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Bidder on MTA Work Agrees to Pay Ethics Fine

Politics: Firm that is now part of consortium seeking Eastside subway job reimbursed employees for 23 contributions to campaigns. Some recipients were connected to the transit agency.


A predecessor to a major construction firm fighting for a high-profile Eastside subway contract has agreed to pay a $40,800 fine for laundering nearly two dozen campaign contributions to officials and causes statewide, including donations to present members of the MTA board and its forerunners.

San Francisco Construction Management Inc., formerly known as O'Brien-Kreitzberg & Associates Inc., reached an agreement with the state Fair Political Practices Commission earlier this month.

An investigation found that O'Brien-Kreitzberg reimbursed employees for 23 contributions made from 1993 to 1995 to officials or campaigns in Los Angeles, Long Beach, San Diego and the San Francisco Bay Area.

A new firm, O'Brien-Kreitzberg Inc., is the lead contractor in a consortium, Metro East Consultants, that is waging a fierce political and courtroom battle over an $85-million contract to manage construction of the Metro Rail subway to the Eastside.

The Eastside contract has sparked intense competition, allegations of political interference in decisions at the Metropolitan Transportation Authority and led to the resignation of former MTA chief Joseph E. Drew.

O'Brien-Kreitzberg and Associates and its successor firm was the construction manager on the Metro Green Line between Norwalk and the edge of Redondo Beach.

In June, O'Brien-Kreitzberg Inc. won a key role as overall program manager for the massive school repair project authorized when voters in the Los Angeles Unified School District approved a $2.4-billion bond issue last spring.

The largest of the laundered contributions to Los Angeles-area officials went to two 1993 mayoral candidates, Linda Griego and Nick Patsaouras. Griego received $1,000 and Patsaouras received three checks for $249 each.

Councilwoman Joy Picus got $500 while fellow council member Richard Alatorre got $100.

Long Beach Councilman Jeff Kellogg received $500 and Long Beach Councilwoman Jenny Oropeza got $99. Ray Grabinski got $150 while he was a Long Beach councilman in 1993.

Alatorre was the first MTA board chairman and remains a powerful member. Patsaouras is an alternate on the MTA board, and Grabinski served as a member of the Los Angeles County Transportation Commission before the panel and the Southern California Rapid Transit District merged into the MTA.

Oropeza joined the MTA board this year. Neither Picus, Griego, nor Kellogg served on the MTA board or its predecessor.

Although the total amount of the laundered contributions was relatively small--the 23 contributions totaled $15,571 and most were in the Bay Area--the panel expressed concern about the practice of O'Brien-Kreitzberg & Associates project managers and other employees being reimbursed for political contributions.

"This chain of activity, making contributions in the name of another person, is commonly referred to as 'laundering,' " said the agreement reached between the state political watchdog agency and the construction firm.

"There were a large number of laundered contributions. The repeated nature of the violations over the course of two years indicates a pattern of laundering activity rather than an isolated incident."

In the settlement agreement, Fred Kreitzberg, former owner and principal officer of O'Brien-Kreitzberg & Associates, told the panel that the construction management industry was becoming more competitive in the mid- to late-1980s.

Kreitzberg told the panel that the firm felt "it was important to become involved in the political process and to contribute to candidates for offices that could review" the company's proposals for construction projects.

Usually, a project manager or other O'Brien-Kreitzberg & Associates employee would make a contribution by personal check to the candidate or campaign committee. They would attach a copy of the check to their expense report and be reimbursed by the company.

Kreitzberg and the employees involved in the laundering told the panel that they did not know their actions violated state law.

When informed by Sacramento attorney and former panel Chairman Ben Davidian that reimbursing employees for political contributions was illegal, they immediately ceased the activity, according to the settlement agreement.

Davidian said neither he nor Kreitzberg would have any comment beyond the stipulated settlement with the panel.

Because O'Brien-Kreitzberg cooperated by voluntarily identifying the contributions it had reimbursed, the maximum fine was reduced from $48,000 to $40,800.

In 1995, O'Brien-Kreitzberg & Associates was sold to the construction company, Dames & Moore.

Two companies were formed, O'Brien-Kreitzberg Inc. and San Francisco Construction Management Inc. Davidian said Fred Kreitzberg remains on the board of directors of O'Brien-Kreitzberg Inc.

O'Brien-Kreitzberg Inc. is the lead in the Metro East Consultants group that has so far failed to win the Eastside contract. A Superior Court judge ruled in late July that the MTA's award of the contract to a different contractor, JMA, was "skewed by improper external pressure."

Unless overturned by a higher court, the decision could force the MTA to revisit the hotly contested process of selecting a construction manager to supervise tunneling on the Eastside.

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