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Billions to Spend: Part 3

Markups by 'body shops' inflate the public's cost

As the Los Angeles Community College District launched a massive building program, contractors with ties to trustees reaped benefits.

March 03, 2011|By Gale Holland, Michael Finnegan and Doug Smith, Los Angeles Times

Its parent organization, the East Los Angeles Community Union, is a major player in Latino and labor politics in California; for the district trustees, both constituencies are mainstays of support.

Founded in the 1960s, the organization grew from an urban revitalization group into a web of nonprofit and for-profit companies active in banking, real estate and construction.

For decades, TELACU's government contracts and political maneuvering have drawn controversy. In 1996, it paid $13,200 for a new tile roof on the Eagle Rock home of Richard Alatorre, then a City Council member who had just pushed to get TELACU a subway contract and a city loan for a shopping center.

TELACU's leader, David Lizárraga, is one of the nation's most prominent Latino businessmen and a frequent contributor to Democratic and Republican politicians. In May, he sat at President Obama's table at a White House state dinner for Mexican President Felipe Calderon.

Among the construction program staff members on TELACU's payroll is David Barilotti, who has served as one of the program's top accountants.

TELACU recruited Barilotti after the district told a small group of contractors about the job opening. Rather than pay TELACU a one-time finder's fee, the district allowed it to serve as Barilotti's employer of record.

He was paid $151,000 over 16 months, but markups by TELACU and URS drove up the cost of employing him to $460,000, records show.

Lizárraga and other TELACU executives did not respond to requests for comment.

Barilotti's case illustrates another downside of the system: It delegates core public functions such as accounting, procurement and contract oversight to people on the payrolls of companies that profit from the construction program.

Of the hundreds of people working full-time on the program, only two are employees of the district: Eisenberg and his deputy, Thomas Hall.

Bad idea, said David Umstot, vice chancellor for facilities at the San Diego Community College District. The San Diego college system has 10 public employees overseeing private contractors in a bond program one-quarter the size of the one in L.A.

"You don't want to have non-governmental employees making decisions on changes in contracts, managing contracts. That's key," Umstot said. "They need to be public employees."

Family business

One of the busiest contractors under the staffing system is Summit Consulting and Engineering, owned by a former school teacher named Michelle Gastelum.

Summit is based in a Pasadena office tower overlooking the 210 Freeway, but there is no company sign at the entrance. Summit is tucked inside the office suite of Gateway Science & Engineering, owned by Michelle's father, Art Gastelum, a longtime L.A. City Hall power broker.

Together, the Gastelums have donated $55,650 to trustees seeking reelection and to their campaigns to expand the construction program. They have also held fundraisers to gather contributions from other contractors.

Since 2007, Summit has employed at least 28 construction program staff members.

One of them was Patricia Torres, who for three years oversaw bidding on construction contracts. Over that time, her pay was $210,000. After markups by Summit and URS, the cost to taxpayers was $563,000, records show.

Torres said she never worked at Summit. Her desk was at the district's construction office in downtown Los Angeles, and she reported to a URS construction manager.

In an interview, Torres said she had problems collecting her paychecks and receiving health benefits from Summit, so she pleaded with Eisenberg and URS to place her with a different subcontractor.

To her disappointment, nothing came of it. She said a URS executive told her the reason was "political."

Frustrated, Torres said she asked: "Who runs this program, the district or the Gastelums?"

In September, after Torres went on medical leave and threatened to go to The Times with her story, higher-ups reconsidered her request to change employers. Her boss, Werner Wolf of URS, left her a voicemail suggesting that she resign from Summit and ask another subcontractor, Seville Construction Services, to hire her. URS had alerted Seville to expect her call, Wolf told her.

"The key would be, this would have to be all done on your own," the URS executive said in the voicemail.

So far, Torres has not taken up the offer. To her, the system of paying staff members through subcontractors is baffling.

"Why not just hire me and pay me?" she asked.

In an interview, Wolf called Torres a valued employee and confirmed her account.

"I have no idea why the people up above were not letting her go, or why they were abiding by Michelle Gastelum's wishes," he said.

Michelle Gastelum called Torres a disgruntled employee and denied blocking her request to switch employers. She also said neither campaign money nor her father's connections helped Summit win district contracts.

"My business is my business; nothing has been handed to me," she said in an interview.

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