Presented by: Special Counsel Aleshire & Wynder, LLP Aleshire - - PowerPoint PPT Presentation

Presented by: Special Counsel Aleshire & Wynder, LLP Aleshire & Wynder, LLP David J. Aleshire Anthony R. Taylor Hagen, Streiff, Newton & Oshiro, Accountants, PC Chris Money

OCGPC formed December 2003 (1st Plan $353M). OCGPC advisory to City Res. 6-42 (April 2006). 2004 Business Plan: $401M, 6-7 years Developer funded: $200M prepay Dev. Fees + $201M imprvts Developer funded: $200M prepay Dev. Fees + $201M imprvts 3700 Ac purchased by Lennar for $649.5M in February 2005. 1347 Ac Deeded City July 2005. Design competition: 30 to 7 firms. Design Studio created/selected

Ken Smith + Gafcon + Consultants.

Budget Estimate: September 2007 est. $979.8M;

January 2008 est. $1.24B; July 2008 $1.6B (no vertical: Bovis) Gafcon – 2007 estimate $3 – 4B but private.

Preview Park: Needed Amenity. Balloon. Cost $25M Preview Park: Needed Amenity. Balloon. Cost $25M 2009 Business Plan: Western Sector $65.5M on 88 Ac. Open ’13 End 2013: $250M spent: how spend $250M for 88 Ac? June 2013 Retained HSNO for Audit

• $260M spent on Park to date. 88 Ac improved park area

Performance Review: 7 years; 23 depositions; 1000’s pages

contracts, reports, documents, transcripts reviewed.

Great Park Review by DA; 2 Grand Jury investigations Great Park Review by DA; 2 Grand Jury investigations

• Jan. 8, 2013 Council Subcom. formed; Audit support Judge Stock

June 2013 HSNO after competitive bid; Prelim. Rpt. Jan. 2014 June 2014 A&W to take depos. and deal with adversarial parties Last depositions: 2 in March with Agran depos. March 13, 2015

Follow up on various findings in our Preliminary Report Review invoices and documents provided by the city and outside

vendors

Work with special counsel on deposition testimony Work with special counsel in analysis of documents provided by

• utside vendors.

Update the revenue and expense schedules to include the

beginning of the park through 2013

Determine the cause for excessive change orders Retention of MCK Associates as Program Manager Retention of MCK Associates as Program Manager Review vetting of the Design Studio Magnitude of duplicate billings Contracts with Forde & Mollrich Hiring of George Urch Feasibility Studies

Total revenue through 12/31/13 - $287.2 million Total expenditures through 12/31/13 - $251.4 million Cash balance as of 12/31/13 - $36 million Cash balance as of 12/31/13 - $36 million

The design competition was conducted without providing the

The design competition was conducted without providing the The design competition was conducted without providing the The design competition was conducted without providing the participants with a design and construction participants with a design and construction participants with a design and construction participants with a design and construction budget budget budget budget

“My recollection is they were told not to concern themselves

unduly with the question of the ultimate cost of producing, on the ground, whatever it is they might design, but bring forward a the ground, whatever it is they might design, but bring forward a competitive design that has a real theme to it, has features that are buildable.” Deposition of Larry Agran, page 41-42

Once the Design Studio was selected,

Once the Design Studio was selected, Once the Design Studio was selected, Once the Design Studio was selected, an an an an overall budget to

• verall budget to
• verall budget to
• verall budget to

construct the Great Park was not given to the Design construct the Great Park was not given to the Design construct the Great Park was not given to the Design construct the Great Park was not given to the Design Studio Studio Studio Studio

“Q: And in terms of the vision you’re talking about, did Chairman

Agran also discuss with you the practical concerns of budget, business plan, revenue projections, the business side of the

• perations?
• perations?

”A: He wasn’t as concerned about that. He had the attitude that “We’ll figure it out. Let’s design something great, and then let’s figure out how to make it happen.” Deposition of Yehudi Gaffen, page 193

Work

Work Work Work was performed at the request of Mr. Agran that was out of was performed at the request of Mr. Agran that was out of was performed at the request of Mr. Agran that was out of was performed at the request of Mr. Agran that was out of scope scope scope scope

“Q: Do you recall any encounters with Mr. Gaffen concerning

scope of work problems on invoice amount problems? ”A: Yes Q: Where he related to you that, quote, “Larry told us to do it”? A : Yes” Deposition of Walter Kreutzen, page 43

We cannot conclude that Gafcon had duplicate billings on

We cannot conclude that Gafcon had duplicate billings on We cannot conclude that Gafcon had duplicate billings on We cannot conclude that Gafcon had duplicate billings on Contract Contract Contract Contract 5759. 5759. 5759. 5759.

Due to the broad scope in Gafcon’s awarded contracts, we

cannot determine if duplicate charges were invoiced and paid.

