MTA Chief Withdraws Pick for Subway Job

Acknowledging that the MTA’s contracting process is seriously flawed, county transit chief Joseph E. Drew on Tuesday withdrew his recommendation of a business team to supervise subway tunneling on the Eastside because it failed to fully disclose its legal troubles and a political contribution.

Drew took the surprise action after he received a report from the Metropolitan Transportation Authority’s chief auditor that rebukes the agency’s system for checking bids, saying that uncovering deception is “left mainly to chance.”

The current process “lacks adequate internal controls,” auditor Tony Padilla wrote, noting that the agency relies on contractors respecting “the honor system.”

In seeking to exclude Metro East Consultants from getting the contract, Drew noted that one of the consortium’s partners failed to disclose that it had been sued in federal court for allegedly overcharging the MTA for previous work. Another partner failed to disclose a $1,000 contribution made by one of its executives to Mayor Richard Riordan, an MTA board member, who returned the contribution.

Officers of both companies certified the veracity of their statements under penalty of perjury.

Transit officials are now hoping for speedy action on the contract amid word that federal officials are growing weary of delays in the project, already a year behind schedule. Three members of Congress from the Eastside wrote to Drew last week urging him to proceed quickly to award the contract to a qualified bidder, noting that the agency’s credibility with federal officials was at stake.

The federal government is paying about half of the nearly $1-billion subway extension from Union Station to 1st and Lorena streets in Boyle Heights.

MTA board member Gloria Molina applauded Drew’s decision to withdraw his controversial recommendation on the $65-million subway contract but ridiculed his reasoning.

“Pleading ignorance when you have a staff that costs the taxpayers millions of dollars is not a good excuse,” said Molina, a Los Angeles County supervisor. “I can’t tell you how disappointed I am.”

Drew said the involvement of DeLeuw, Cather & Co. in the lawsuit was not discovered by MTA contract administrators in a search of legal and newspaper databases, even though The Times reported on the lawsuit May 21.

The MTA chief executive officer said that while some staff members, including the agency’s construction chief, were aware that a lawsuit had been filed against Parsons-Dillingham, they were not aware that DeLeuw, Cather was a subsidiary of Parsons Corp. and a full partner in the joint venture. The MTA has paid more than $300 million to Parsons-Dillingham to manage subway tunneling over the past decade.

Drew also said the agency did not learn that another partner, TELACU Industries, made the campaign contribution to Riordan until questioned by The Times.

It was not immediately clear whether the MTA board--which appeared ready to award the contract to Metro East until the agency’s inspector general launched a criminal investigation into the bidding process--can still award the contract to Metro East.

Drew said the inspector general has cleared the way for the MTA board to vote on the contract at its next meeting on Dec. 18, even as the investigation continues. He said he has not decided whether to recommend one of the other two bidders, both of whom he described as qualified.

His action probably will not end the controversy that has rocked the agency for nearly two months and threatened its political support in Washington.

A Metro East spokesman said the consortium will keep fighting for the contract, disputing the auditor’s report as being “wrong as a legal and practical matter” and will ask Drew to reconsider his disqualification of its bid.

“The purpose of disclosure is to inform the MTA of any pending lawsuits, and the agency was already informed. There was no surprise,” said Neil Papiano, a Los Angeles attorney. “If the MTA officials had any problem with the suit, they were obligated to bring it to DeLeuw’s attention during the bid process, and they didn’t. It’s too late now.”

Officials from DeLeuw, Cather and TELACU referred all questions to Papiano. DeLeuw, Cather had disputed the fraud allegations in the lawsuit. James F. McNulty, president of Parsons, said the failure to disclose the lawsuit was “an honest mistake.”

MTA officials said they checked computer databases for any lawsuits filed against DeLeuw but turned up nothing. Said Papiano: “These people couldn’t find an elephant in the snow if they couldn’t find the Times article.”

The bitter controversy over the Eastside contract erupted in October when Drew recommended Metro East even though it was ranked last among three bidders by the agency’s panel of outside tunneling experts. Several of the business team’s executives have either worked or raised money for Los Angeles City Councilman and MTA board member Richard Alatorre.

Alatorre declined to comment Tuesday.

James Cragin, a Gardena city councilman and MTA board member who criticized Drew’s original recommendation, expressed fear that the board may still choose Metro East.

“There is so much money involved, I think that integrity, logic and common sense are going to be thrown in the heap,” he said.

A spokesman for Riordan said the mayor did not want to “micro-manage” the agency and believes the auditor’s findings demonstrate the need for greater accountability at the MTA.

Zev Yaroslavsky, an MTA board member and Los Angeles County supervisor, ripped Drew’s decision-making and called on the board to “urgently review the crisis of management” at the agency.

“Drew’s backpedaling on his recommendation does not address the fundamental issue that a cancer is growing at the executive offices of the MTA,” he said.

But Nick Patsaouras, another board member, disagreed. “I don’t think an isolated incident should penalize Joe Drew,” he said. “He has been so far an open, accessible leader, and if a leader makes one mistake and you kick him out, it would suppress initiative and risk-taking and creativity.”

Dennis O’Connor, a spokesman for JMA, the consortium rated first by the outside panel of experts, said he was “stunned” by the latest turn of events. “We hope to take the opportunity to regain Drew’s confidence,” he said.

Drew had rejected JMA, expressing concern that the business team was busy enough supervising tunneling on the North Hollywood leg of the subway.

Drew expressed frustration with the weaknesses in the contracting process.

“It is of great frustration that even today, after imposing strict procedures for reviewing contract applications, that faulty information on DeLeuw, Cather and TELACU submittals were not detected by our MTA procurement process,” Drew said.

Steps are underway to strengthen the process, including establishing a “prequalification” process that would include extensive background checks of bidders.

“This could have been an honest mistake,” Drew said, referring to DeLeuw, Cather’s failure to disclose its involvement in the lawsuit. But Drew added, “Proposers understand the rules of the game.”