Cash-Rich Transit Agency Spends Freely on Itself : Funds: Review of millions in expenses for travel, meals finds many questionable items. Reform has begun.

In the bountiful world of the Los Angeles County Transportation Commission, Aug. 21, 1991, was an unremarkable day.

Two dozen of the agency’s accountants, bookkeepers and financial planners headed off for a three-day retreat at a Palm Springs resort that cost taxpayers nearly $9,000.

The executive director boarded a plane for Washington, D.C., on one of dozens of trips he has made around the country since he was hired in 1989 with a generous contract and an open-ended expense account.

And back at headquarters in downtown Los Angeles, three departments held lunch meetings catered by a nearby restaurant where the commission has a standing account. The bills totaled $499.

These are boom years for mass transportation in Southern California and the agency in charge of building the region’s vast new rapid transit system has made the most of them.

Fueled by billions of dollars in sales taxes approved by frustrated commuters, the LACTC has burgeoned over the last decade. Once an obscure transportation planning agency, the commission has been transformed into a cash-rich giant with the power to bestow some of the biggest construction and consulting contracts in the country.

But the gush of tax money has brought problems. Management of the agency has been marked by poor accounting, questionable spending practices and inadequate financial controls, a Times examination has found.

During a recent 18-month period, the agency’s 446 staffers, who are among the highest-paid government workers in the region, spent at least $2.9 million on travel, meals, entertainment and automobile expenses, according to records obtained by The Times under the California Public Records Act.

The records show a pattern of financial practices uncommon for a public agency, including issuance of more than a dozen credit cards with limits up to $10,000, a haphazard bill-payment system that resulted in thousands of dollars in late fees for overdue bills and a casual approach to executive expense accounting.

Problems in the agency start at the top.

Neil Peterson, the agency’s executive director, rarely filed expense accounts. Ten days ago, he reimbursed the commission for $1,267 in personal charges he made on a commission credit card during the 18-month period. One of the bills was from a Scottsdale, Ariz., golf school. Peterson repaid the money after The Times requested explanations of his credit card purchases.

Lax financial controls also made it possible for another top official, Thomas Tanke, to charge $1,588 in bicycles on an agency credit card, records show. He repaid the money and $1,136 in additional personal charges six months later, after auditors traced the charges to him, officials said.

In interviews last week, Peterson and other LACTC officials acknowledged that their spending practices may appear inappropriate during a tenacious recession that has forced private businesses and less fortunate government agencies to make dramatic cutbacks. Peterson said he and his staff “have realized that the economic times have changed.”

“We’ve got religion,” Peterson said, adding that new policies on meal, entertainment, travel and automobile expenses have been instituted and financial controls put in place. He said spending on travel and meals has been drastically reduced.

Procedures Recently Reformed

“It’s one thing to have done something,” Peterson said. “It’s another thing to be mature enough to say, ‘Hey, even though it might be legitimate and even though we may have done business that way in the past, we need to change,’ and we’ve done that.”

In a review of thousands of pages of LACTC records, The Times found that:

* Peterson and other employees spent $51,000 at the Los Angeles Athletic Club during the period. A large portion of the money was spent for food for group business meetings at the club, records indicate. Some of the total was spent by Peterson for breakfasts, lunches and other meals with staffers and others. It was not clear from the records how much was attributable to Peterson, who received a membership in the club as part of his employment contract.

* Bills were frequently paid late--sometimes by nearly a year-- prompting creditors to charge thousands of dollars in late fees for commission credit card accounts and vehicle leases. Late fees on the Athletic Club bills totaled nearly $1,000 over 18 months. A San Jose-based magazine that ran an employment advertisement for the commission received its $288 payment 10 months after sending the first of numerous bills and letters demanding payment.

* One senior staffer flies regularly to Sacramento at taxpayers’ expense to work on her doctoral degree. The agency pays her living expenses and part of her tuition.

