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March 5, 2012 Mr. David Demerjian, Head Deputy Public Integrity Division Los Angeles County District Attorney’s Office 320 West Temple Street, Rm. 766 Los Angeles, CA 90012 Re: Formal Complaint regarding San Gabriel Valley Council of Governments and Executive Director Nicholas Conway Mr. Demerjian, It is my understanding that your office is currently reviewing the operations of the San Gabriel Valley Council of Governments (SGVCOG) and its Executive Director, Nicholas Conway (Conway). It has been reported that a complaint was filed with your office over Conway/SGVCOG’s participation in a previous Caltrans grant and I have previously submitted information related to a “settlement” payment made to Conway by the SGVCOG. Of course, I am unaware of the full scope of your review and am concerned that it may not include many additional issues which I believe warrant your consideration and examination. Consequently, I felt it important to contact your office to insure that these additional issues are brought to your attention. I have attended most of the SGVCOG Governing Board and committee meetings over the last several months and have obtained a variety of public records related to the SGVCOG/Conway activities. As I indicated in prior correspondence, I am currently involved in litigation against the SGVCOG for violations of the California Public Records Act and the Brown Act. The SGVCOG has withheld important records vital to public participation in government and has violated the Brown Act in so many different instances. The cumulative effect of these violations is the inability for any meaningful public participation on issues of public concern. While this complaint does not address those transparency issues and my lawsuit is technically unrelated to the matters addressed in this letter, it is this intentional atmosphere of secrecy that has allowed the issues raised here to come to be. I believe the following information illustrates that Conway and the SGVCOG have violated and continue to violate various State and Federal conflict of interest statutes. In addition, various statutes related to the misappropriation of public funds, the misdirecting of public funds and the procurement, implementation and administration of grant funding, may have been violated. General Background Information The SGVCOG is a joint powers authority formed in 1994 which serves the San Gabriel Valley area. The agency membership is comprised of 31 local cities, 3 Los Angeles County Supervisorial Districts and 3 local water agencies. 1
Arroyo Associates, Inc. (AAI) is a privately owned management and consulting firm. Conway is the sole owner of AAI. The SGVCOG contracts with AAI, in the form of a management services agreement, to maintain a physical SGVCOG office and provide staffing/management for the day to day operations of the agency. The agreement also designates Conway to serve as the Executive Director for the SGVCOG. The SGVCOG office is currently located at 1000 S. Fremont Ave., Unit 42, Building A10, Suite 10210, Alhambra CA 91803. This is also the sole location utilized by AAI, which serves a variety of other clients besides the SGVCOG. However, because Conway refuses to release records about the AAI operations, it is currently unknown what percentage, if any, AAI independently pays for its portion of the office, which is not used for SGVCOG business. In addition to the management services agreement (MSA), the SGVCOG and AAI have entered into three additional contracts known as management services agreement attachment one (MSA 1), attachment two (MSA 2) and attachment three (MSA 3). These contracts call for the SGVCOG to pay additional compensation to AAI for providing additional staffing/services related to various grant programs. Some of these grants/funding programs include: 1. Homeless Services Strategy Implementation (funded by LA County) 2. Watershed Coordinator Program (funded by California Department of Conservation) 3. Southern California Edison Local Government Partnership Program (SGVEWP) (funded by California Public Utilities Commission) 4. CalRecycle Product Stewardship Grant (funded by California Department of Resources, Recycling And Recovery) 5. Water Quality Improvement Program (funded by participating jurisdictions) 6. Southern California Edison’s California Long-‐Term Energy Efficiency Strategic Plan (CEESP) program (I believe funding comes from a variety of sources including State and Federal programs) 7. Energy Upgrade California initiative of the County of Los Angeles program ( I believe funding for this program comes from not only the County, but also State and Federal programs) The grant funding received by the SGVCOG appears to flow from County, State and Federal agencies and programs. Some