County transportation officials have spent tens of millions of dollars on legal fees without adequate financial controls or oversight to evaluate and limit the costs, according to an audit released Wednesday.
The review, by the inspector general of the Los Angeles County Metropolitan Transportation Authority, found that MTA attorneys had no written procedures for managing cases and routinely spent more than $200,000 for outside legal work without getting permission from the board of directors.
Auditors further discovered that agency attorneys did not do risk assessments to determine when it was possible to settle cases early and avoid the high cost of prolonged litigation. Nor did MTA lawyers rely on an automated case management system that tracks expenditures and the status of legal matters.
"Money for lawyers had been leaving MTA's hands with the speed of a runaway train," said Los Angeles County Supervisor Mark Ridley-Thomas, an MTA board member who asked for the audit in February. "There were insufficient checks and balances and lots of decisions being made absent board knowledge and consent."
Concerns about the MTA's legal costs reached a high pitch early this year when it was disclosed that a 15-year legal battle with subway contractor Tutor-Saliba had cost the agency more than $34 million — far more than the MTA could expect to win in damages. The MTA has accused Tutor-Saliba of cheating the agency out of millions of dollars during construction of the Red Line.
A 2004 review by the state auditor found that the MTA's legal costs had risen 200% between 1995 and 2004 and that the management of contracts involving private law firms, which amounted to more than half the agency's legal costs, was lax.
In addition to the inspector general, a consulting firm hired by the MTA participated in the audit. Thompson, Cobb, Bazilio & Associates, based in Torrance, evaluated the agency's case load and expenditures for legal services from January 2005 to February 2010.
The inventory contained 228 open and closed cases and a total of $41.4 million in costs — $29.4 million for work by private attorneys hired by the Los Angeles County counsel's office, which represents the MTA, and $12 million for work by its own attorneys. The amount of payouts and settlements totaled almost $52.4 million.
Auditors noted 15 cases in which the costs to hire private counsel exceeded $200,000 but the expenditures were never approved by the MTA board as regulations require. Those cases ended up costing $26 million, representing 76% of the total cost of all the cases reviewed. Two of the cases accounted for almost $18 million.
"Overall, our audit found that the transportation division of the county counsel should improve its litigation cost controls and have an automated case management system in place to more efficiently monitor its cases," the report stated.
The MTA board approved the audit at the request of Ridley-Thomas, Los Angeles Mayor and MTA board Vice Chairman Antonio Villaraigosa, and Los Angeles City Controller Wendy Greuel.
"Ten million dollars was spent in the Tutor case without board approval," Ridley-Thomas said. "How do you get caught like this? [The county counsel's office] is a professional law firm. This should never have happened."
The audit made more than 20 recommendations to improve management, including spending caps for cases, risk assessments, regular reports to board members, and requiring board approval of expenditures of more than $200,000.
County Counsel Andrea Ordin could not be reached for comment Wednesday. According to the inspector general's report, the office has improved its management of MTA cases since February and adopted many of the recommendations in the audit.
"A lot of these things we've been advocating for a while," said county Supervisor Don Knabe, who chairs the MTA board. "Some of them are in place. They are making improvements, but they have a ways to go."