores.”

The result: FTR narrowly beat out Hensel Phelps.

Hoefel said FTR was chosen solely on the merits, adding: “We had no reason to favor FTR.”

Gastelum said he did not influence the selection.

In September, FTR released a statement saying that its proposal offered “the best design at the lowest bid” and that the contract was awarded fairly.

As for Hensel Phelps, Wayne S. Lindholm, an executive vice president of the company, said he and his colleagues could tell “that something was going on, but we didn’t know what, and what relationships were causing it.”

“There was funny business going on,” he said. “What else can you say? It’s obvious.”

A late opening

The fitness center opened in January 2010, 15 months late and $3 million over the original $34-million budget.

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Two years later, FTR is seeking an additional $1 million from the district for fireproofing, soil compacting and other work. But this time, Gastelum said, Gateway will approve no further payments.

“It’s over,” Gastelum said. “We’ve already told them, ‘You think you’re owed money, sue the district.’ ”

michael.finnegan@latimes.com

gale.holland@latimes.com

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