August20,2013 BriefingDocument,PreliminaryFindings MetraandFormerExecutiveDirectorAlexCliffordSettlementAgreement RTABoardChairmanJohnS.Gates,Jr.Statement:TheRTAsauditstaffhasdeterminedthattheMetra BoardsdeliberativeprocesswasflawedandtheirdecisiontogiveMr.Cliffordagenerousseverance packagewasnotafinanciallyprudent.AllcostsrelatedtotheCliffordcontractdisputeshouldhave beenclaimedunderMetrasexistinginsurancepolicyinsteadofbeingpaidfromtaxpayerfunds. TheRTAauditorsconclusionsupportsmybeliefthatRTAneedsstrongertoolsandauthoritytoprevent situationslikethis.CurrentlawdoesnotrequireMetra,CTAorPacetodiscloseemploymentrelated settlementstotheRTA.NordoestheRTAcurrentlyhaveanylegalauthoritytocancelormodifygolden parachuteagreements. RTAsdiscoveryofMetrasinsurancepolicy,whichwouldhavecoveredthecostsoflitigationand settlement,callsintoquestionthereasonsbehindMetrasdecisiontopayCliffordwithoutnotifyingits insurancecarrier.IurgeMetratoreviewitsinsurancepolicyandifitwouldstillbefinanciallyprudent, MetrashouldimmediatelycancelCliffordsseveranceagreement.

ement. Objective:Determinefinancialprudenceofthesettlementagreement. Process:RTAAuditorslookedatthousandsofpagesofdocumentsandemails;listenedtomultiple hoursoftestimonybeforeRTABoardandtheHouseMassTransitCommittee;listenedtoaudiofilesof Metraexecutivesessions;interviewedcertainMetraemployees;metwithseveralMetraBoard membersandMetrasoutsidecounsel. Focusofauditorreview: Actualcostandtermsofthesettlement Processtoarriveatthesettlement Processusedtoapprovethesettlement Status:RTAsauditisnearlycomplete;informationgatheredhasbeenexamined/analyzedandneedsto becompiledintofinalform.RTAexpectsthefinalworktobecompletebythenextRTABoardmeeting onSeptember13. HighlightsofPreliminaryResults: SettlementAgreementprocesswasinadequateandnotsufficientlydocumented. Thereisalackofjustificationforthegenerouspostemploymentpackage. Lackofdocumentation:Nowrittenreportsofinternalinvestigationor12hourmediation,forwhich Metrapaid$17,000;nowrittenreportfromformerU.S.AttorneyRogerHeaton,forwhichMetrapaid $52,000;nooverallcostbenefitanalysisoftheseveranceagreement. InsurancePolicyCouldHaveCoveredLawsuitCostsBeyond$150,000:A$98,000MetraPublicOfficial andEmployeePracticesLiabilityPolicyinsurancepolicycouldhavecoveredaCliffordlawsuitbeyond

first$150,000.OnJuly17,2013,RTABoardMemberJamesBuchananaskedthenMetraBoard ChairmanBradOHalloranifMetrahadinsurance,towhichOHalloranrespondedthatMetrawasself insured. Throughoutthisprocess,Metrastateditwaspresentedafinancialchoiceofpayingtheseverance agreementorfacing$2to$3millioninlegalfeesfromaprotractedlawsuit.TheRTAauditidentifiedthe existenceofathirdoption,the$150,000deductibleofthisinsurancepolicy. OutsideAttorneysandConsultantsComplicatedProcess Inhiringitsownoutsideattorneysandconsultants,theMetraBoardduplicatedeffortsthatpossibly keptMetrastaffanditsinternallegalteaminthedark,creatingconfusionandincreasingcosts.Because thoseindividualsreporteddirectlytoBoardmembersindependentoftheagency,itsdifficultto determinewhoseintereststheywereserving. SeveranceNotTiedtoPerformance:SomeboardmembershadissueswithCliffordsjobperformance. Reasonsincludedadropinridershipnumbers;failuretoaddressMetrapoliceovertimeissue;anduseof expensiveconsultants.TheseissuesofpoorperformanceweregenerallynotcommunicatedtoClifford, whohadnoformalPerformanceEvaluationplan. ImprovingRTAOversightTools:HowThisCouldHaveBeenAvoided The following would allow the RTA to more effectively discharge the responsibilities that have been giventoRTAunderthelawandpotentiallyavoidthistypeofsituationrecurring. Board Members Conflict of Interest and Revolving Door: Board members should be prohibited from engaginginanybusinessrelationswiththeRTA,anyServiceBoardorappointingauthoritiesduringtheir termofserviceorforatwoyearperiodfollowingtheexpirationoftheirterm. Simplify the Board Member Removal Procedure: Any elected official who is granted the authority to appoint a RTA board member or Service board member should also have the authority to remove that individual from office in cases of incompetence, neglect of duty, malfeasance in office, conviction of a crime,etc.TheGovernorshouldalsohavetheauthoritytoremoveanyServiceBoardmemberuponthe recommendation of a supermajority of the RTA board. Currently, neither the RTA nor the appointing authoritieshadtheabilitytotakethataction. Service Board Members/Fiduciary Duty: By statute, a fiduciary duty should be created for all board memberswhorepresenttheCTA,MetraandPaceorRTA.Thiswouldlegallyobligatethemtoactsolely in the best interest of the Northeastern Illinois transit system and riders. Current law makes it difficult for the RTA to mandate that a Service Boards board members comply with certain RTA requests due to Boardmemberspotentiallyconflictingpoliticalinterests. RTA Review of Service Board Employment Contracts: The Service Boards should be required to obtain RTA board approval prior to executing or amending employment contracts for nonbargaining unit positions. Under current law, while the RTA has the authority to review and approve budgets, the ServiceBoardsarenotrequiredtogivenoticeofordiscloseindividualemploymentcontractstotheRTA.

RTA Approval of All Severance Agreements, Settlements and Bonuses: All Service Board severance agreements or employmentrelated settlements that exceed $50,000 should be brought to the RTA Board prior to being executed in order for the RTA Board to ensure that all agreements are reasonable and in the regions interest. Furthermore, all Service Board nonemployment related litigation expenses or settlements over $1,000,000 should be provided to the RTA 48 hours prior to any agreement being enteredorexpensebeingpaid. Strengthening Financial Oversight: The Service Boards should be required to provide the RTA with detailed budgets in categories defined by the RTA during the budget process, and additional details should be made readily available if requested. Additionally, beyond approving or rejecting a Service Boards annual budget, the RTA should be granted line item veto power with the ability to make amendmentstobudgetlineitems. Access to Financial Data and Records: The RTA should have realtime access to the Service Boards financial information and other documents. Without contemporaneous access to the Service Boards financial data, the RTA cannot provide the timely oversight required by the act and cannot immediately respondtoimpendingproblems. RTA Enforcementof ExistingLawand NewOversightPowers:TheRTAhasbeengiventheresponsibility to provide oversight for the Metropolitan Chicago Transit System. However, we have only one tool to ensure compliance the authority to not approve the total budget of a Service Board and therefore withhold its entire funding for the year. This is a rarely utilized nuclear option,effectively shutting down a large portion of our transit system. The RTA should be allowed to issue fines to Service Board executives who refuse to comply with the RTA act, and suspend certain powers of Service Boards until correctiveactionistaken. Subpoena Powers: The RTA should be given subpoena powers when conducting audits such as that of the MetraClifford separation agreement, to assure the auditor is able to review all relevant information. In this case, the lack of these powers made in impossible for the RTA to investigate allegationsofethicsviolationsmadebeforetheHouseMassTransitCommittee.