Fraud, Misappropriation of Public Funds by City Auditor Alleged

By: 
Stephen Downing

A whistleblower report just received by the Beachcomber from a confidential source with knowledge and access to investigations conducted inside Long Beach City Hall began with an introduction by an individual who identified themself as an auditor-employee in the Long Beach City Auditor’s Office.

The Sept. 7, 2021 whistleblower report was addressed to Fred Verdugo, deputy human resources director, Gary Anderson, principal deputy city attorney, and Eric Golz, LBPD Financial Crimes Detail sergeant.

According to the report, the whistleblower also filed the report with the Los Angeles District Attorney’s Public Integrity Division on August 6, 2021.

The 10-page report alleged that over a period of more than 15 years, the city’s watchdog, City Auditor Laura Doud, ignored city purchasing policies and misappropriated over $1 million of city public funds to a lobbying firm without a contract and without services being provided.

The major allegations outlined in the report include the following:

“I suspect misappropriation of public funds or contract fraud has been committed by City Auditor Laura Doud since 2006.

At her direction and approval, a regional lobbying firm, called Kindel Gagan (formerly known as Rose & Kindel), has been paid $5,700 or $6,000 per month since late 2006 with City of Long Beach funds without providing any services or products.

These consistent payments appear to be made shortly after Ms. Doud’s election as the city auditor in November 2006.

According to the city’s financial system records, I estimate a total of $1,018,500 has been paid to Kindel Gagan to date and payments are still ongoing.

Based on my knowledge, research and inquiry, no actual services have been nor are currently being provided.

There is no contract agreement that defines the services to be performed and the terms of the agreement, such as the consultant’s hourly rates.

My current and former coworkers and I are not aware of any deliverables, reports, audits or analysis provided.

When asked, City Auditor Doud refuses to share what Kindel Gagan actually does for the office or for her.”

Report Confirms Investigation

Over the past month, the Beachcomber received multiple tips that an investigation into the relationship between the Kindel Gagan organization and Doud was being conducted by the LBPD’s Financial Crimes Detail.

The whistleblower report acquired by this newspaper served to confirm the information received.

The tip information was researched and it was confirmed through public records that Kindel Gagan is a registered lobbyist with the City of Long Beach and that Doud had a business relationship with Michael Gagan – a principal of the firm – prior to and during her first election to office in 2006.

As a result of these findings this newspaper filed two Public Records Act Requests (PRA) on Jan. 24, one with the City Auditor’s Office and one with City Financial Services.

The PRA to Doud’s office read in part: “It is requested that all documents in possession of the Long Beach City Auditor’s Office be produced that are related to any and all business and/or contracted services and delivery of such services to the City Auditor’s Office by Kindel Gagan Inc., a public affairs advocacy company that advertises itself as “A Los Angeles-based Public Affairs and Lobbying Firm” located at 550 S. Hope St. #530, Los Angeles CA 90071.”

The PRA made to City Financial Services requested that all invoices paid by the city to vendor Kindel Gagan, Inc. and all related companies since 2000 be produced including: 1) A listing of all payments made by the city to vendor Kindel Gagan, Inc. and all related companies since 2000 and 2) All contract agreements between the city/departments to vendor Kindel Gagan, Inc. since 2000.

City Response to PRAs

On Jan 31 Financial Services responded, stating that responsive records exist, that staff is compiling and reviewing the documents and will release the appropriate records upon completion of the review.

On Feb. 1 the City Auditor’s office responded that the Auditor’s Office was “experiencing a delay in searching for records” and that the newspaper “will be notified by Feb. 18, 2022 as to whether the city has any responsive documents.”

Beachcomber Source

During the early part of the Beachcomber’s investigation, contact was made with a former auditor employed by the City Auditor’s office who left city employment several years ago.

The former auditor-employee agreed to speak on condition of anonymity and offered the following comments in response to Beachcomber questions related to the relationship between Laura Doud and the Kindel Gagan organization:

“The contract was in place when I got there.”

“Many people warned Doud that the Kindel Gagan contracts would become a problem.”

“The contract was made exclusively between Laura and Kindel Gagan.”

“No one that I know of was ever asked or consulted about the framing, content or deliverables associated with the contract.”

“No one other than Laura had contact with Kindel Gagan.”

“No one in the office ever saw a deliverable [product] associated with the contract – but they were expected to sign off on the Kindel Gagan invoices every month.”

“No member of the staff – during my time with the office – ever saw a deliverable from the Kindel Gagan contract.”

The source had no idea how often Doud “consulted” with Gagan. She said, “Doud did not keep a telephone log or any kind of record of the calls that I knew of.”

“Laura’s rationale was that Michael Gagan is her contract. She believed that her ability to consult with him was in itself a deliverable.”

“Laura never thought that there was anything nefarious about the contracts and the monthly invoices.”

“Laura believed that Gagan’s advice and counsel was key to her success – even though her actual success was limited by the fact that she never applied the full power and authority of her office with regard to the choices of what audits to conduct and how to conduct them.”

The source concluded the conversation with the Beachcomber saying, “Laura had a great deal of power and she did not use it.”

Source Confirmed by Report

The following are statements within the whistleblower report that validate the Beachcomber interview of the former auditor-employee who made the comments above.

“No contract agreement with Kindel Gagan exists to delineate services, terms and deliverables.”

