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Corruption in LA Water and Power

On Thursday, a city audit conducted on two nonprofit trusts created by the Los Angeles Department of Water and Power was released, revealing a pattern of financial dealings that smacked of corruption.

The evidence against The Joint Training Institute and the Joint Safety Institute, which are run by DWP managers and leaders of the utility’s largest employees’ union, included hiring vendors without a competitive bidding process, exorbitant salaries for higher level managers and the use of credit cards to charge personal expenses without filing expense reports.

Although City Controller Ron Galperin said there was no evidence of criminal wrongdoing, the trusts, which are funded with over $40 million from ratepayers, fought long and hard to keep their records secret. The nonprofits chiefs, especially Brian D’Arcy, head of the International Brotherhood of Electrical Workers Local 18, the city-owned utility’s largest employees’ union, battled the city for over a year; when the city finally won, Galperin exulted, “We were fought tooth and nail on this, and we won,” according to The Los Angeles Times. On Thursday, D’Arcy said Galperin’s audit was “littered with accusatory innuendo and peppered with contradictory statements.” He added that there was no evidence to prove money was spent on anything other than “improving safety and training of the hard-working employees of the DWP” and said the nonprofits had not “violated any laws or regulations.”

Yet some of the evidence seems to point toward questionable behavior; the audit reported that in the span of five years, some trust employees charged over $660,000 to their publicly financed credit cards for steak dinners and trips to Las Vegas, Hawaii and New Orleans; one administrator making roughly $220,000 a year, used his card from the trust to purchase over $30,000 worth of gas between 2010 and 2014; five top administrators make roughly $220,000 while employees at the state Public Utilities Commission who have similar jobs make roughly $148,000; the trusts paid $6.1 million to outside vendors, the majority of the time “without any competitive or documented process to ensure reasonable price or value was received.”

Additionally, head administrators received a “transportation allowance” of $500 a month, and administrators used public funds to buy themselves iPads and cellphones, which was explained as their need for “a secure communications channel” outside devices provided by the DWP.

Galperin simply said, “They are used to operating out of public view, and that’s how they like it. Transparency is not their favorite word.”

City Administrative Officer Miguel Santana released his own report Thursday that argued the trusts did not offer any “real information on the outcomes or effectiveness” of their programs. Galperin’s audit reported that the trusts have over $11 million saved.

Last year, former nonprofit administrators told the Times that the reason for the enormous savings was that management and labor sides could not agree how to spend the money. Galperin responded, “If they’re not spending this money, you have to wonder why we keep giving it to them,” adding that he wanted to suspend future annual payments until the savings was gone. In 2013, DWP’s five-member Board of Commissioners voted to cut off funding for the Joint Training Institute and the Joint Safety Institute.

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