Former Mayoral Candidate Rationalizes Alleged Payment Scheme

By: 
Stephen Downing

By Stephen Downing

A Sept. 7, 10-page whistleblower report obtained by the Beachcomber alleged serial contract fraud and misappropriation of public funds in excess of $1 million over the past 15 years by means of a payment scheme between City Auditor Laura Doud and a regional lobbying firm – Kindel Gagan, Inc.

What’s the rationalization for the payment scheme?

The above question was posed by the whistleblower in their report and answered as follows:

“During several occasions when I raised my concerns regarding the payment scheme to Ms. Doud – even broaching the possibility that the Kindel Gagan payment scheme can be viewed as fraudulent – her responses to me provided a glimpse into her rationalization:

Similar payment arrangements “happen all the time” in the city and in government in general. Doud mentioned that she was aware that other elected offices – noting the councilmembers, mayor and city attorney – all have similar contracts or payment schemes.

Such payment schemes are a benefit of holding public office. Doud likened the scheme to the City Council’s “divide-by-nine” funds.

These payments are small and insignificant, compared to the millions and millions spent by other departments on contractors and consultants.

Question Posed to Incumbents

The Beachcomber asked Mayor Robert Garcia, City Prosecutor Doug Haubert, City Attorney Charles Parkin and each member of the City Council via email to respond to the whistleblower’s statement that “Ms. Doud mentioned that she was aware that other elected offices all have similar contracts or payment schemes.”

City Attorney Charles Parkin is the only elected official to provide a response: “This office does not have any contracts or payment structures as described in the letter you have referenced.”

Why has Doud been able to execute the scheme?

The above question was posed by the whistleblower in their report and answered as follows:

Ms. Doud has been able to skirt the city’s purchasing policies by having staff submit the Kindel Gagan invoices as if they are one-time payments each month, rather than ongoing payments that should be tied to a contract agreement. Since the invoices are treated as one-time payments, they are not required to undergo competitive bidding (or multiple proposals) or have proper contract terms.

The city’s policy guidance on approval of vendor invoices for payment allows discretion and flexibility to each city department. If the city department approves the invoice, there is an assumption that the department has performed the due diligence to verify the services or products provided.

Elected offices within Long Beach are afforded an even higher level of autonomy and independence. In my opinion, accountability is more lacking with respect to the elected offices. Many of the city’s administrative regulations are optional to elected offices. For example, AR 23-2 (the requirement to verify the work performed billed in invoices) appears to be violated by Doud’s payment scheme but the regulation is optional for elected offices.

Internal controls within the city auditor’s office to flag such payments are simply ineffective or non-existent because Doud has the power to override these controls. Protests and recommendations raised by me and likely by my predecessor to correct the Kindel Gagan payment scheme to Doud have had no impact on her actions. Administrative staff who process the invoices have recently – and in the past – asked for a contract agreement but have been directed to process the invoices as one-time payments.

Doud’s payment scheme is executed out in the open. People within the city auditor’s office are aware of the scheme but are likely too afraid of reprisals from Doud to report the scheme to others outside of the city auditor’s office. So, they often would ignore the Kindel Gagan scheme or attempt to derive various explanations to justify it (e.g., “she’s the boss, she can do anything she wants” or “give her the benefit of the doubt because maybe Kindel Gagan does provide her services that we just don’t know about”).

Doud has shunned and isolated her staff and diminished the responsibilities of staff who question her decisions regarding various matters (I have been experiencing escalating reprisals for at least the past 1.5 years). Most of our employees are at-will and not part of an employee bargaining unit, so fears of reprisals are elevated.

I myself grappled with the decision of expressing my concerns and recommending appropriate actions to Doud. I was fearful that Doud would terminate my employment shortly after I refused to approve invoices from Kindel Gagan and Davis Group, but I felt that it was the right thing to do, regardless of the possible consequences, from which I am suffering now. I believe this fear of retaliation has prevented other staff members from reporting her payment scheme in the past and has allowed her to continue the scheme without being caught.

Question Posed to Others

The Beachcomber asked Mayor Robert Garcia, City Prosecutor Doug Haubert, City Attorney Charles Parkin, each member of the City Council and each candidate currently running for elective office in November 2022 to comment on the whistleblower’s statements.

Again, City Attorney Charles Parkin was the only incumbent office holder who responded. He effectively declined comment by writing: “As to your other questions as you are aware an investigation is ongoing.”

The Beachcomber has confirmed through confidential sources that the city attorney contracted with RSM, a global audit, tax and consulting organization to conduct an administrative investigation into the whistleblower’s allegations.

In a follow up question, the Beachcomber asked Parkin if the RSM investigation report would be made public.

The city attorney did not respond.

This newspaper reported on its website on Feb. 11 that the LBPD financial crimes detail has opened a criminal investigation.

On Feb. 16 a Beachcomber source in the district attorney’s office – who was not authorized to speak publicly – confirmed that the office’s Public Integrity Division has opened a criminal investigation.

Remarks (edited for length and repetition) solicited from candidates running for office in November who responded to the Beachcomber’s request for comment follow:

Gerrie Schipske, Mayor Candidate

“The city auditor is entrusted to audit contracts paid out of city funds and is supposed to question payment when there is a lack of documentation that services were provided.