Mr

Mr Mr

• Mr. Agran misled the public in January 2006 when he said the

. Agran misled the public in January 2006 when he said the . Agran misled the public in January 2006 when he said the . Agran misled the public in January 2006 when he said the

Mr

Mr Mr

• Mr. Agran misled the public in January 2006 when he said the

. Agran misled the public in January 2006 when he said the . Agran misled the public in January 2006 when he said the . Agran misled the public in January 2006 when he said the Great Park could be built for $401 million, when he had been Great Park could be built for $401 million, when he had been Great Park could be built for $401 million, when he had been Great Park could be built for $401 million, when he had been told in November 2005 it would cost approximately $1 billion. told in November 2005 it would cost approximately $1 billion. told in November 2005 it would cost approximately $1 billion. told in November 2005 it would cost approximately $1 billion.

“I remember it because I heard it first in New York, as part of the

• competition. [Ken Smith] said “We’re presenting this to you

assuming we’re selected. And if we were selected, we believe all

• f this can be built for $998 million.” A billion dollars. That was

in 2005.” Deposition of Larry Agran, page 42

January 2006: After New York Trip; Design Studio selected;

Agran states $401M buildable with canyon, lake element: In New York Smith told Agran $1B was true cost.

January 2006 – September 27, 2007: Master Plan ($10M) July 24, 2007: Schematic Design starts ($27.3M); Budget

$979.8M (9/27/07)

January 2008 Design Studio estimates $1.24B July 2008 Bovis Estimate $1.6B without vertical 2007 Gafcon internal estimate with vertical was $3-4B

2004 City Business Plan

2004 City Business Plan 2004 City Business Plan 2004 City Business Plan: $401M; funded by Developer

$200 fees + $201 improvements

March 2005 Adoption of Redevelopment Plan

March 2005 Adoption of Redevelopment Plan March 2005 Adoption of Redevelopment Plan March 2005 Adoption of Redevelopment Plan

RSG

RSG RSG RSG Estimate of Revenue for Redevelopment Estimate of Revenue for Redevelopment Estimate of Revenue for Redevelopment Estimate of Revenue for Redevelopment Build Out: Begin 2006-07 complete 9 years Total: 40 years raise $978M Present Value: $218.5M City $134M Loan to Agency City $134M Loan to Agency

P

2009 Business Plan 2009 Business Plan 2009 Business Plan 2009 Business Plan Build Out: Begin 2011-12 complete 12 years Total: 40 years, by 2050-51 raise $1.28B Present Value: $267.9M February 2009 Staff est. $1.4B cost. End Schematic Design March 2009 Board aprvs.500 Ac plant:36 mo./w Design Studio CEO Ellzey determines not practical. October 2009 $60 October 2009 $60 October 2009 $60 October 2009 $60 – – – – 64M Plan Western Sector 64M Plan Western Sector 64M Plan Western Sector 64M Plan Western Sector – – – – 88 Ac developed 88 Ac developed 88 Ac developed 88 Ac developed by Oct ’13. by Oct ’13. by Oct ’13. by Oct ’13.

Preview Park

Preview Park Preview Park Preview Park (approx. 8 AC)

Jan 9, 2007 Council approves 4.1M for GP Balloon July 14, 2007 Balloon opens.

Western Sector Elements

Western Sector Elements Western Sector Elements Western Sector Elements (88 Ac + 26 Ac for future development)

December 11, 2007 Balloon Enhance Project $13.9M March 25, 2008 Expand to Preview Park March 25, 2008 Expand to Preview Park

Incorporate Preview Park

2009

2009 2009 2009 Business Plan Business Plan Business Plan Business Plan scaled back Schematic Design of whole park Fiscal Sustainability

Estimate that could fund $60 – 64M in improvements

• Oct. 22, 2009: $65.5 M Project deletes lake district

Complete Sept. 2013. $69.8M cost

Resolution 06-42 made the GPC an advisory entity, ratified by

Irvine voters by Measure R approved November 4, 2008.

Irvine structure separates policy-making function of the elected

legislative body from admin. function of appointed mgrs.

Policy-making/administrative dichotomy broke down. Policy-making/administrative dichotomy broke down.

Chairman directly interjected himself in the admin. operations.

Consultants had strong connections to Chairman Agran and took

• n management functions.

Chairman

exercised influence through and was influenced principally by Arnold Forde (Forde & Mollrich) and Yehudi Gaffen (Gafcon).

Design Studio blended a small New York architectural firm,

various consultants, construction design and management firm, where the assembled team had never collaborated before on a major public project.

One-third of 83 contracts over $100,000 were not bid

competitively or subject to “open competition”. competitively or subject to “open competition”.

City was not involved in selecting subcontractors, list of

subcontractors including Gafcon and Forde & Mollrich which could not be terminated without City approval.

Final Project Management Plan including goals and cash flow

projections was never produced or approved, depriving the Project of valuable management tools.

Lack of control over contracts illustrated in the construction of

Lack of control over contracts illustrated in the construction of the Preview Park: three phases = $25.4 million. Belaire Contract

• f 1.75M ended up almost $8M in change orders.

Design

Studio

• perated

beyond the scope according to deposition testimony by City Staff.

Testimony of work being begun before the scope of work was

fully defined.

