L.A. city leaders unsatisfied with audit of DWP-funded nonprofits

Los Angeles Department of Water and Power union leader Brian D’Arcy’s effort to “clear the air” and explain what happened to more than $40 million in ratepayer money paid to two nonprofits has failed to convince city leaders calling for full accounting of the groups’ expenditures.

Instead, Mayor Eric Garcetti, City Controller Ron Galperin and City Atty. Mike Feuer said Wednesday they would ramp up actions to determine how the money was spent.

The three citywide elected leaders said an opinion piece by D’Arcy in the Los Angeles Times defending the spending, and his release of an audit conducted by a firm hired by the nonprofits, falls far short of the full accounting they have been seeking for nearly six months.

FOR THE RECORD:
DWP nonprofits probe: A headline in an earlier version of this online article indicated that an audit of two Los Angeles Department of Water and Power-funded nonprofits was done by the DWP. It was conducted by a firm hired by the nonprofits.

The nonprofits — the Joint Training Institute and the Joint Safety Institute — were created more than a decade ago after a grueling round of job cuts at the city-owned utility. The institutes were charged with improving relations between labor and management, and have received up to $4 million per year.

The newly released financial statements, which appeared on the International Brotherhood of Electrical Workers Local 18 website, offer broad categories of spending, not the check-by-check accounting city officials first called for in September after The Times reported that DWP officials had only scant information on the groups’ expenditures.

Galperin said the new records were just as vague as the nonprofits’ tax returns, which are already publicly available on the Internet. And the tax returns “are what raised more questions than answers in the first place,” he said.

The new records show that the proportion of the nonprofits’ revenue going to the top administrators is greater than previously known. All told, $1.7 million, or 44% of the groups’ revenue in 2013, went to pay salaries, benefits and automobile expenses for the institutes’ employees. DWP records show the groups had eight employees last year.

D’Arcy’s opinion piece said 75% of the groups’ expenditures go to safety and training programs, the other 25% is spent on administration of the nonprofits.

The new records also show the nonprofits paid $207,202 for “meetings, conferences and travel” in the last two years. But they do not indicate who traveled, or where they went.

DWP emails obtained by The Times under the California Public Records Act discuss plans for the nonprofits’ top managers to attend conferences in Chicago, San Francisco, Seattle and New Orleans. It’s not clear from the emails whether any of the trips were taken, but D’Arcy is mentioned as a potential traveler to Seattle and New Orleans. D’Arcy did not respond to a request for comment Thursday.

Following the posting of the audit on the union’s website, Garcetti spokesman Jeff Millman said “a summary is not good enough, the city has the right to follow the money.” Mel Levine, the new head of the DWP Board of Commissioners and a Garcetti appointee, announced plans to replace two management representatives on the boards of the nonprofits, which have been jointly overseen by the utility and D’Arcy’s union.

Gone are recently resigned DWP General Manager Ron Nichols and recently dismissed Senior Assistant General Manager Aram Benyamin — who was considered a close ally of D’Arcy.

In their places will be Rich Llewellyn, the mayor’s general counsel, and DWP Commissioner Michael Fleming, who has publicly referred to D’Arcy as a “bully.” Fleming said months ago that an audit like the one released this week, conducted by accountants chosen by the union, would be of limited value.

Nichols had said that he could not turn over the nonprofits’ spending records because union representatives on the board voted against it. He also said D’Arcy threatened to sue him personally if he disclosed the groups’ financial documents on his own.

The months-long battle over the spending records is now being waged in Superior Court. D’Arcy is suing to quash a Galperin subpoena that seeks to compel D’Arcy to answer questions and turn over several years’ worth of the institutes’ bank records and credit card statements.

D’Arcy maintains the nonprofits are independent trusts created for the benefit of DWP workers and not subject to the state Public Records Act or the authority of the city controller.

Feuer insists the city has an absolute right to audit the nonprofits because they are receiving and spending public funds. “Any attempt to obfuscate that fundamental point is misguided, and it’s important that nobody takes that bait,” Feuer said. “I feel more strongly now than ever that there is no basis to block the controller’s audit.”

Last week, a source in the Los Angeles County district attorney’s office said prosecutors and criminal investigators would join the hunt for the nonprofits’ detailed financial records to see if any crimes have been committed.

In his opinion piece, D’Arcy said he had asked former Dist. Atty. John Van de Kamp, who is now a crisis consultant, to act as a “neutral party” in his dealings with prosecutors.

On Thursday, Van de Kamp said he was working pro bono for D’Arcy. Van de Kamp said he thought D’Arcy was wary of potential political motives behind city officials’ demands for the nonprofits’ records. D’Arcy helped raise millions of dollars in campaign contributions to elect Wendy Greuel, Garcetti’s chief opponent in last year’s mayoral race.

D’Arcy “thinks he’ll get a fair hearing, and an objective look, from the D.A.’s office,” Van de Kamp said.

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