Agency Loses on Loans to Executives
The low-cost mortgage loans and real estate deals it handed out to its favored senior officials have turned out to be among the most costly financial misadventures of a public agency that has often conducted itself like the “Bank of MTA.”
The county’s transportation agency has suffered losses of more than $660,000 after a handful of its top officials defaulted on properties or sold them at less than they cost because of the steep slide in real estate values.
Both the MTA and the former Los Angeles County Transportation Commission provided housing assistance to top officials who relocated here from lower-cost areas. The goal was simple: to ease the pain of adjusting to Southern California’s higher-than-average housing prices.
The financial help took two forms, either a mortgage at below-market interest rates or a shared equity investment in which the agency kicked in money to help purchase an employee’s home.
The program, which involved public money raised from the county’s transit sales tax, was an expensive and embarrassing failure and has been discontinued.
In both cases in which employees made no contribution of their own to a shared equity deal, the MTA lost its entire investment, agency records show.
In two cases in which the MTA provided a mortgage, the agency suffered losses when the officials involved could not sell their homes for an amount equal to or greater than the outstanding loan balance.
The program’s largest loss involved the $250,000 invested in a Beverly Hills condominium on behalf of Leslie V. Porter, who was fired as treasurer of the agency after defaulting on a private loan. He later declared bankruptcy.
The agency lost $150,000 on the investment it made in the Norco home of John Rinard, the former chief engineer of Metrolink, the region’s commuter rail line.
The other shared equity deal that turned sour was the agency’s $100,000 investment in the Altadena residence owned by Linda Bohlinger, who left the MTA after serving in a variety of top positions, including interim chief executive. Bohlinger had contributed to the purchase of the home, but the decline in real estate values proved costly. The MTA lost $70,000 on its investment in the property.
The agency also lost money when two officials could not sell their homes for an amount close to the value of the mortgages the MTA had placed on the properties.
The largest loss on a mortgage occurred when the MTA’s former chief administrative officer, Judith Pierce, sold her Los Angeles home last year. The total loss to the agency was $119,190 after delinquent mortgage and interest payments, overdue property taxes and closing costs were included.
A sharp drop in Long Beach real estate prices proved costly to both the MTA and Neil Peterson, the former executive director of the county transportation commission. The agency lost $78,000 on the mortgage loan made on his home.
The largest of the remaining mortgage deals involves former MTA chief executive Franklin E. White, who received a $522,500 loan at just 3.45% to purchase a home in the Hancock Park area of Los Angeles. White is currently $10,000 behind on his mortgage payments, according to MTA finance chief Terry Matsumoto. White has indicated that he will pay the delinquency when the home is sold.
Rather than buying in Los Angeles, MTA Inspector General Arthur Sinai--the official charged with combating waste, fraud and abuse--received approval to refinance his home on Staten Island, N.Y., with a low-cost MTA mortgage. He is current on his payments.
Stanley Phernambucq, the MTA’s former construction chief, is also current on his mortgage payments, according to agency records.
Ralph de la Cruz, the MTA’s general manager of rail operations, and David Solow, deputy executive director of Metrolink, are both in good standing on the MTA’s remaining shared equity deals.
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The ‘Bank of MTA’
Using the public’s money, the MTA made low-cost mortgage loans and real estate investments on behalf of 10 top officials of the agency and its predecessor, the Los Angeles County Transportation Comsission. The experience has proved costly. More than $660,000 raised from the transit sales tax has been lost to date.
Mortgages
Official: Neil Peterson / Ex-executive director, Los Angeles County Transportation Commission
Property Location: Long Beach
Date of Loan: August 1989
Loan Terms: $350,000 loan @ variable rate
Status: MTA Loss--$78,000
*
Official: Judith Pierce / Ex-chief administrative officer, MTA
Property Location: Los Angeles
Date of Loan: May 1995
Loan Terms: $390,000 @ 5.56%
Status: MTA loss $119,190
*
Official: Franklin White / Ex-chief Executive Officer, MTA
Property Location: Los Angeles
Date of Loan: August 1993
Loan Terms: $522,500 loan @ 3.45% interest
Status: Delinquent on $10,000 in payments
*
Official: Arthur Sinai / Inspector general, MTA
Property Location: Staten Island, NY
Date of Loan: September 1995
Loan Terms: $153,000 loan @ 5.79% interest
Status: Payments current
*
Official: Stanley Phernambucq / Ex-construction chief, MTA
Property Location: Cypress
Date of Loan: October 1995
Loan Terms: $392,748 loan @ 5.81%
Status: Payments current
****
Shared Equity Deals
Official: Leslie V. Porter / Ex-Treasurer, MTA
Property Location: Beverly Hills
Date: October 1990
Purchase Price: $490,000
MTA Investment: $250,000
Employee Contribution: None Status: MTA loss--$250,000
*
Official: John Rinard / Former Chief Engineer, Metrolink
Property Location: Norco
Date: August 1991
Purchase Price: $336,000
MTA Investment: $150,000
Employee Contribution: None
Status: MTA loss--$150,000
*
Official: Linda Bohlinger / Ex-interim Chief Executive Officer, MTA
Property Location: Altadena
Date: February 1990
Purchase Price: $390,000
MTA Investment: $100,000
Employee Contribution: $38,000
Status: MTA Loss--$70,000
*
Official: Ralph de la Cruz / General Manager of Rail Operations, MTA
Property Location: Arcadia
Date: May 1991
Purchase Price: $546,000
MTA Investment: $250,000
Employee Contribution: $46,000
Status: Good standing
*
Official: David Solow / Deputy Executive Director, Metrolink
Property Location: Laguna Niguel
Date: June 1990
Purchase Price: $326,350
MTA Investment: $100,000
Employee Contribution: $79,350
Status: Good standing
Source: Metropolitan Transportation Authority records
Researched by JEFFREY L. RABIN / Los Angeles Times