City

City City City Manager, Sean Joyce, testified that: Manager, Sean Joyce, testified that: Manager, Sean Joyce, testified that: Manager, Sean Joyce, testified that: “among the concerns I heard from staff was that Yehudi Gaffen was pursuing or performing work for which authority did not exist from the board of directors. And that was a constant concern, which was addressed more than a few times.” (Joyce depo pg. 123) depo pg. 123)

Former Interim CEO, Sharon Landers also testified that

Former Interim CEO, Sharon Landers also testified that Former Interim CEO, Sharon Landers also testified that Former Interim CEO, Sharon Landers also testified that: “the contractor tended to deal directly with the members of the board and went around staff.” (Landers depo pg. 68.)

Significant

program change

• rders,
• f

more than 25%, amounting to millions of dollars.

Bovis Lend Lease was hired as “Program Management,” to include

“over the shoulder review”. Couldn’t get Project Management Plan completed by Design Studio.

Forde & Mollrich total payments for Audit period: $7.2M. Through

four phases F&M contract went from fixed $50,000/month to time and materials (averaged $70,000/mo), to a fixed fee

• f

$100,000/month, then back to $50,000/month. (42 months @ $100,000).

$2.7M savings if $50,000 for entire period. No clear evidence of changes in service level.

Contracts with Design Studio all required avoidance of situations

that could create the appearance of impropriety.

Personal

relationships example: Chairman Agran recruited George Urch.

Gafcon had an agreement to remodel Stu Mollrich’s Laguna Gafcon had an agreement to remodel Stu Mollrich’s Laguna

Beach house.

Failure of Design Studio, Forde & Mollrich to fully disclose

potential conflicts.

Failure to secure Council approval of the final Design Studio

Close Out Agreement.

Grounds for legal recovery including contract claims, claims

under the False Claims Act, and professional negligence.

Gafcon required certify accuracy all invoices submitted by Forde

& Mollrich.

Gafcon gave Stu Mollrich a 30% discount for professional services

remodeling job at Mr. Mollrich’s private residence.

Schematic

Design Agreement prohibited this type

• f

arrangement as a potential conflict of interest.

Over $4 Million in payments made to Design Studio would have

been held pending an investigation had this been disclosed to City.

Questions asked: Did anyone who worked on the Great Park

Project also volunteer for you on your political campaigns between 2005 to 2012? (Transcript, at pgs. 138-148) Mr. Agran refused to answer these questions.

This is relevant to determining compliance with the conflict of This is relevant to determining compliance with the conflict of

interest provisions in the Schematic Design Agreement.

Recommend that the City Council find these questions proper

and pertinent for the Audit. Recommend that the City Council adopt the resolution. (Exhibit D to Staff Report)

Supplement

the Special Counsel Report depending

• n

any additional testimony provided by Mr. Agran.

Promise:

Promise: Promise: Promise: 1347 Ac GP. $401M developer financed. 6–7 yrs.

Realty:

Realty: Realty: Realty: 88 Ac developed, costing about $100M. Total cost $260M. 10 years

Why?:

Why?: Why?: Why?:

• Finance:

Finance: Finance: Finance: Planners/Designers not given budget constraint Planners/Designers not given budget constraint No financial realty to plans Developer funded program $401M With aggressive development, redevelopment could have produced $250M A billion dollar development program over even 10 years was never feasible Phased program was only possible approach

Governance:

Governance: Governance: Governance: Confusion of government structure: Evolution GPC structure to advisory Confusion of roles: Policy making vs. administrative Managers not empowered to manage Consultants managing instead of being managed Consultants managing instead of being managed

Contract Administration

Contract Administration Contract Administration Contract Administration: Problems revealed in contract administration Little competition in contract award process Mechanisms to manage contracts ineffective Lack of parameters to manage contracts Consultant roles inappropriate and out of control

“I think everybody wanted to run the park. A number of the board members really felt they should run things. Mike Ellzey felt he should run things. Ken Smith felt he should design things and have the freedom. Gafcon felt they should have more input, and that Ellzey’s job was more just to implement more input, and that Ellzey’s job was more just to implement the plans… Ellzey felt that, no, it was his job to evaluate these things; and he felt they weren’t buildable, right, doable, or

• whatever. And just try to put all those people together and try

to get them all—I wouldn’t say anybody’s role was invalid in a

• way. Everybody thought they were in charge.” Arnold Forde at
• pgs. 70-71

Appearance Impropriety

Appearance Impropriety Appearance Impropriety Appearance Impropriety: Areas for further investigation Further legal research on claims and bring back to Council in Closed Session review of liabilities of parties on theories of: Breach of Contract False Claims Professional Malpractice Defenses including statute of limitations will be Defenses including statute of limitations will be considered

• Administrative Remedies:

Administrative Remedies: Administrative Remedies: Administrative Remedies: Work with Management Team for 360 review Considered findings of report and staff perspectives Develop recommendations for changes in (a) Great Park/City Changes (b) Charter changes (c) Ordinance changes Report back to Council on 360 review