U.S. Probes Contracts at City Hall

The U.S. attorney’s office has launched a wide-ranging investigation of contracting practices at City Hall, ordering managers at the city’s three largest departments to turn over thousands of records.

The federal subpoenas, delivered earlier this week to the heads of the airport, harbor and water and power departments, follow the start of a Los Angeles County district attorney’s investigation of airport officials’ handling of lucrative outside contracts.

Councilwoman Cindy Miscikowski called the federal investigation devastating, and Councilman Eric Garcetti said it merited “a real questioning of how we do business here in Los Angeles.”

Miscikowski and others said the federal investigation appeared to focus on contracts awarded by the citizen commissions that oversee the departments.

The investigation “puts a cloud over each of these agencies ... as they are attempting to do serious business,” Miscikowski said.

Mayor James K. Hahn said he did not know what federal investigators were looking for.

He added that he did not believe there had been any criminal wrongdoing in the departments, which collectively administer more than $1 billion in contracts each year.

“I am not going to accept the premise that, just because someone is investigating something, that there is a problem,” the mayor said.

Though the three proprietary departments are technically part of the city administration, they operate semi-independently with their own budgets and the ability to approve some contracts without City Council approval.

Subpoenas issued Monday order the heads of the three departments to appear before a federal grand jury Feb. 18 to turn over dozens of boxes of records pertaining to contracting.

In addition, the airport is required to provide all records pertaining to any projects funded by U.S. Department of Transportation grants.

The subpoenas follow a visit last month by agents in the Department of Transportation’s inspector general’s office who met with City Controller Laura Chick to discuss her recent audit of the airport department.

In her audit, which was released Dec. 15, Chick criticized the department for not having a formal process for evaluating and selecting bids on lucrative airport contracts.

She also said she was concerned that there was an environment at the airport that was ripe for “fraud, misuse of power and inappropriate award of contracts” and that she was turning over the results of a preliminary investigation to the inspector general’s office, as well as to state and local authorities.

Los Angeles County prosecutors have also called several city officials to testify before a county grand jury.

Among them are Deputy Mayor Troy Edwards, interim Airport Director Kim Day and airport executive Jim Ritchie.

Chick said she believed “these investigations are absolutely very connected to both the audit and to the preliminary investigation that my auditors turned over to these agencies.”

Local and federal law enforcement officials said Friday that they could not comment on the investigations.

The federal subpoenas call for Los Angeles World Airports and the Department of Water and Power to produce original copies of all contracts of $100,000 or more from Jan. 1, 2000, until now, while the Harbor Department is required to turn over contracts from Jan 1, 1998, to Aug. 1, 2000.

All contracts of more than $100,000 must be approved by the citizen commissions that oversee those departments.

The commissioners are appointed by the mayor. The period that federal investigators are focusing on covers the administration of Mayor Richard Riordan as well as Hahn’s.

One commissioner, Leland Wong, served on all three commissions during the time under scrutiny.

Wong, a prolific fundraiser for political campaigns, resigned from the Department of Water and Power commission Jan. 13 after his employer, Kaiser Permanente, concluded that he had misused company funds for political purposes.

Wong was on the harbor commission from August 1994 to July 1998, on the airport commission from July 1998 to March of 2003 and on the DWP commission from March 2003 until Jan 13.

Wong, who has previously denied wrongdoing, could not be reached for comment Friday.

Assistant U.S. Atty. Adam Kamenstein declined to discuss the case.

Officials said they would comply with the order to collect the documents by Feb 18, though some said it would be a Herculean task, possibly involving many truckloads of paperwork.

DWP’s acting general manager, Frank Salas, said he was confident the investigation would not find any impropriety.

“We have nothing to hide,” he said.

Dominick Rubalcava, president of the DWP commission and a former federal prosecutor, said the subpoena for records did not necessarily mean the U.S. attorney’s office had identified wrongdoing.

Though the city controller has raised concerns that airport commissioners sit in on interviews with contract bidders, Rubalcava said that is not the practice of the DWP.

“Right now I have no concern about the process of the DWP and I am confident in the way we handle contracts,” Rubalcava said.

Harbor Commissioner James Acevedo also said he welcomed investigators’ look at contracting “because I believe everybody does good work.”

But several council members said the federal investigation should not be taken lightly.

“This is an incredibly serious matter,” said Councilman Jack Weiss, a former U.S. attorney. Weiss added that federal criminal investigations could take months, and “the city should not wait for the conclusion of the federal investigation. This administration should get to the bottom of these suspicions right away and report the results to the public.”

Councilman Bernard C. Parks said the three proprietary departments have traditionally operated with less oversight from the council than other city departments, but he said council members had been providing more scrutiny, now that allegations have arisen.

“It is not a good sign that this investigation has gotten to this point,” Parks said.

“On the positive side, a good, thorough investigation will clarify what is going on and whether there has been misconduct or criminal wrongdoing.”

Chick and several council members, including Parks and Miscikowski, are also pushing a set of reforms that would ban campaign fundraising by commissioners.

When she released her audit of the airport department, Chick said she was worried that there was a perception of a “pay to play” environment in Los Angeles, in which contractors make contributions to political campaigns in exchange for preferential treatment.

The city’s Ethics Commission is scheduled to take up the ban next week.

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Times staff writers Jennifer Oldham and Noam N. Levey contributed to this report.