Conduct Unbecoming: The Laura Doud Scandal

By: 
Stephen Downing

Hypocrites are those who apply to others the standards that they refuse to accept for themselves – Noam Chomsky

 

During the April 13 meeting of the Long Beach City Ethics Commission, the commissioners held a study session to discuss the RSM investigation report into whistleblower allegations that City Auditor Laura Doud made improper payments of $1.6 million in City funds to political contractors.

When compared to the mayor and City Council, the Ethics Commission should be commended for publicly addressing Doud’s questionable, and possibly criminal, payment schemes.

However, the commission failed to hold Doud accountable for her 15-year payment arrangement that failed to meet her own standards of financial and ethical conduct.

One commissioner described the RSM report saying, “It’s an extremely sad report. It’s troubling. There are years of what appears to be a lack of controls… I was shocked there was sole sourcing, no justifications, just no basic accounting practices, et cetera.”

Staff Refutes Lack of Procurement Policy

During the meeting, several commissioners questioned whether the city had appropriate purchasing policies and whether there were similar payment arrangements in which contractors were paid before services were rendered.

City staff assigned to support the commission shot back.

Deputy City Attorney Taylor Anderson said: “Commissioners, I'd just like to clarify that the city does have policies in place on procurement. The issue here is that we have an elected official that this occurred with. They answer to the people [voters]. There’s nobody really above them.”

Anderson essentially said that Doud – because she is an elected official – operated with impunity by ignoring basic purchasing policies that already exist within the city, while anyone else would be held accountable for the same actions.

The whistleblower stated in her complaint that only the arrangements with Kindel Gagan and the Davis Group did Doud not follow city policies.

According to Doud, she alone managed those two firms. All other contract agreements for auditing and other professional services that were overseen by Doud’s audit staff followed city procurement policies.

The whistleblower and other audit staff advised Doud on multiple occasions to follow city policies to no avail.

The Doud outrage is not about the lack of policy. It’s about Laura Doud choosing to bypass basic but critical internal control policies.

Responding to the claim that there is the possibility of similar pre-paid contracts in the city, Deputy City Manager April Walker said: “We want to ensure that we're not just handing over a huge lump sum of money to someone and that we’re not going get the people [and] the kinds of services that [we’re] paying for and deserve. So, we’re not taking that risk with people’s money when we write contracts. We’re making sure that there are those checks and balances in place. Like I said, it’s unusual to have a contract where you’re billing and paying out for nothing.”

Commission Focuses on Purchasing Policies

In their attempt to address the problem, the Ethics Commission consistently framed their discussions around the lack of internal controls and procurement policies throughout the city rather than Doud’s payment schemes.

The study session should have addressed the root cause of the scandal: the clear evidence in the investigative report that we have an elected city auditor who chose not to follow city procurement policies – against the repeated advice from her staff – so that she could make monthly payments to her outside political support group without applying the checks-and-balances that basic internal controls required throughout the city provide.

Had ethics violations been the focus of the study session, a decision for appropriate action by the commissioners could very well have been reached, in accordance with the Ethic Commission’s authority provided by the City Charter.

Doud Violated Multiple Ethics Policies

The Ethics Commission now plans on assessing the procurement and internal control policies of every city department rather than addressing the role Laura Doud played in violating existing policy.

That is not their chartered responsibility.

What the Ethics Commission should have addressed is the fact that the RSM investigation found that Doud did not follow her own internal control recommendations made to city departments.

The city’s Code of Ethics is codified in the Municipal Code and requires that every city employee and every elected and appointed city official must pledge, in writing, to follow these principles:

  • To place the best interests of the city above all other interests.
  • To uphold all laws, regulations and policies.
  • To take no action for the purpose of benefiting the official or employee personally.
  • To make every effort to avoid a conflict of interest.
  • To avoid disclosure of confidential information obtained in the performance of their duties or in their official capacity.
  • To exercise prudence and good judgment at all times.
  • To be fair, impartial, and unbiased in the decision-making process.
  • To treat each other and the public with respect.

Doud’s deliberate payment arrangements clearly violated most all of these ethical principles.

Commission Avoids Holding Doud Accountable

Toward the end of the study session, the Ethics Commission directed city staff to gather procurement best practices and review purchasing policies from the city manager departments, and the Water and Harbor Departments – a time-consuming effort that diverts the commission from its primary responsibility.

The City Charter defines the powers and duties of the Ethics Commission to “make recommendations to the mayor and the City Council concerning campaign finance reform, lobbying, governmental ethics and conflicts of interest and to report to the council concerning the effectiveness of these laws.”

What should have come out of the Ethics Commission April 13 study session surrounding the RSM investigative report are the following:

  1. Recommend to the mayor and City Council that based upon the findings of the RSM investigation report, that City Auditor Laura Doud be publicly censured for behavior that violated the city’s code of ethics and reflected poorly on the City of Long Beach.

This unethical behavior stems from a 15-year relationship she had with Kindel Gagan and the Davis Group, resulting in the expenditure of over $1.5 million under circumstances that violated her own internal controls and public statements related to those controls.