* Staff members charged taxpayers for at least $194,000 for food, from catered lunches at the office to dinners at some of the city’s most expensive restaurants. Bills for doughnuts delivered to agency offices totaled more than $6,000 during an 18-month period ending last December.

* Staffers frequently bought meals for public officials from other government agencies and held parties for them. Last May, the agency held a reception and dinner for state legislators at a cost of $2,382, not including transportation and lodging costs for staffers who flew to Sacramento for the event. A year ago, Peterson was host of a dinner at a Washington, D.C, restaurant for transit officials and two members of Congress. The bill came to $815, or $74 per person. Last month, after The Times inquired about the dinner, three lobbyists for the commission sent the agency checks totaling $450 to cover part of the cost.

* Employees crisscrossed the country, attending dozens of conferences, conventions and workshops, from New Orleans to Las Vegas to Atlantic City. Nine top officials traveled to Walt Disney World in Florida last May for a convention, and 16 staffers and commission members attended a transit convention in Toronto last September. In 18 months, staffers generated travel bills totaling at least $719,000.

* The agency owns or leases 81 automobiles, nearly all of which are assigned to individual staff members, who take them home at night and on the weekends. The agency pays their gasoline, repair and car wash bills, all at a cost of $1.14 million during the 18 months.

* The agency spent $4,112 on a Christmas party in 1990, $216 to help fund an employee camp-out at Point Mugu last September, and $3,361 for a 1990 staff outing at the Magic Mountain amusement park in the Santa Clarita Valley.

* The agency spent about $800,000 for the 1990 opening ceremonies for the Long Beach-to-downtown Blue Line. The tab included a lavish $26,000 luncheon for dignitaries and $400,000 for T-shirts and memorabilia.

* Over the last five years, the agency has paid $460,000 to move 31 new employees to the Los Angeles area from around the country. Peterson, the executive director, was paid $30,000 to cover expenses of moving from Seattle. Peterson also was given a $350,000 home mortgage that is interest-free for five years.

* After Peterson rejected the hiring of a financial consultant from Baltimore, the head of the agency’s finance department hired him anyway, arranging for him to be paid $69,000 for six months work plus more than $14,000 in travel and living expenses.

Peterson said last week that the hiring of the consultant, Thomas Webber, was a “mistake,” and referred questions about the matter to Les Porter, the agency’s chief financial officer. But Porter said he was pleased with Webber’s work, which involved helping to design a new financial management system for the agency. Porter said he chose Webber without seeking other bidders because he knew him well and needed to hire someone quickly.

Lacking a contract, which Peterson had disapproved, Webber was put on the commission payroll as a temporary employee. As such, Webber would not normally have been entitled to living and travel expenses. However, in written directives to the accounting staff, who questioned the arrangement, Porter ordered that the expenses be paid. Porter said that the arrangement was approved by the agency’s human resources department.

While in Los Angeles, Webber was housed in a $1,650-a-month apartment at the Promenade Towers downtown. The commission also paid for Webber to take two trips back to Baltimore each month.

Los Angeles Mayor Tom Bradley, who controls three seats on the 11-member Transportation Commission, said Monday that reports of “outrageous spending indicate that the agency may be out of control.”

In a letter to County Supervisor Mike Antonovich, who is chairman of the commission, Bradley asked for an inquiry into allegations of “freewheeling employee and consultant hiring,” as well as “excessive charges for employee and consultant meals, travel, entertainment and cars.”

In recent months, Bradley said, he has questioned LACTC staffers about excessive spending and pushed for a “lean and mean” spending style. He said he has been dissatisfied with the staff’s “obscure” and “disappointing” answers to some of his inquiries.

The mayor called for an independent review of agency spending by auditors who “represent the finest thinking from the private sector on the issues of efficient and frugal management.” The auditors must be free from interference by LACTC staff members, Bradley said.

Commission member Gerry Hertzberg, an aide to County Supervisor Gloria Molina and her representative on the LACTC board, called some of the expenditures “incredibly inappropriate” and “just plain stupid.”

