Metrolink Hires Company That Was Fired by MTA

Just 17 months after the Metropolitan Transportation Authority fired an armored truck company for alleged mismanagement, it is now helping bankroll a contract worth nearly $1 million awarded to the same firm by a sister transit agency.

In a move derided by some MTA officials, Los Angeles Federal Coin Inc. has been hired to collect and transport hundreds of thousands of dollars each month from fare machines for Metrolink commuter trains, a system subsidized by transit agencies throughout Southern California.

No agency kicks in more than the 61% provided by the MTA, meaning that it is paying the lion’s share of Federal Coin’s new contract. This for a company that faced allegations ranging from the falsification of licensing documents to sexual harassment during its MTA tenure.

“With the financial mess we’re in [at the MTA], it’s ludicrous,” said contract administrator Amelia Earnest, who helped bring to light the firm’s problems. “For someone to know what kind of outfit this is and still give them a contract like this, there’s something wrong. That’s not good business.”

Executives at Federal Coin, a small local outfit in an industry dominated by a handful of larger ones, have defended their record in letters to the MTA, characterizing the allegations against them as unfair and “ridiculous.” They declined to be interviewed for this article.

The firm’s new contract was unanimously approved last month by the board that oversees Metrolink operations, which includes four MTA members. They say they were unaware of Federal Coin’s poor record with their own agency because details of the summer 1994 termination never reached their level.

“If the allegations were true, then it strikes me as seriously outrageous to be giving this firm another contract,” said MTA board member Hal Bernson, who also is a Los Angeles city councilman. “This is something we certainly should have known about.”

Raul Perez, an MTA board member who sits on the Metrolink board but was not present for the vote, said he wished he had known of the problems that plagued Federal Coin before his colleagues approved the $943,000 deal. But Perez, like other Metrolink officials, said he is confident that the company--co-owned until recently by former Los Angeles Rams tight end David Hill--has cleaned up its act.

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Federal Coin’s questionable history--including a federal tax lien of $137,000--was no surprise to Metrolink administrators, who ordered a financial audit after the company submitted the lowest bid.

Finance director Annette Colfax said the review showed that the company had gotten its affairs in order. “We feel their record is satisfactory,” she said.

In addition, the firm has received good reviews from at least one agency in the Metrolink system--the Orange County Transportation Authority. It began using Federal Coin in 1991 to haul bus fare cash and renewed the contract this November for $170,000 a year after reviewing some of the MTA’s concerns, said the Orange County agency’s finance director, Jim Kenan.

Nonetheless, critics of the new contract contend that Federal Coin’s past performance with the MTA should have been grounds to knock the company out of contention.

The MTA’s problems with the firm began shortly after it was hired for $894,000 to collect cash from fare machines for the Red and Blue lines. At the time, the company also was providing rail line security.

Within a month of the start of its work in October 1993, MTA managers complained that Federal Coin was demanding far more supplies than its predecessor and encountering “far too many problems” in its service, according to internal memos at the agency.

The company’s armored trucks, one ex-employee alleged to the MTA, were in “poor working condition,” posing a safety risk. MTA supervisors said that cash pickups started late and that ticket machines were frequently jammed or damaged by the company, rendering them out of service at “an alarming rate,” one internal memo stated.

An employee reportedly once left a vault filled with cash lying at a Long Beach station, where it was discovered by a train operator.

The MTA became so concerned about the escalating complaints that it arranged for Federal Coin’s employees to be retrained in mid-1994. But that, too, proved a bust. “Not one person attended, or called to give a reason why,” a retraining manager wrote. “This is very upsetting.”

The problems went beyond work performance. One security guard was alleged to have sexually harassed a woman in a station break room, asking her to “sit on his lap.” In a letter to the main security contractor, the company denied the allegation, saying the guard had merely said she could sit “on his knee.”

Another security guard was accused of drawing his weapon and harassing someone in the ladies room, according to correspondence between the firm and the MTA’s primary security contractor. Federal Coin denied wrongdoing.

What’s more, MTA officials learned that at least one other guard was carrying a gun even though his weapons permit had expired two months earlier.

The final blow for the company came when contract administrator Earnest learned that Federal Coin did not have a license from the Public Utilities Commission, the state agency that certifies “for-hire” cash carriers.

MTA officials worried that the agency would be exposed to possible civil and criminal liability if the company got into an accident, or if it was discovered that the firm was operating without a license.

PUC representative Jim Westfall said in an interview that the firm’s license was suspended in July 1993--three months before it began work for the MTA--after the state learned that its workers’ compensation insurance had been canceled.

“It’s unlawful for anyone to operate as a for-hire carrier during a period of suspension,” Westfall said, “and it’s a misdemeanor violation if they get caught.”

Federal Coin got its license back in September 1994, only to have it suspended five more times for underpayment of state fees or inadequate insurance. In all, Federal Coin’s license has been suspended 11 times since 1991. It is active today.

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Even more troubling than the company’s failure to hold a license, MTA officials say, was its alleged effort to camouflage the problem by submitting to them a PUC certification that state investigators concluded had been “obviously altered,” according to one memo.

Specifically, MTA investigators found that the company had deleted a reference to the fact that its license had been suspended shortly before it started work for the transit agency.

Although Federal Coin executives contended that they did not realize their PUC license needed to be kept current, the MTA inspector general’s office was skeptical, at best. In a report, according to sources, MTA investigators responded: “The question is, if they didn’t know they needed it, why did they submit an altered document as proof they had it?”

Federal Coin was cut loose Aug. 11, 1994, in a curt letter stating that because of the firm’s failure to maintain a license, “the Authority has no choice but to take immediate action.”

But that was then. Today, thanks to Metrolink, the company is back--with an even fatter paycheck--taking over for a competitor that was ranked higher in technical skills and experience but that charged more money.

By the beginning of next month, Federal Coin will start collecting a monthly haul of $400,000 from fare machines along the 394-mile rail system that links Los Angeles to Orange, Riverside, San Bernardino and Ventura counties. Employees will also count and transport the cash in armored trucks for deposit.

As one new measure of protection, Metrolink wants to hold the company liable for any damaged machines or service problems.

“We are concerned with their level of experience,” said finance director Colfax, “and it definitely gives us a feeling of comfort to know we can make them accountable.”