Wednesday, April 14, 2004
Page 7
PERSPECTIVES (Column)
City Hall: Bastion of Mischief, Deception and Tricks—Part 2
By ROGER M. GRACE
It was shortly before 6 p.m. on Thursday, June 13, 2002, that this newspaper received by fax a notification that the Los Angeles City Clerk’s Office had decided to award a contract for legal advertising to the Los Angeles Daily Journal.
We were dumbfounded. As I recounted in yesterday’s column, at the time the contract was awarded to us by unanimous vote of the City Council on Dec. 17, 1997, there was extreme disgruntlement on the part of the city with the way the Daily Journal had been processing its notices. Ever since our contract had gone into effect in March, 1998, satisfaction with our performance had consistently been expressed.
What was faxed to us included a copy of a report from City Clerk J. Michael Carey to Mayor James Hahn, sent on Monday, June 10, asking for authorization to enter into a contract with the Daily Journal. It said that the Journal had offered a better price. Had the contract been put out to bid, that’s all that would have mattered. But there had, instead, been a request for proposals, so that other factors could be taken into account. (In any event, as I’ll get to, there was only an illusion of a lower price.)
Curiously, the report hailed the Daily Journal’s capabilities even though that newspaper had not handled the city’s notices since the contract went to us, at which time the Daily Journal’s performance had been viewed as sorely wanting. Whether something was rotten in Denmark I don’t know; there was surely the stench of decay in Los Angeles.
My wife, Jo-Ann, placed a call to Hahn the next morning, and I sent him a letter late that afternoon asking that he hold off on giving approval until the matter could be reviewed. Did we have reason to think we would be able to get through to the mayor? Yes. He was hardly a close buddy, but we had gotten to know him in recent years, chatting with him at various functions. He was a guest of mine the previous year at the annual meeting of the Society of the Friendly Sons of St. Patrick, and Jo-Ann and I conversed with him at length at a small gathering later that year. (Those in attendance had paid $500 each, to be applied to Hahn’s campaign fund in the run-off for mayor. That is, of course, peanuts in contrast to what big players spend.)
Anyway, we were not strangers to Hahn, we own two newspapers in the city, and, yes, I did think he would respond.
I could understand that Hahn did not contact us that very day. There was much revelry in Los Angeles that Friday over the Lakers winning the NBA championship, and Hahn was in the forefront of the festivities.
Nonetheless, as we learned the following Tuesday, the mayor did manage to find time that frenzied day to sign the authorization.
The following January, my wife and I attended the dedication in downtown Los Angeles of the Paul Hastings Building. The mayor spoke there. He mingled with those in attendance. It was clearly discernable that he was choosing his path deliberately and was avoiding us. “Jimmy” knew he had been a bad boy.
What had been in it for Jimmy?
Hahn’s authorization was all he needed, Carey proclaimed. Approval of the City Council was not necessary, as he saw it. Oh, there was the formality of a go-ahead from the City Attorney’s Office but, his stance was, that shouldn’t delay switching over to the Daily Journal immediately upon expiration of our contract on June 30.
If you read yesterday’s column, you might notice a contrast in the approach the city was taking. When we sought an opportunity to compete for a contract, the city found it necessary to name a blue-ribbon panel to consider the matter; the panel took nearly two years to conclude that competition was a good idea; it was almost a year-and-a-half before the City Council ordered that the Clerk’s Office issue an RFP; more than two years past before that office complied; it was nearly a year before the contract was awarded; and about three months before it went into effect. Yet now, in 2001, with the Daily Journal selected to resume its role as contractor there was haste—haste that did not exist during the seven years we were battling to break that newspaper’s monopoly hold on city notices.
In fact, the mayor’s OK was not enough. The request for proposals, itself, specified that the award of a contract was subject to City Council approval. Moreover, the California Supreme Court has held that the award of a government contract is a legislative act; the City Council is the legislative body, not the mayor. A suspicion does arise as to collusion between the clerk and the mayor to award the contract to political benefactors of the mayor.
(That the Daily Journal is in the hands of moneyed interests is not in doubt. Its CEO and principal shareholder, Charles T. Munger, who is business partner of Warren Buffett, had a net worth of $1.6 billion a few years back, and is bound to have picked up a few dimes and quarters since then.)
We filed protests in connection with the impending award of the contract.
On June 27, 2002, I spoke with Carey by telephone. He was strident and huffy. The clerk declared flatly that that “Your contract is terminated as of June 30,” said that a contract with the Daily Journal would not be in place by Monday, July 1, declared that what his office would do in connection with publishing notices as of July 1 “is my decision not yours,” and, responding to my suggestion that it would not be his decision if the law pointed to a particular path, proclaimed: “I have total authority.”
On July 1, he took action to prove his “total authority” by switching the business to the Daily Journal, notwithstanding that no contract had been entered into with it, and notwithstanding that it is normal procedure for city departments and offices to continue utilizing services of the existing vendor where a new contract with another vendor has not yet come into existence.
This was, to state the obvious, blatant favoritism.
There’s more. We finally received a copy of the Daily Journal’s proposal on Friday, June 28. (Carey required that we file a Public Records Act request to get it, and wait 10 days, even though the RFP said the respective bids would be made public.)
It was patent that the Daily Journal’s bid was non-responsive.
The RFP did not merely seek a price for publishing notices in the proposer’s own newspaper. It also called for a price for publication of notices in a bevy of other specified newspapers, with the price being guaranteed during the initial year of the contract and with the city reserving the right to extend the contract by one or two years “on the same contract terms and conditions.” While the city routes most notices to the newspaper owned by the vendor, it designates some for foreign language or community newspapers, and must, by law, publish environmental notices in the city’s largest circulated paper, the Los Angeles Times.