“No work is performed by Kindel Gagan. No report drafts, final analysis, final reports, and/or recommendations from Kindel Gagan have been located that can verify that work was actually performed. Ms. Doud has not explained the services provided.”

“Monthly invoices for the past 15 years contain no information describing the services or hours that were rendered for that invoice period.”

Offer of Proof and Confidentiality

In item #11 of the whistleblower report he/she details a list of documents that support the allegations against Doud – many of which correspond with the documents requested in the Beachcomber PRA’s; documents which our confidential LBPD source could not provide.

After vetting the whistleblower’s true name identified in his/her report the Beachcomber located an email address and sent the individual a communication that included the following:

“We recognize that the road ahead will be difficult for you – as it is for all whistleblowers. For that reason, we intend to protect your privacy as best we can by referencing you only as the whistleblower.

We will not expose your true identity – which we have fully vetted though public records – as we appreciate and understand the pressures and threats that will come from your decision to deliver truth to power.

We also recognize that this is a developing story and there are many questions (and documents) that can best be answered by you as events unfold.

It is therefore our hope to report on those events with the most accurate information possible by establishing an exclusive – confidential – relationship with you.

If you chose to communicate and/or respond to our questions or requests for supporting documents, we can do so via this email address.

If you choose not to, we will report that the whistleblower did not comment.

Our commitment to protecting your identity will not be affected either way.

Thank you, we look forward to receiving a signal that you will join with us in delivering the truth to the people as this matter develops.

Should you choose to offer comment prior to our first publication that will expose the major allegations in your report, please do so prior to our deadline, which is end of business today.”

The whistleblower did not respond prior to the deadline.

Doud’s Response

City Auditor Laura Doud was asked to comment on the whistleblower allegations. A response was received from her criminal defense attorney, Kate Corrigan, of Newport Beach who wrote:

“Thank you for your inquiry of Ms. Doud. She is working diligently with the appropriate parties to ensure that the truth comes out. She is actively cooperating with the City of Long Beach and with its independent investigation of the false accusations leveled against her and her office. She looks forward to these issues being resolved in a timely manner.”

This is a developing story that will be updated as additional information becomes available.

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

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Comments

I'll say it again, the entire city of LB and every department within it is broken and corrupt. Its assisted in its criminal activity by our elected city council. Why is the corrupt LBPD investigating another LBC corrupt employee? Every time they investigate themself nothing is done. This city has proven that it is a corrupt organization therefor it needs to be investigated by the Feds – not a corrupt and incompetent LBPD. When are the LB citizens going to wake up and demand accountability?. SMH

Let’s remember that she had another partner in crime. Together they “strengthened the auditors role” by actually diminishing her role. Together they “strengthened term limits” by increasing terms. Then there’s the multi-million dollar Queen Mary fiasco, the closed door negotiations to sell the convention center, terrace theater, sports arena, the elephant lot, and related lands and other structures, the way-overpriced year-round homeless shelter, and the potential city subsidy of the LBPOA allowing them to run a profit on public land since 1973. Where is the F.B.I. When we need it?

According to Laura Doud's own bio; "The City Auditor is the watchdog” of the City’s Treasury, the person who assures the citizens that their City is running efficiently and effectively. The City Auditor is also the check and balance of City government." What is NOT mentioned is the City Auditor has immense power and operates free of scrutiny.

As a Certified Public Accountant, Certified Fraud Examiner with a Law Decree, it appears Laura Doud has utilized her background to further corruption and fraud of Long Beach taxpayers for over 15 years.

We trust Laura Doud as city auditor to monitor the business of the city and keep it honest. This is a shock to find the misappropriation of over one million dollars. The Queen Mary contracts and the Community Hospital 30 million dollar gift to the operators show corruption at the highest level. The LB Police Officers Association gives hundreds of thousands to our elected officials and the city pays our millions in brutality claims. Let's make the council full time so they can oversee this stuff. We need a clean sweep of the city manager and staff.

Unless you can figure out a way to get Long Beach residents registered to vote and actually show up to vote, it is highly likely very little will change.

It's still hard to believe that after having over $1,000,000 and the thief that took it apprehended one would like to believe that the crime will be dealt with a sentence that goes something like: restitution to pay the City back, another professional historical achievement by a local sports team, and we'll all be saying, Laura hoo? She's working on her tennis game at the San Louis Obispo Women's Country Club eating three times a day and sleeping on her cot nightly. Almost forgot! Our new D.A. part Original sentence behind bars will be cut in half or eliminated for good behavior.

With so many comments here and on Next Door calling for the FBI to investigate the fraud and corruption rampant in Long Beach, has the FBI ever been contacted and asked to do so? As a relative newbie to the city I have become increasingly aware of and witness to some spurious activities but don’t feel informed enough about them or even how to invite the FBI to begin an investigation. Surely there are other concerned Long Beach citizens more qualified and knowledgeable than I to take the first step. I gladly volunteer to help in any way I can.

I can appreciate whistleblowing as an effective tool against fraud and corruption. But I have a greater appreciation for the presumption of innocence until proven guilty principle. If the residents of Long Beach are truly concerned about corruption within our city, I would caution against trying this whistleblower investigation in the court of public opinion. Who knows, perhaps that is the intent. It is an election year and we all know politics can be a dirty game.

Shouldn't payments made be accompanied by a detailed Invoice?
Business 101
If not....something is awry

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