of the funding appears to have originated from the California Energy Commission, the U.S. Department of Energy, the American Recovery and Reinvestment Act, the U.S. Department of Transportation, the U.S. Department of Housing and Urban Development, etc. Management Services Agreement Attachment One (MSA 1) The MSA 1 contract was originally executed on July 1, 2008. It provided for the SGVCOG to pay AAI an additional monthly payment of $6,250.00. Sometime in the spring of 2010, a new MSA 1 agreement was executed which called for increasing this monthly payment to $8,750.00. This 2010 agreement indicates the compensation to AAI is for staffing related to the Watershed Coordinator Program, SGVEWP and the CalRecycle Product Stewardship programs, as well as for providing staff to be “responsible for two EENR Working Groups (Energy and Stormwater Management)”. The original 2008 agreement requires that it be “evaluated by the Governing Board of the SGVCOG whenever necessary, but at least annually at the Regular May Meeting of the Governing Board.” The staff report, which recommends approval of the new 2010 MSA 1 agreement, states that “this amendment must be renewed on an annual basis and is dependent of the revenues and staffing requirements associated with grants approved for the COG in the upcoming fiscal year.” 2
(As a sidenote, I have been unable to locate any record of the SGVCOG Governing Board evaluating or renewing the MSA 1 agreement at either the 2011 regular May meeting or any other Governing Board meeting held in 2011) Management Services Agreement Attachment Two (MSA 2) The MSA 2 contract is dated July 2010 and was written so as to become effective “upon execution of the Southern California Edison California Energy Efficiency Strategic Plan Implementation Contract” between Southern California Edison and the SGVCOG. It will terminate upon completion of that contract, which is anticipated to be no later than December 31, 2012. The agreement calls for AAI to “coordinate, review and oversee all work and activities performed by staff, consultants or others” in connection with the CEESP program. The MSA 2 contract calls for the SGVCOG to provide AAI with additional compensation for these services and provides that this compensation will be based on a schedule of the “fully burdened hourly rate of the FIRM’s staff working on this grant”. The schedule of these rates, which is incorporated into the contract, is as follows: President -‐ $156.00 Office Manager -‐ $83.00 Associate lV -‐ $92.00 Associate lll -‐ $83.00 Associate ll -‐ $63.00 Associate l -‐ $50.00 Intern -‐ $33.00 This contract calls for the additional compensation is to be paid monthly, in arrears, and for an invoice to be submitted monthly by the 10th day, for work completed the preceding month. The invoice shall identify charges and hours and comply with any other requirements of the CEESP contract. (While a schedule of rates is incorporated into the agreement, no analysis or documentation illustrating the “fully burdened hourly rates” is provided. The MSA 2 agreement is triggered “upon execution” of the grant/funding contract, which I believe is worth noting because AAI/Conway is personally enriched by a public contract that he participated in making) Management Services Agreement Attachment Three (MSA 3) The MSA 3 contract indicates it became effective as of March 17, 2011. The agreement provides that it will commence “upon execution of the Energy Upgrade California Sub-‐Recipient Agreement, between the County of Los Angeles and the SGVCOG”. The agreement calls for the SGVCOG to provide AAI with additional compensation to “coordinate, review and oversee all work and activities performed by staff, consultants or others in connection with the Energy Upgrade California initiative of the County of Los Angeles, funded by the California Energy Commission and U.S. Department of Energy’s Betterbuilding program.” The amount of additional compensation paid to AAI by the SGVCOG is to be based upon the “level of effort” and the “fully burdened hourly rate of the FIRM’s staff working on this grant, in an amount not to exceed $125,000.00 over a three year fiscal year period”. AAI is to bill in arrears monthly and to submit 3
