Firm Says It Lost LAX Bid by Not Donating

By Ted Rohrlich, Ralph Frammolino and Jeffrey L. Rabin, Times Staff Writers

Executives of an engineering company working at Los Angeles International Airport have told federal prosecutors that the firm lost a multimillion-dollar contract because it refused to contribute $100,000 to the anti-secession campaign led by Mayor James K. Hahn.

The officials at URS Corp. also told federal prosecutors a few weeks ago that they had complained directly to Hahn, to no avail.

They told federal authorities that a lobbyist for the company had solicited the donation at the behest of Ted Stein, Hahn's appointee as president of the Airport Commission, and that the lobbyist had said they would face serious problems if they did not contribute, according to sources familiar with their statements.

The URS allegations are a major focus of continuing county and federal investigations into contracting in Los Angeles city government. Dist. Atty. Steve Cooley has said he was probing the possibility that contractors had been forced to "pay to play" at the airport, harbor and water and power departments. Federal authorities have subpoenaed thousands of pages of city records, and harbor officials received subpoenas this week to appear before county and federal grand juries.

In addition to the URS allegations, three current and former members of the city's airport department told investigators for City Controller Laura Chick that they believed Stein was exerting improper political influence over contracting at the airport, according to sources familiar with Chick's audit.

Both Stein and John Ek, the former URS lobbyist alleged to have solicited the donation at Stein's behest, said in interviews this week that the firm's allegations were false.

"There has never, ever been a quid pro quo on any contract at the airport," Stein said. He said he had been dissatisfied with URS because of its performance and high bills, not for a lack of political donations.

Ek acknowledged that he had asked URS to contribute to the successful 2002 anti-secession fight that kept the San Fernando Valley from breaking away from the rest of the city of Los Angeles. But Ek said he had never told URS the request originated with Stein, and the lobbyist added that, in fact, it had not. Ek said he did not recall having suggested an amount but was certain he had never warned of dire consequences if the firm did not give.

"My response is, it's outrageous," he said of the URS executives' allegations. "I don't do business that way. Never have. Never will."

Hahn said Wednesday in an interview that he remembered meeting in early 2003 with a URS executive and the firm's new lobbyist, Mike Roos, who is also a Hahn appointee as president of the Recreation and Parks Commission. But the mayor said there had been no discussion about a contribution or the lack of one.

Spokesmen for URS, an engineering and management firm based in San Francisco, have declined repeated requests for comment. Robert Gilbert, the URS project manager at the airport, and Steve Pearson, the firm's regional manager in Southern California, also declined to comment.

"While all of the investigations are going on, we're not going to talk about it in the paper," Pearson said.

Law enforcement authorities have taken the firm's allegations seriously enough to summon Gilbert and Ek to testify before a county grand jury. A federal grand jury issued a subpoena last month for all documents in Stein's files related to URS' contract at the airport, where the company is managing environmental analysis and preliminary planning for Hahn's proposed $9-billion modernization.

Later in the year, the Airport Commission is expected to consider a new multimillion-dollar contract for the project's advance planning phase. A joint venture by the architectural and engineering firms Daniel, Mann, Johnson & Mendenhall, based in Los Angeles, and HNTB, based in Kansas City, Mo., has been tentatively chosen over URS by five senior airport staff members. Stein did not participate in the staff review, because Hahn recently banned commissioners from sitting on selection panels.

URS executives say they believe they lost the contracting opportunity as a result of their refusal to contribute to Hahn's anti-secession campaign. HNTB and Daniel, Mann, Johnson & Mendenhall contributed a total of $141,000 to the anti-secession effort.

The URS allegations underscore the vulnerability to corruption charges of a local political system that, until recently, allowed volunteer citizen commissioners like Stein to double as fundraisers for the elected officials who had named them to their influential posts. Commissioners oversee city agencies such as Los Angeles World Airports and decide which private companies get lucrative city work.

The commissioners' dual role has created a sense among some companies that political contributions are expected as a price of winning and keeping city business.

Stein in particular, a wealthy San Fernando Valley housing developer who has been active in city affairs for many years and who became one of Hahn's biggest fundraisers, has been a magnet for controversy, in part because of his aggressive and demanding manner, which some liken to that of a bully.

In their statements to federal investigators, URS executives said their lobbyist, Ek, had approached their LAX project manager, Gilbert, for the contribution. They said Gilbert had turned to his boss, URS regional manager Pearson, who had sought an opinion from company lawyers. The attorneys said not to make a donation, according to one of the sources.

URS has made regular contributions to politicians running for local, state and federal offices, including Hahn. But those contributions, totaling more than $200,000 in recent years, went directly to candidates, not to local ballot initiatives. The most an individual or company can legally give to a candidate in regular Los Angeles elections is $500 or $1,000, depending on the office.

But the 2002 battle over the Valley secession threat was different. There were no contribution limits.

The secession fight sparked a fundraising frenzy as Hahn, then in office for only a year and a half, sought to keep the city together.

Gilbert and Pearson told federal prosecutors last month that lobbyist Ek had suggested that a donation of $100,000 would be appropriate and that it should be made through Stein, so Stein would get credit for it with the mayor and be more inclined to make things go smoothly for URS at the airport.

