L.A. Coliseum had scant controls over spending, audit finds

A new city report assails officials in charge of the Los Angeles Memorial Coliseum for failing to impose even basic financial controls, allowing the routine squandering of public money and permitting corruption to take root in “a dysfunctional and risk-prone culture.”

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.

The audit report says Coliseum officials scheduled five dates between 2003 and 2009 for Uruguayan all-star soccer teams to play at the stadium. But none of the matches happened, the commission did not formally approve contracts for the contests, and more than $870,000 in deposits was lost.

Lynch used his personal credit card to reserve more than $56,000 worth of hotel rooms for one of the matches, and the commission reimbursed him. Canceling the reservations cost the Coliseum $17,000 of that sum, the audit found.

Last July, The Times sought information from the commission about canceled events -- including money lost -- under the California Public Records Act. In response, the panel released a document showing the canceled 2009 match had total expenses of about $92,000. The audit report pegs those losses at about $670,000, not counting the hotel charges.

The report also says the commissioners failed to consistently comply with state law requiring public officials to disclose the free tickets they receive for Coliseum events on their website. In addition, it says Lynch misused the stadium’s liquor licenses -- lending one to a charity in which Parks’ wife is active, for example.

Parks said his office had nothing to do with the license and Lynch should have determined whether the charity could legally borrow it.

The audit was performed for Greuel’s office by Sjoberg Evashenk Consulting Inc. of Sacramento.

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(BEGIN TEXT OF INFOBOX)

Audit findings

City Controller Wendy Greuel’s office audited the taxpayer-owned Los Angeles Memorial Coliseum. Among the findings:

$10.3 million in public money was invested without clear oversight

$4.8 million was paid to a contractor, now an accused criminal, who had no contract

Coliseum Commission had no inventory of assets and allowed corruption to take root in a “dysfunctional” culture