Conflict of Interest Found in County’s Telecom Pact
Los Angeles County’s top technology officer violated conflict-of-interest law in his handling of a $250-million telecommunications contract and a subsequent order that all county agencies buy equipment from Cisco Systems, a company in which he owns stock, according to a confidential audit obtained Monday.
The county auditor-controller’s office found that Chief Information Officer Jon Fullinwider owned as many as 68 shares of Cisco stock while overseeing the telecommunications contract, which calls for Cisco equipment to be used. Additionally, Fullinwider this summer ordered all county departments to use Cisco products even though he had not gotten approval from the Board of Supervisors to do so, the audit states.
Fullinwider did not disclose his stock--worth $1,000 to $4,900 since 1999, as its price fluctuated--or about $120 in gifts from Cisco on his statements of economic interest, as he is required to by law, auditors reported.
The investigators wrote that they could not determine whether the official had additional stock conflicts because he refused to tell them what other stocks he owned.
In an interview Monday night, Fullinwider said he disagreed with many of the audit’s findings and will write a rebuttal for county supervisors. He said his Cisco stock was not bought by him but on his behalf by an independent financial planning firm, and that because he is in a dispute with that company, he did not want auditors to contact them.
“This is a managed account,” Fullinwider said of the fund, which he described as a rollover account from his 401k at a prior private sector employer. “I have no control over it.”
Fullinwider said his fund manager may have run the purchases by him when they were made in 1999 and 2000, but he was not paying attention and did not realize he owned the Cisco stock until auditors inquired about it recently.
The Cisco gifts consist of a meal he does not recall and food served during a presentation in Northern California that Fullinwider did not realize counted as a gift, he said.
The audit marks the second time Fullinwider has had to answer questions about a possible conflict of interest in the telecommunications contract, one of the county’s most expensive and ambitious undertakings. In 1999, The Times reported that Pacific Bell, the primary vendor on the contract, had taken Fullinwider and his daughter to the World Series while his agency was reviewing the project--a gift Fullinwider did not disclose on his statement of economic interest.
Under the telecommunications contract, approved by the board last year, Pacific Bell provides Cisco Systems equipment to the county.
The issue is scheduled to be discussed today in executive session by the Board of Supervisors, who have the power to reprimand or terminate Fullinwider.
Daniel Lowenstein, a UCLA law professor and former chairman of the Fair Political Practices Commission, said that although the law is clear that public officials such as Fullinwider need to disclose financial interests in companies they deal with, the case is not necessarily a scandal.
“There are law violations ranging from parking meter violations to murder,” Lowenstein said. “And this is somewhere in between the two--but it is somewhere closer to a parking meter violation than murder.”
The telecommunications project dates to 1998, soon after Fullinwider took his $150,000 post with the county. Fullinwider drew up a plan to reconfigure the county’s sprawling telephone and computer systems. The winning bidder would provide a new network to allow the county’s disparate information systems to work together and post documents on a common Web site. It was modeled on a system Fullinwider pioneered when he was chief information officer of San Diego County, and he argued it would ultimately save Los Angeles $12 million.
A county panel selected Pacific Bell over two other telecommunications companies. Its proposal listed two possible sub-vendors for the network--Cisco and Nortel Networks. But after negotiations with the county, which were led by Fullinwider, the contract was rewritten to require Cisco products, the auditor’s report states.
Fullinwider said he went with Cisco because its equipment was already being used by the county. He said he had input only “in the end, when we were dealing with the service level.” Auditors, though, noted that he supervised the evaluation process and made recommendations to county supervisors.
Supervisors were scheduled to approve the contract in late 1999, but delayed it six months because of problems the state was having on another networking contract with Pacific Bell. During that time, Fullinwider bought 34 shares of Cisco stock, which split in March 2000 to 68 shares, auditors found. In April 2000, Fullinwider recommended supervisors approve the contract, saying new safeguards were in place. Supervisors did so.
One year later, the county’s largest hospital was rewiring its internal network and took bids from Cisco and Extreme Systems, according to records and interviews. Officials at Los Angeles County-USC Medical Center wanted to select Extreme, reasoning that because its network is internal to the hospital it would not interfere with the Cisco-based network linking county departments. Extreme also argued that its equipment was compatible with Cisco’s, a claim backed up by industry observers.
But Fullinwider on May 30 ordered the health department, which runs County-USC, to use Cisco products. He argued in a memo that the contract with Pacific Bell required all county departments to buy Cisco equipment for all networking, internal or external.
That order led Supervisor Mike Antonovich to request that the auditor investigate Fullinwider’s handling of the telecommunications contract and his relationship with Cisco.
Auditors found that, contrary to Fullinwider’s statements, the Pacific Bell contract did not require Cisco to be used by all county agencies.
Fullinwider said Monday he believed the Pacific Bell contract authorized him to order that Cisco equipment be used countywide. “It wasn’t anything we were doing maliciously,” he said.
Instead, he said, the motivation was the policy he described in an interview in late August: The county, long criticized for allowing individual departments to design incompatible computer systems, needed to change its way of doing business.
“What we’re doing is what corporate America is doing,” Fullinwider said then.
But Harry Silverglide, a vice president for Extreme interviewed then, called Fullinwider’s move “a fundamental misuse of power” and argued that competition for county business would benefit taxpayers.
Cisco said Monday night it could not comment because it had not seen the audit.
Auditors found that although some industries use a single technology vendor, a number of businesses prefer to use two companies’ equipment to ensure competitive pricing and service. The report also stated that the county, which faces possible litigation from the vendors that were shut out of County-USC, did not violate its own procurement policies.
