Audit: OC Fair & Event Center paid nonworking employee $74,000 in separation agreement

The OC Fair & Event Center paid a former employee roughly $74,000 in wages and benefits after she stopped working amid allegations that she had created a “hostile” work environment. The deal raised red flags in an audit released this week.

Officials of the state-owned fairgrounds in Costa Mesa said the payments, from July 2016 to February 2017, were made as part of a separation agreement with the staff member and were in line with an organizational practice that has since been discontinued.

The costs of the arrangement ultimately totaled $74,432. That included $44,468 in wages, $13,668 in employer retirement contributions and $4,474 in accrued leave hours paid after the employee’s departure, according to the audit from the California Department of Food and Agriculture.

The audit concludes the Fair & Event Center “overpaid the employee for work that was not performed and therefore may be considered a gift of public funds.” The report recommends trying to recoup the money.

It also cites an opinion from the California Department of Human Resources’ legal division “that the settlement agreement is likely an illegal contract because it violates” provisions of the state Government Code and Code of Regulations.

However, the audit states, the “CalHR legal division concluded that despite its illegality, the [Fair & Event Center] likely cannot void the contract and recover the amount paid to the employee.”

Fairgrounds officials said the pact was one of about a dozen such agreements the organization has entered with former employees since 2004. The accords provided two weeks to 12 months of severance pay.

Fair & Event Center spokeswoman Terry Moore said this week that “none of the past severance agreements had been flagged by auditors” and that some underwent legal review as well.

She said she could not immediately provide the cumulative cost of the agreements and was unable to provide specifics about them because of privacy issues.

“Employee separation agreements involving severance pay had been offered to employees in the past,” she said. “That is no longer the district’s practice.”

The organization says it is working with the California Public Employees’ Retirement System, or CalPERS, to adjust the employee’s accrued service time, which would reduce her pension benefit and involve a refund in employer retirement contributions.

The fairgrounds defended itself in a letter to the Department of Food and Agriculture in May.

The agreement “was created from a previously approved CalHR separation agreement that we used as a template” and was the culmination of “a progressive discipline path” for the employee, according to the letter, which was signed by fairgrounds Chief Executive Kathy Kramer and then-Fair Board Chairwoman Barbara Bagneris.

“We believe that by removing the employee mentioned in the audit, we avoided significant risk from other actions; loss of work from several staff that called out sick due to the stress caused by her and/or lawsuits by staff that reported to her or other co-workers because of her actions having created a hostile, intimidating and bullying work environment,” the letter states.

“We make decisions that are in the best interest of the district and the workplace,” Kramer said in a statement. “We want all employees to be successful, but sometimes that’s not possible and we must take action for the good of the organization. In the case that is noted in the audit, the separation agreement was negotiated rather than enter into a lengthy and potentially costly legal process.

“Since receiving this audit, separation agreements with severance pay are no longer being used by the district.”

However, some observers accused Fair & Event Center leadership this week of trying to conceal the audit, which the organization received in early October. During Thursday’s Fair Board meeting, several residents demanded the full report’s release and expressed serious concerns about it.

“CDFA auditors did their job and found serious issues, but the staff who caused those serious issues have been able to bury the audit so far,” fairgrounds activist Reggie Mundekis said.

“We need to fix these problems,” Mundekis added. “We need to clear out the staff who are causing the problems and get the issues resolved now. ... The fish rots from the head. It’s time to remove the rotting fish from the building.”

Criticism also is coming from a seemingly unlikely source — Adam Carleton, the Fair & Event Center’s vice president of finance and administration. He alleges Kramer wrongfully placed him on involuntary paid “administrative time off” on Dec. 11 as part of an effort to conceal the payments detailed in the audit.

“I can put up with poor performance and all kinds of stuff,” Carleton said in an interview this week. “I’m a pretty loyal employee, but not when things are illegal and certainly not when you perp-walk me out the door for bringing up the issue.”

In a letter informing Carleton he was being placed on leave, Kramer wrote that the decision “is a result of recent findings of substantial financial errors in your work.”

The letter also references possible unspecified “misconduct” and says an investigation is going on.

Carleton said that neither he nor his lawyer have been able to get more specifics.

“No one should ever be put on ATO for such nonspecific, possible reasons,” he said. “Certainly not the top financial officer of the company, given the present circumstances and facts described in the audit.”

Moore called the situation “a personnel matter that is still under review.”

Kramer said in a statement that “I can tell you that the employee’s administrative leave is not related to the audit or his concerns about the audit. Board leadership has been aware of the audit since the first draft was released.”