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Firm challenges plan to select AEG to run L.A. Convention Center

Pennsylvania-based SMG said in a letter that AEG, which runs Staples Center and L.A. Live, did not meet the city's search specifications. The City Council will vote on a firm this month.

June 10, 2013|By David Zahniser, Los Angeles Times

A company seeking to run the Los Angeles Convention Center on Monday filed a challenge to the city's plan to hire Anschutz Entertainment Group, saying AEG lacked the experience needed to secure the lucrative contract.

Pennsylvania-based SMG said in a protest letter that AEG did not meet the city's search specifications, which called for a firm with five years of "managing and operating convention or exhibition facilities in similar markets." SMG and AEG were the only candidates in the city's search process.

"AEG does not manage or operate any 'similar facility' in any 'similar market,' " said SMG Senior Vice President Gregg Caren in a letter to city officials. "Indeed, AEG does not operate a single convention or exhibition facility in the United States, and operations in … Qatar can hardly be considered experience in a similar market."

SMG's letter served as a formal challenge to the selection process, which is expected to culminate in a City Council vote later this month.

City Administrative Officer Miguel Santana, who recommended AEG, said officials were satisfied with the company's track record running convention centers in Australia, Malaysia, Qatar and Oman. In its search process, the city defined a "similar" convention facility as one with at least 350,000 square feet of exhibition space and 100,000 square feet of combined ballroom and meeting space.

AEG owns Staples Center and the L.A. Live entertainment complex, both near the Convention Center. Company spokesman Michael Roth defended the city's search and said the Convention Center would benefit from AEG's international network of sports, entertainment and exhibition venues.

SMG runs 70 convention centers, including facilities in Chicago, Houston, Denver and Atlantic City. Closer to L.A., the company operates exhibition spaces in San Francisco, Long Beach, Fresno and Palm Springs.

In its protest letter, SMG also said AEG has a disqualifying conflict of interest — ownership of the two hotels at L.A. Live. Caren cited the city's conflict-of-interest code, which bars city employees from making decisions on matters that affect their personal financial interests.

Roth disputed that notion and said that a company that runs convention centers that compete directly with Los Angeles "presents much more of a conflict than a company headquartered in Los Angeles with a common interest in attracting those events to this city."

AEG has been a major player in Los Angeles politics, giving generously to an array of candidates and city ballot measure campaigns. The company and its former executive, Tim Leiweke, provided more than $127,000 to the City Council's failed bid to hike the city's sales tax earlier this year.

AEG also donated $50,000 to Working Californians, a campaign group that provided major financial support for mayoral candidate Wendy Greuel and other contenders in this year's election. Greuel lost to Eric Garcetti, who takes office July 1.

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