L.A. Coliseum had scant controls over spending, audit finds
A city audit of the stadium finds routine squandering of public funds in a setting 'void of essential formal policies, procedures and protocols.' Two Coliseum commission officials acknowledge 'insufficient oversight' but contend there is 'plenty of blame to go around.'
The Coliseum Commission manages the Sports Arena, foreground, and the Los Angeles Memorial Coliseum. ( Los Angeles Times / May 27, 2010)
On the Coliseum Commission's watch, $870,000 was sent to South America for soccer matches that were never held, according to an audit released Thursday by City Controller Wendy Greuel's office. In addition, a Coliseum contractor received millions in payments even though he had no contract, and a stadium staffer was paid for working 25 hours in a single day.
Auditors also found that the commissioners gave their former general manager, Patrick Lynch, an annual bonus of $125,000 for several years without requiring him to undergo a performance review.
"Today's findings are of a historic magnitude," Greuel said at a news conference. "Although I have conducted more than 50 audits, the egregiousness that was discovered at the Coliseum is one for the record books."
The 70-page report says the commission, made up of three L.A. County supervisors and three appointees each from the city and state, freed Lynch to manage the taxpayer-owned stadium in a setting "void of essential formal policies, procedures and protocols."
"The tone at the top was not suitable for a government entity," the report says.
In response, Commission President David Israel and Supervisor Don Knabe, a commission member, acknowledged in a letter to Greuel that the panel applied "insufficient oversight" to Coliseum managers. But the two also faulted Greuel, saying that financial abuses could have been avoided if she had used her authority to audit the Coliseum earlier. "There is plenty of blame to go around," the letter says.
Citing the Coliseum's charter, Greuel said the commission had the responsibility to request an audit and never did. She said that in February 2011, after The Times began reporting on financial irregularities at the Coliseum, her office offered to conduct an audit and the commission did not respond. Eventually, the controller insisted on an audit.
Lynch was one of six people charged last month in a 29-count indictment alleging bribery, embezzlement and conspiracy by former Coliseum managers, rave concert promoters and a janitorial contractor at the stadium. Lynch has pleaded guilty to a single count of conflict of interest, avoiding trial and a possible lengthy prison term.
Many of the findings by both Greuel and prosecutors mirror what The Times has reported. They include inappropriate payments to Lynch and the stadium's former events manager; questionable spending by other officials; and the delivery of about $1 million in cash to a union representative for stagehand wages without proper payroll deductions, benefit contributions and record-keeping. Some of the practices continued for months after Lynch resigned in February 2011.
The audit determined that the commission lacked an inventory of the Coliseum's physical assets, failed to comply with various public disclosure laws and kept incomplete financial records. Among the specific findings:
* The janitorial contractor -- Tony Estrada, a fugitive in the corruption case brought by the district attorney's office -- received $4.8 million in payments without a contract. He has been charged with paying kickbacks to Lynch.
* The Coliseum's former financial director, Ronald Lederkramer, invested up to $10.3 million of public money "without a clear investment policy or oversight." He circumvented the agency's own bylaws by investing the funds through commercial accounts instead of the city treasury.
* The Coliseum paid $75,000 in bonuses outside city payroll channels and did not withhold taxes.
The report also says the average rent per attendee for four raves at the Coliseum dropped substantially during years when the promoters of the concerts were paying the stadium's events manager, Todd DeStefano, on the side -- and as the property was sliding into the red. In 2010, producers of the Love Festival rave paid no rent, and the Electric Daisy Carnival was billed only $20,000, despite taking in about $13 million in ticket sales.
DeStefano and the chief executives of the companies that staged the Love Festival and Electric Daisy raves -- Reza Gerami of Go Ventures Inc. and Pasquale Rotella of Insomniac Inc., respectively -- face numerous charges in the corruption case. The sixth defendant is former Coliseum technology manager Leopold Caudillo Jr., who has been accused of conflict of interest for directing more than $20,000 in stadium business to a private firm he ran.
Estrada says he was a whistle-blower who should not have been charged. Four others have pleaded not guilty.
Greuel's audit concluded that the commission delegated heavily to Lynch, who had a practice of discussing certain matters only with the panel's president. Since 2008, when the commission's finances began to tank, the one-year presidency has been rotated among Supervisor Zev Yaroslavsky; attorney Barry Sanders, an appointee of Mayor Antonio Villaraigosa; and Israel, a former sports columnist and television producer appointed by then-Gov. Arnold Schwarzenegger.
Israel, who was president in 2008 and has held the post again since February 2011, remains on the commission even though his term has expired because Gov. Jerry Brown has yet to replace him, according to a Brown spokesman. Other commissioners include Supervisor Mark Ridley-Thomas and City Councilman Bernard C. Parks.