Ek said this was nonsense. He would have wanted any donation to go through him so his then-employer â€" the lobbying firm of Rose & Kindel, which was asking all of its clients to give â€" would receive the political credit, he said.

When the donation was not forthcoming, URS' Gilbert told federal authorities, Stein told him that the firm would never see another dollar from the airport, the source said.

The source also said Gilbert had told prosecutors that a high-ranking airport staff member had mentioned URS' failure to contribute in relation to its contract woes. Jim Ritchie, a retired Marine colonel in charge of long-range planning at the airport, told Gilbert, according to the source, that if the company had donated, "you wouldn't have had these problems; you messed it up by being cheap."

Asked to respond, Ritchie said: "That is patently false. I can't believe Bob Gilbert would say that, frankly…. Gilbert is a straight guy."

Stein and Ritchie, who oversaw URS' work for the airport, said the firm's problems had nothing to do with its unwillingness to make a political contribution. They had to do with how well the company was performing and with what Stein said he had perceived to be its out-of-line cost forecasts for continued work on a huge task: preparing a modernization plan for LAX.

Stein, who began his career as a deputy district attorney and says he has high ethical standards, repeatedly quarreled with URS officials about the quality, speed and cost of their work, according to Ritchie.

Ritchie said that problems arose as Stein pushed hard to speed up URS and that, in the rush, mistakes were made. For example, he said, URS told Stein that no new on- or off-ramps to the San Diego Freeway would be needed as part of the reconfigured airport.

Stein said he had made speeches to the community announcing this, only to learn later from Gilbert that new ramps would indeed be necessary.

"I was extraordinarily embarrassed," Stein said.

When URS gave a price for the next phase of planning in summer or fall of 2002, Stein said, he thought it was too high.

URS executives, meanwhile, have told federal authorities that Ek described to them a September 2002 anti-secession fundraiser at Stein's house at which they were singled out because the company name appeared on a scorecard of likely contributors with a zero next to it.

Stein and the lobbyist have denied this, saying there was no scorecard and no discussion of URS at the fundraiser.

Just after secession was defeated in November 2002, Stein backed URS for a new, much smaller contract at the city-owned airport in Palmdale.

Ritchie and Stein cited this as evidence that Stein bore the company no ill will.

Stein noted that URS was supplying a different group of people to work on Palmdale and said his problems were with the project team at LAX.

"On several occasions," Ritchie said, Stein didn't believe that the team at LAX that URS supervised "was telling him the truth."

Worried about its problems with Stein at LAX, URS hired its new lobbyist, Roos â€" the Hahn-appointed president of the parks commission â€" in early 2003. Roos began squiring the firm's executives around City Hall. He took regional manager Pearson to see the mayor in February 2003, Hahn's office said.

In September 2003, Roos took Pearson to visit City Councilwoman Cindy Miscikowski, whose district includes LAX and who has staked out a position against Hahn's ambitious airport plan. "They felt there was a sense of retaliation," Miscikowski said, adding that she suspected "a pay-to-play situation" at LAX.

Miscikowski found a way to put the brakes on Hahn's airport proposal, saying it was absurd to go ahead with more planning before the public had finished commenting on an environmental impact report. Rather than risk a council vote on its plan at that point, the mayor's office agreed last year to what became a six-month delay.

While this was going on, auditors working for City Controller Chick on contracting procedures at Los Angeles' airports were having some unusually provocative conversations with URS' Pearson and airport executives.

Lydia Kennard, then the airport's executive director, told an auditor that she was troubled by the possibility that Stein had played too large a role in selecting contractors. Stein has treated his volunteer airport post as nearly a full-time job, at times sitting with staff members to interview potential contractors.

Kennard told the auditor, according to three sources familiar with her statements, that only staff members should do such interviews, with commissioners restricting themselves to voting on staff recommendations.

She said Stein had told her that he sat on the panels, always with another commissioner, because he did not trust the staff to do an honest job.

Informed of her reported comment, Stein said it was "a mischaracterization somewhat. I think one reason it's important to have commissioners sit in is because many times staff is prone to go with the comfortable shoe … someone they've worked with in the past, someone they know they can get along with."

Assistant City Atty. Timothy Hogan, one of about a dozen city lawyers at the airport, also expressed suspicions about Stein, according to sources with detailed knowledge of Hogan's statements. They said Hogan had told auditors last fall that he believed Stein had manipulated contractor selections to make sure work went to whomever Stein wanted.

Stein denied Hogan's allegations. He said Hogan had never been on, or witnessed, a selection panel on which Stein sat.

Before Chick released her audit of airport contracting late last year, The Times published an unrelated article reporting that the district attorney's office had missed a rare opportunity to plumb back-room patronage and deal-making when it shut down a corruption investigation prematurely.

Dist. Atty. Cooley announced that he would reopen his probe.

Soon afterward, Chick's office handed over to Cooley the statements that Pearson and airport executives had given her auditors, sources said. Cooley then expanded his investigation to include URS and Stein.

Times staff writers Jennifer Oldham and Anita M. Busch contributed to this report.

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