Hertzberg called for the appointment of an independent inspector general who would monitor agency finances and report directly to the commissioners. He said it may be time to reassess whether the commission, under its current structure, is capable of overseeing the staff and the huge construction projects it manages.

Private Industry Rules’

The commission is a part-time board that includes the five Los Angeles County supervisors, Bradley, two Bradley appointees and three other local officials. All have major responsibilities in their own areas of government.

Hertzberg said he has complained to staff members about instances of “excessive” spending over the last year and has warned them that “their political judgment is just bad on these things.”

However, Hertzberg and others portrayed the staff as an unusually dedicated group of public servants who work long hours and are available nearly 24 hours a day.

“A lot of them are workaholics, but that doesn’t justify the inappropriateness of some of these expenditures,” Hertzberg said. Because many staffers came from private industry and work constantly with private consultants, he said, “They just seem to have an attitude that they can keep working by private industry rules.”

Peterson headed his own executive recruitment business in Seattle before taking over at the LACTC in 1989. He also had worked as a private consultant and spent six years as head of Seattle METRO, the agency in charge of public transportation in that city. Peterson’s five-year contract with the Los Angeles commission gave him a base salary of $125,000 in 1989 with annual cost-of-living increases plus yearly performance bonuses that can be as much as 15%. He also gets $29,000 a year in other benefits, plus the Athletic Club membership and the $350,000 mortgage.

Staff members describe Peterson as a workaholic who juggles an array of major political and policy issues while overseeing construction of new subway and light rail lines. Peterson also is spearheading an effort to start a commuter railroad network along existing railroad tracks in Southern California.

In addition, Peterson is chairman of the legislative committee of the American Public Transit Assn., a voluntary post that has taken him to conferences and meetings around the country.

Records of Peterson’s travels are incomplete, but he said he took 22 trips during the 18-month period and frequently traveled on weekends. Nearly half the trips were to Sacramento or Washington, D.C., he said.

He also traveled to San Diego; Las Vegas; Memphis; Snowbird, Utah; Phoenix and Miami Beach. Peterson was among the nine staffers who attended the Urban Mass Transit Assn. convention at Walt Disney World in Orlando last May.

Current and former aides said Peterson is not “detail-oriented,” instead preferring to delegate ministerial matters to his staff.

Peterson acknowledged in an interview last week that his own expense accounts have suffered from a lack of attention. He has yet to account for a trip to Japan last fall as well as a trip to Washington nearly a year ago, both of which were charged to the LACTC.

Peterson said he recently reviewed his agency credit card bills, could not immediately account for about a dozen charges over the last 18 months and is seeking further documentation. But he said he identified $1,267 in restaurant bills and other items that he improperly charged to his commission credit card. He wrote a personal check on Feb. 28 to reimburse the agency.

Credit Card Irregularities

Such credit cards, unusual for a government agency, were the bane of the commission’s accounting department and were canceled five months ago after a review turned up irregularities in their use. In all, 13 top officials had been issued LACTC Mastercards with credit limits ranging from $3,000 to $10,000. Three “floater” cards carrying only the agency’s name also were issued, a circumstance that made it difficult to track the users. All the credit card bills were paid directly by the agency.

One of the officials who was issued a card was Tanke, the second-in-command of the Rail Construction Corp., the division in charge of building the county’s subway and light-rail system.

Tanke, who left the agency several months ago, used another official’s credit card to purchase $1,588 in bicycles at a Newbury Park bicycle shop in February, 1991, LACTC officials said. An investigation of the bicycle charges and Tanke’s own Mastercard account prompted officials to demand repayment of $2,724, which Tanke refunded to the agency in two checks last August, officials said.

Tanke, who now works for an LACTC contractor, did not return phone calls about the matter.

Under a policy instituted several months ago, employees now must pay most expenses first then submit documentation to be reimbursed, agency officials said.