“What is more concerning is that the services paid with city funds were for a firm that is a registered lobbyist and for another firm that does political consulting. It is illegal to pay city funds for political services.

“I recommend that the voters of Long Beach support placing on the November ballot the Long Beach Anti-Corruption Act.

“Long Beach politics aren’t broken, they’re fixed.

“Over the past several years, the mayor and City Council have destroyed the 1994 voter-approved Long Beach Campaign Finance Reform Act by raising officeholder account limits to $120,000 (City Council) and $300,000 (mayor) that can be raised during their four-year terms.

“Few cities allow officeholder accounts. But no other city allows officeholder accounts to be used for political purposes.”

(Editor’s Note: Schipske’s recommended adoption of an Anti-Corruption Act by voters can be read here: https://beachcomber.news/content/anti-corruption-act)

Deborah Mozar

Candidate for Mayor

“I welcome an investigation into the matter as we need to have a watchdog function so that there is full transparency and accountability in our elected officials.

“I whole-hearted disagree with Doud’s contention that these sorts of arrangements are a “perk” of public service and it’s this very attitude that has me seeking the office of mayor.”

Joshua Rodriguez

Candidate for Mayor

“If these claims are true, it is very concerning because this alleged misappropriation of public funds may be criminal.

“According to city officials, divide-by-nine funds are not to be utilized for payment schemes.

“There should be absolutely no benefits to officeholders beyond allocated salaries and contractual employment benefits.

“The citizens of Long Beach deserve full transparency – particularly concerning the use and misuse of taxpayer money.”

George Moyer
Candidate for Prosecutor

“I agree with the whistleblower. A number of the city’s administrative regulations, including AR 23-2, explicitly do not regulate the elective offices and instead ask that elective offices comply in the interest of administrative uniformity.

“The elective offices are generally not run in a transparent manner.

“We need transparency. If the statements offered in justification are true, then we need a full accounting of such arrangements by other departments and elective offices in Long Beach.

“I have no insider knowledge of the use of public funds to say whether the practice is common, but I think that misses the point – this is a practice that should be stopped.”

Ian Patton, Candidate for
Council District 5

“What City Auditor Doud has been up to reminds me of what goes on with money laundering, specifically the term used is “structuring” – an illicit ongoing arrangement or lump sum yet attempt to deposit the funds in a way that makes it appear to be a series of discreet, unrelated, smaller separate chunks.

“Criminals do that to evade taxes and avoid triggering rules where banks have to report larger deposits to the authorities. In Doud’s case, she appears to have been attempting to evade the very regulations she was charged with helping to enforce by taking an ongoing, longstanding contract – which she wanted to hide from scrutiny – and ordering her staff to treat each payment like it was a one-time expenditure.

“For that reason alone, she should resign.

“She has been an absentee auditor for far too long. By giving the mayor and city manager early access to the small investigations her office actually has done, what I call chickenfeed audits, she has compromised her office. As she did by supporting a term limits extension ballot measure campaign (Measure BBB). That’s not the “110 Years of Independence” advertised on her web site. That is a tool of the city machine doing just enough to barely justify her existence, if anyone asks what she’s been doing, and nothing more. Which is just what the machine wants and expects of her.

What motivated Doud to execute the scheme?

In their report the whistleblower offered several rationales to explain Doud’s motivation. The following is the one that examines her relationship with Kindel Gagan:

“I believe that Michael Gagan (founder of Kindel Gagan) was someone with whom she worked in her prior job 20 years ago with the Water Replenishment District (WRD).

“I recall that Ms. Doud once told me that it was Mr. Gagan who, as her long-time mentor, encouraged her to run for public office in 2006.

“Doud’s win immediately propelled her from a staff accountant at WRD to one of the most influential public figures in Long Beach. Therefore, I believe that these monthly payments, especially to Gagan, were “tokens” of her appreciation for his guidance and encouragement.”

Former Mayoral Candidate Supports Whistleblower’s Rational

The whistleblower’s conclusions were supported on Feb. 15 when this newspaper’s publisher, Jay Beeler, received a call from Norm Ryan, a candidate for Long Beach Mayor 20 years ago who had previously served as treasurer on the Water Replenishment District (WRD) board of directors.

Ryan, who now lives in Redding, Calif., told Beeler that he hired Doud as controller for the WRD and that Michael Gagan was the board’s chief lobbyist at the time and “attended all of our meetings.”

Ryan said, “We made her (Doud) the controller at the WRD and then two years later she used that – with my encouragement – to run against Gary Burroughs (for Long Beach City Auditor).”

Ryan then undertook to provide Beeler a rationalization for the Gagan/Doud relationship saying, “I don’t know if you remember what LA politics was like at the time, but in 2001 Laura Chick became the first citywide elected woman to hold an office – city auditor for Los Angeles. What these guys and gals do in these lobbying firms is to keep you connected to people that are moving up in an area that you’re basically interested in.