  1. Recommend to the mayor and City Council that the city attorney be directed to further the RSM investigation and provide a supplemental investigation aimed at providing answers to multiple unanswered questions:
    1. Did Doud pay Gagan and the Davises, both lobbying and political consulting firms, receive public funds for unlawful political and campaign-related work?
    2. Were Doud, Gagan and the Davises willful and deliberate in providing as little detail as possible in their contracts, invoices and services in order to avoid scrutiny and accountability?
    3. Did Doud, in her capacity as city auditor, commit other unethical activities, such as “shutting down audits and investigations because of political or personal reasons,” as the whistleblower claimed?

In our past reporting, the Beachcomber identified various shortcomings of the RSM investigation, all of which should also be elements of a supplemental investigation:

  • The RSM investigation did not explain why Doud believed she needed to communicate privately through her personal Yahoo email account with the Davises – and no one else – to conduct city business.
  • RSM failed to obtain and analyze meeting records, phone records and Doud’s personal email account to determine the full extent of Doud’s relationship to the Davises and Gagan, particularly regarding their involvement in the various political campaigns in which she was personally involved.
  • RSM failed to obtain the financial records of Doud, Gagan and his company, Kindel Gagan, the Davises and their company, the Davis Group, to determine whether some or all payments were in fact financial kickbacks.
  • RSM interviewed the whistleblower once. RSM did not interview other current or former auditors and administrative staff within the city auditor’s office who may have additional information on Doud’s payments, as well as whether there was duplication between the Davis Group’s services and the work of Doud’s staff.
  • RSM did not verify whether the work products provided by the Davis Group or Gagan were actually completed by them. The RSM report did not include any examples of the Davis Group’s work products, although the report included examples of Gagan’s work.
  • RSM concluded that it did not find clear evidence of misappropriation, yet RSM noted payments were made when there appeared to be no services provided.

The Hypocrisy

In a post on her re-election Facebook account, Doud said, “In addition to graduating from law school and earning my Juris Doctor degree, I am also a Certified Public Accountant and Certified Fraud Examiner. The education I received in Long Beach has been a key to the success of my work for the city.”

Unfortunately, that training and educational background did not deter her from making nearly 300 monthly payments totaling $1.6 million in taxpayer funds to two lobbying and political consulting firms owned by her friends with very little to show in services or work products.

During the meeting one commissioner lamented the responsibility of the commission, “We are here to try and increase the public confidence in the electeds and the staff of the city. Having a situation like this [Doud scandal] does absolutely nothing to build their confidence. In fact, it just tears it apart. And it’s a besmirch on all of us, you, the other electeds, and everyone else, because it looks like we weren’t watching the chicken coop to make sure that the fox didn’t get in there and do something that they shouldn’t have.”

Watching the coop was Doud’s job.  A recommendation to censure Doud for her anthropomorphism belongs to the Ethics Commission.

The Long Beach electorate has the power to keep her on the job – or not.

Doud’s Challenger

Dan Miles, a Long Beach resident, experienced CPA/CFO and candidate for the office of City Auditor was asked by the Beachcomber to review the Ethics Commission transcript and comment for this article.  His statement follows.

“The Ethics Commission, that includes appointees by the current auditor, who did not recuse themselves from the discussion, recommended to postpone taking action until after the election.

The Ethics Commission was formed to review matters such as those documented by the RSM audit of our auditor as described by a whistleblower.

The RSM report has been finished. The whistleblower's findings were validated. The findings have been referred to the Los Angeles County DA for possible criminal action.

Our elected auditor is the one with the responsibility to ensure that basic financial payment practices have been followed, if any city payments are made incorrectly, the auditor can withhold payment.

The city auditor is the one to force adherence to basic disbursement practices. While "best practices" might include efficiencies such as imprest funds, basic financial disbursement practices always require support. 

Use of imprest payments are for one time and/or minor payments.

Payments of up to $2 million dollars, made month after month, year after year, for over 15 years without support is not minor, one time, or a violation of "best practices". It is and always will be just be plain wrong. Time for fresh eyes on our money.”

 

Stephen Downing is a Long Beach Resident and retired LAPD deputy chief of police.

Stephen.Beachcomber@gmail.com

 

Editor's Note: The Beachcomber has published four news articles related to the Doud scandal.  They can be read at the following links:

Doud Investigation – A Velvet Covered Hammer
https://beachcomber.news/content/doud-investigation-velvet-covered-hammer

What We Know/Don’t Know About Doud Investigation
https://beachcomber.news/content/what-we-knowdont-know-about-doud-investigaton

Pattern, Practices of Auditor Laura Doud
https://beachcomber.news/content/pattern-practices-auditor-laura-doud

Q&A About City Auditor Doud
https://beachcomber.news/content/qa-about-city-auditor-doud

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Comments

We need to clean house all around, starting with Tom Modica.

The LBC is run like a third world city government, full of incompetence and corruption. The sad thing is that the LBC citizen are ok with it, SMH

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