An overhaul of the accounting began about a year ago with the hiring of a new chief accountant, Angela Spaccia. About six times as many bills are now being paid each month and bill payment is now current, Peterson said.

He said he ordered formation of an internal task force six months ago to establish new spending policies and find ways to cut expenses. That group is headed by Jerry Givens, a longtime commission employee and Peterson’s top aide.

Givens himself has been a frequent traveler, and his bills for in-town business meals with staff members and agency consultants reached several hundred dollars a month. Givens routinely drove his agency car to meetings, breakfasts and lunches at the Athletic Club, which is three blocks away from his office, records show. He charged Athletic Club parking fees to the LACTC, even though prepaid agency parking was only three blocks away.

Givens said in an interview last week that all his expense charges had been proper, but the arrival of harsher economic times had persuaded management to cut back on discretionary spending, including the Athletic Club meetings.

Under revised policies, staff members are no longer allowed to take each other to lunch and charge the agency, Givens said.

Also, the catered lunches in the office have been banned. “That’s been absolutely stopped,” Peterson said. “It was a different environment, it was wrong and we’ve stopped it.”

Staffers also will be encouraged to use public transportation, especially in the downtown area, where the 25-cent DASH stops near all major government buildings, officials said.

Also, revisions are under way that would cut down the size of the automobile fleet and institute a pool-car policy that would make vehicles available to the entire staff. Under the old arrangement, lower-level staffers frequently had to use their own cars or even rent cars because none of the 81 vehicles was available.

Travel Expenses Defended

Staff travel also has been cut back, but not banned, Peterson said. He said trips to transit conferences are important because they provide opportunities for staff members to share information with representatives of other cities. He said his own travel has been helpful in improving relations with government officials in Sacramento and Washington, who preside over key transportation legislation and millions of dollars in transit funding.

Peterson also defended the subsidizing of doctoral work for Linda Bohlinger, the agency’s chief capital planner. The commission paid $800 toward her tuition for a doctorate in public administration, along with travel and living expenses for four weekend trips to Sacramento. “This is an investment in her,” Peterson said. “She is a special person.”

Bohlinger said the trips coincided with meetings in Sacramento she attended on commission business. She said she intends to continue with her doctoral work in Sacramento.

Bohlinger, who was moved to the Los Angeles area from Sacramento, is one of five commission staffers who receive housing assistance from the agency in the form of “shared-equity” agreements. In Bohlinger’s case, the commission paid $100,000 toward the price of her $390,000 home in Altadena. Under the agreement, the agency retains a $100,000 interest in the house to be repaid when the house is sold.

Four other staffers have similar arrangements, with assistance ranging from $100,000 to $250,000.

Such assistance is highly unusual for government agencies. Both the city and the county have firm policies barring housing assistance. In the past year, the high cost of housing in Southern California and the bans on housing assistance have led to highly publicized problems in recruiting a new city zoo director and county coroner. Even so, city and county officials refused to relent because they did not want to set a precedent.

Times researcher Tracy Thomas contributed to this story

Questionable Spending

Spending controls at the The Los Angeles County Transportation Commission--the agency that is building the region’s mass transit system--has been lax in recent years. Millions of tax dollars have been used to pay for catered meals, restaurant lunches, receptions, travel and automobiles. Such expenditures are uncommon for a government agency, particularly at a time of deep recession when cities, counties and school districts are cutting back on essential services.

About two dozen members of the agency’s finance department held a three-day retreat in Palm Springs that cost taxpayers $8,893.92.

Neil Peterson, the agency’s executive director, wrote a check for $1,267 on Feb. 28 to repay the agency for meals and other expenses that he improperly charged on a commission credit card over the past 18 months.

The agency had a standing account with West & West Caterers in Los Angeles and several restaurants that supplied food almost daily to commission offices for meetings and other functions. The practice has been stopped under a recent policy change; officials said tough economic times made such spending inappropriate.