Riordan Criticized Over MTA’s Use of Free Adviser, Lawyer : City Hall: Alternate board member says officials may feel obligated to make repayment. Mayor’s attorney says action was intended to save money.

In a flap over mixing public and private resources, a Metropolitan Transportation Authority board member has objected to Los Angeles Mayor Richard Riordan’s recruitment of a private consultant and lawyer to work for free on an MTA project, suggesting that the arrangement was unseemly because it involved a favor that officials might feel obligated to repay.

Alternate board member Janice Heidt, a Santa Clarita councilwoman, wrote a letter last month to other board members to register her strenuous objection to the arrangement that, she said, implies that the consultant and lawyer “are doing a favor for someone.”

“I think the mayor with his background in private business may have difficulty understanding that government is public business,” Heidt, a bookstore owner and longtime civic activist, said in an interview. “Maybe things take longer, but that’s the nature of the beast.”

Heidt was complaining about Riordan’s recruitment of the management consulting firm McKinsey & Co. and lawyer Karen Hedlund to work without pay in helping to do an evaluation of MTA’s chief executive, Franklin White. Riordan headed the board subcommittee charged with doing the review.

The mayor’s counsel, Karen Rotschafer, said Heidt’s concerns are groundless. McKinsey & Co. and Hedlund worked for free “because the mayor asked them to come in and help out. He was trying to save the MTA money.”

Rotschafer said that Hedlund, a nationally known privatization expert, and the McKinsey staffer who undertook the work, Nolini Sri-Kumar, did so out of “a sense of civic responsibility” and expect no repayment.

However, the firm may yet profit. The vice chairman of Riordan’s committee, Glendale City Councilman Larry Zarian, said McKinsey did such a good job that the firm may be hired for pay. Zarian said he saw no problem with the mayor’s arrangement and felt no obligation to repay the firm.

The dust-up follows two other recent controversies involving the mayor, who made his living as a lawyer and venture capitalist until he took office in 1993, and the use of private resources for public purposes. In one, City Atty. James K. Hahn criticized the mayor for what he said was Riordan’s plan to send more city legal work to private lawyers. The mayor denied having such a plan.

In the other, the mayor’s office acknowledged that “some people might think there is an appearance of conflict” of interest in the mayor having solicited funds and his chief of staff having accepted funds from companies doing business with the city. In that case the Fair Political Practices Commission ruled there was no legal conflict, but the mayor’s office took steps anyway to limit the appearance of a conflict.

In her letter, Heidt complained about the lack of a written agreement between McKinsey & Co., Hedlund and the MTA.

Committee Vice Chairman Zarian and other MTA officials said they too were unaware of any written agreement.

However, the mayor’s office provided The Times with a letter from McKinsey & Co. to Riordan, outlining the work to be done.

Told about that letter, Heidt said: “That’s the whole problem. (Riordan) makes his own deals.”

In the letter, Sri-Kumar said that she, Hedlund and others on a McKinsey & Co. team would spend five or six weeks interviewing the MTA’s board members and senior staff, including White, then summarize the interviews for Riordan’s committee. “We are happy to complete this assignment on a pro bono basis,” Sri-Kumar wrote.

Hedlund, whose practice mainly involves the private financing of government facilities, said she has done a lot of free work for state and local governments. “I felt I was doing a favor for the citizens of the county of Los Angeles and the board of the MTA,” she said. “I would never go to the MTA or to the city and ask for any favor in return.”

Noelia Rodriguez, Riordan’s press secretary, said the arrangement came about when the mayor approached Sri-Kumar, who is on a sabbatical from McKinsey. Sri-Kumar appeared before the committee and was given approval to do the work for free. When she needed help later, the mayor suggested Hedlund. They reported their findings to the committee and then to the entire board in what Rodriguez described as “a very inclusive process.”

The board later extended White’s contract for a year.