“Gagan was helpful with Doud doing that … getting campaign contributions, campaign advice … because they do that as well, but also keeping all these people connected to each other so that they all see what everybody else is doing. That’s kinda the secrets of the trade…”

Beeler said he agreed that his rendition of events made sense but added, “When you pay out city funds for that person it’s illegal.”

Ryan excused the illegality saying, “The ideas people like Doud come up with are not necessarily their ideas, but come from people like Gagan, but it is those ideas that get government proposals done – and people like Doud don’t have to go to their city manager for money or to figure out what to do to satisfy your constituent … be willing to trade your votes for it … that kind of thing.”

Ryan summed up his argument by suggesting that Gagan was “The only person that she needed to bounce any of that stuff off of. I guess her thinking was the stuff she was dealing with is nothing any of her staff were meant to do … so I don’t think she necessarily did anything intentionally shady, but I don’t think she thought it through either.”

Ryan did not comment as to whether his call to Beeler was self-initiated or not.

According to public records – after moving to Redding and becoming the CEO for the Haven Humane Society, a non-profit organization – Ryan was accused of taking public money from the animal shelter where he worked.

On Sept. 26, 2009 Ryan was sentenced to 180 days in the Shasta County Jail, followed by 180 days in an adult work program and three years supervised formal probation.

On Aug. 10, 2005 the WRD Admin Committee agenda (item #7) reveals that Ryan served on the committee that recommended and passed a measure to change Doud’s title from assistant controller to controller. 

Doud expressed her intention to run for the auditor’s office a month later. 

According to a Jan. 13, 2006 article in the LB Report announcing Doud’s first run for the auditor’s office against the then incumbent, Gary Burroughs, it was revealed that Doud previously served as financial treasurer for Ryan’s 2002 mayoral campaign.

The report, written by Bill Pearl, which outlined integrity issues exchanged by both candidates, can be read here: https://www.lbreport.com/news/jan06/doud1.htm.

Doud was asked to respond to the whistleblower allegations but declined through her criminal attorney, Kate Corrigan, who stated “Ms. Doud is continuing to work diligently with the appropriate parties to resolve these important matters and concerns. She is cooperating with the investigation.”

 

Stephen Downing is a resident of Long Beach and a retired LAPD deputy chief of police
stephen.beachcomber@gmail.com

Category:

Comments

Rather than rooting out corruption, the job City Auditor Dowd was elected to do, she looks the other way as long as she is allowed to benefit from her own department's corruption.

It makes one wonder how many Long Beach departments have agreements with Ms. Dowd to ignore their corruptions as long as she gets to have her corruption. Thank you Stephen Downing for reporting on this.

Laura Doud has been the most effective auditors Long Beach has had in decades. I am saddened by the allegations against her. It is my hope these alleged improprieties are found to be without merit. As auditor, she has operated independent of inside Long Beach politics because that is where an auditor must position themselves in order to be effective as an elected auditor. In providing oversight of governmental operations on the behalf of the taxpayers, she inherently subjects herself to retaliation and even political reprisal. Simply reporting the whistleblowers one sided claims and statements from candidates running for offices leaves the accused unfairly exposed. She has earned the right to an independent and fair investigation free of bias journalism trying to bake guilt into their “reporting”.

In my mind, City Auditor Dowd lost her independence when she endorsed Mayors Bob Foster and Robert Garcia. An Auditor shouldn't pick sides. She was supposed to protect taxpayers money from corruption, not pick the side that benefits her the most.

Shirley I congratulate you on supporting her you think is a good candidate but I cannot for the life of me believe you said that. She has taken sides in every single proposition that the mayor and the machine has put on the ballot and approved every budget including higher and higher place budgets without having the extra 200 police officers we were promised from the passage of those ballots. She has approved all of the John Molina projects or giveaways or whatever you wanna call them. Giving him community hospital and then giving him a contract saying the city would give him over $30 million at the end of the first year because he couldn’t make it work. Let’s not even bring up a Queen Mary fiasco where people have already gotten arrested. She has not been an auditor she has been a rubberstamp her to all of the machines desires. We have got to stop voting for our friends are people we admire and actually look at their records.

I agree with you on allowing for a fair and impartial investigation. I hope it isn't true because I am running for mayor and don't want to work alongside this type of corruption. I want honest people in our city government to give our residents, the best service they deserve.

The entire city of long beach is a criminal organization!!! They all work together to hide, steal millions. Then retaliate against anyone that speaks up against them. I just cant believe that they have been doing it for so long in front of all the LBC residences noses because they know LB citizens are too busy working to support their families to do anything about it. Am sure if the FBI does some kind of financial audit on the city they will find a-lot more of payout disguised as overtime to many, current and former city employees like many to the LBPD. They LB city official are all a bunch of dirty corrupt incompetent clowns. SMH

You give the Long Beach corrupters too little credit. They are more than mere thugs. They are sophisticated. They've been doing it for years.... decades. And they've been entirely supported by the LA District Attorney's office.

I've filed multiple complaints with the Public Integrity Division of the LA District Attorney's office. I still have their responses back claiming they found nothing actionable. The same goes with the State Attorney General's office. All of my complaints were ignored.

This is a California issue that can only be solved by the voters. Dump the whole lot of them.

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