Filling in the prices was, as I mentioned yesterday, risky since any newspaper could, at any time, raise its prices. Thus, the contractor would have to pay the current price, minus its commision from the newspaper, but be reimbursed by the city at the price set forth in the contract.
We submitted a proposal with guaranteed prices. The Daily Journal didn’t. It specified that after the first year, it could raise the prices to conform with what the outside newspapers were charging.
This was a substantial deviation. On that basis alone, the proposal should have been rejected. And Carey, an attorney, certainly should have known that.
In any event, the prices we set forth for other newspapers, aside from being locked in, were 14.62% lower than those stated by the Daily Journal. This was even more important than the rate to be charged by the vendor’s newspaper. As I pointed out in a protest dispatched July 5, 2002:
“The amount of money spent by the City Clerk’s Office from Jan. 1, 1999 to the present on publications in the Metropolitan News-Enterprise, as the ‘official newspaper,’ was $249,230.69; the amount spent during that period on outside publications was $1,516,197.37.”
The big shocker was that the conclusion that the Daily Journal’s price was lower for publication in its own newspaper was wrong. Although we had bid $2.81 per legal square and the Daily Journal had bid $2.70 per legal square, a “legal square” is an imprecise method of cost calculation that does not take into account varying type widths and propensities of newspapers to include or not include white around the notices. Submitted with the responses to the requests for proposals were completed “exercises” involving the typesetting of notices. The actual cost we listed for notices we typeset was 8.13% lower than the Daily Journal’s price for its version of the same notices. Under our alternative proposal, if the city paid within 45 days, it would have been entitled to a 1.7% discount; our discounted price was 9.7% lower than the Daily Journal’s.
Decidedly, we were the low bidder.
My impression is that the City Attorney’s Office advised Carey that the matter did need to go to the City Council. Additionally, City Council President Alex Padilla seemed to think the council should not be cut out of the process. Carey responded by simply rejecting both bids.
He continued feeding the notices to the Daily Journal, even though we had been the existing contractor and our bid was lower. Is there something wrong with this picture?
As a favor, Howard Sunkin, City Hall lobbyist for Joe Cerrell’s firm, arranged a meeting with Carey in his office. Sunkin (who is extraordinarily skilled in making a presentation), my daughter (our lawyer), and I discussed with Carey how a new RFP might be formulated, avoiding legal squares. I went away from the meeting thinking a new RFP would be issued.
It wasn’t.
Some months later I bumped into Carey outside the City Hall Mall. He told me his office would be placing legal notices directly with the foreign language and community newspapers.
I wrote to City Controller Laura Chick last Jan. 6 outlining the situation and asking for an appointment to discuss the matter with her.
Some weeks later, I talked with Councilman Ed Reyes about the matter at a small fundraising gathering at Cerrell’s office. Reyes said it seemed to be something Chick would take an interest in. I told him that she had not responded to my letter seeking an audience with her, and he said he would speak to her about it.
On March 11, I followed up with a letter to Reyes reminding him of our conversation. I haven’t received even a form letter from his office acknowledging receipt of my missive.
And, there’s been no response from Chick.
Perhaps more important matters have been commanding their attention. Indeed, taking into account recent news reports of federal, state and county probes of the city’s contracting practices, it might be that favoritism in making awards is simply too commonplace for anyone in city government to lend notice to one particular instance.
Meanwhile, I’ve gleaned from documents recently supplied by Carey in response to a Public Records Act request that the amount the Daily Journal has been paid for publishing city notices since July 1, 2002 is the very price it offered in its response to the RFP.
It has been awarded an unwritten contract, with the amount stated in its proposal being the contract price. Given that the contract is incorporeal, there was no opportunity to challenge the award of it. To my way of thinking, this reflects bureaucratic sleaze.
Moreover, the legality of this is doubtful. City competitive bidding requirements are being skirted apparently on the theory that no contract exists; there is simply a series of individual purchases, each purchase being in an amount lower than that required for competitive bidding. The flaw is that the purchases are in an amount less than the Daily Journal’s open rate, and the special price the city is getting is one which the newspaper offered in connection with seeking a contract—that is, it is a price that was offered with the expectation of getting all of the city’s notices, except those appropriate for foreign language or community newspapers. It is a price that obviously would not be extended if there were not a tacit understanding that the newspaper would get every notice it would have received had it been awarded a formal contract in writing. There is, plainly, a de facto contract, awarded by administrative fiat.
The city, by the way, has been overpaying. Aside from the price we offered having been lower, the Clerk’s Office has tolerated notices being typeset with large gobs of white spaces and with some notices which we would have typeset being camera-shot (with large type and double-spacing), thus being larger than necessary.
Too, we learned, notices that are being sent by the Clerk’s Office to newspapers other than the Daily Journal are being transmitted via Daily Journal software, presumably with consideration in some form flowing to the Daily Journal. Yet, no bids or proposals were sought in connection with this service.
I cannot say that Carey is a corrupt official. I can say that he has engaged in favoritism and deviousness and that the facts, as known to me, point to at least the appearance of corruption.
Whether he is merely carrying out orders or is independently motivated to award business to a particular company through irregular procedures, I don’t know.
It is my personal view that his conduct is unworthy of a member of the State Bar, and is far below the ethical level residents of Los Angeles expect, or ought to be able to expect, of our local officials.
Copyright 2005, Metropolitan News Company