an invoice by the 10th day of each month for work completed the preceding month. The invoice shall identify charges and hours and comply with any other requirements of the Energy Upgrade Sub-‐ Recipient Agreement. (No schedule of the hourly rates to be charged for staff is incorporated in the agreement nor is there any analysis or documentation of the “fully burdened hourly rates”. As in MSA 2, the MSA 3 agreement is triggered “upon execution” of the grant/funding contract) Conway as the SGVCOG Executive Director and the grant programs Conway, operating as the SGVCOG Executive Director, is a public official as defined under the various conflict of interest statutes. He is involved and participates in making important agency decisions. When he is not directly involved, he uses his official position to influence the making of these decisions. While he does not directly vote on SGVCOG matters, he does obligate the agency to a course of action on issues such as the grants and actually executes, or enters into, various contracts for the agency including grant agreements. As the SGVCOG Executive Director, Conway participates in: • Identifying various grant/funding programs to be pursued by the SGVCOG • Preparing and submitting SGVCOG proposals/applications for these various programs • Preparing and providing recommendations related to the grants to the Governing Board, in the form of Staff reports, memos and other materials. • Recommending participation in particular grant programs directly to the Board. • Negotiating the terms with the grant/funding provider on behalf of the SGVCOG • Executing, or entering into, the contract for the actual grant/funding on behalf of the SGVCOG As for using his official position to influence decisions of the agency, I have been informed that Conway: • Routinely contacts various Board Members to discuss agency business via phone, email, face to face meetings, etc. • Holds “pre-‐meeting” meetings with select groups of Board Members to discuss pending agency business. • Enjoys personal relationships with some Board Members and meets with them for dinner/drinks, etc., where he strategizes with them on pending agency business. I have also been informed that Conway has been involved in a business partnership with a Board Member. These examples illustrate that Conway is in a position to use his official position to influence agency decisions. I believe these claims can be independently verified by members of the Governing Board. If you would like to know which members might be able to verify this information, contact me and I will provide that information. When Conway participates in the decision to obligate the SGVCOG to a course of action, namely the participation in these various grant programs, and executes or enters into the various grant contracts, 4
those actions result is a financial benefit in the form of increased compensation to AAI. Ultimately, Conway as a public official is financially interested in contracts both in his public and private capacities. I submit that the potential for such self-‐dealing is prohibited under the law. The public has the right to know that its interests are being represented at all times, unclouded by the personal financial interests of a single public official. As the California Supreme Court has opined every public officer should “be guided solely by the public interest, rather than by personal interest, when dealing with contracts in an official capacity.” (Thomson v. Call (1985) 38 Cal. 3d 633, 650.) As well, it is undeniable that the Governing Board and Conway, should be and actually are, fully aware of the conflict of interest violations triggered by Conway’s participation in the various grant contracts and programs. The determination that a conflict of interest exists has been outlined in two prior, and separate, Caltrans reports. In both reports, Caltrans determined that a conflict of interest existed related to Conway’s activity both as the SGVCOG Executive Director and owner of AAI and provided that finding to the SGVCOG and Conway. These determinations were not simply made by Caltrans administrative staff, but included a review by the Caltrans legal staff. It is my understanding that Caltrans took the additional step of seeking a review of this issue by the California Attorney General’s office in their last review and the Attorney General agreed with their determination. As a result of the determinations made in the first Caltrans report, the parties sought the legal opinion of a retired judge related to the conflict of interest issues. In his opinion, Judge Zebrowski concluded that two conflict of interest violations existed related to the activities of Conway as the SGVCOG Executive Director and owner of AAI. In response to the most recent Caltrans report, the SGVCOG commissioned a review of their management operations by a private consulting firm, Citygate Associates, LLC (Citygate). In their review, Citygate determined “there is the appearance of a conflict of interest between managing the SGVCOG and managing as well as administering grant programs.” The SGVCOG adopted a Conflict of Interest Code which became effective on April 13, 2005. That code clearly states that the Executive Director position involves “the making or participation in the making of decisions which may foreseeably have a material effect on financial interests”. As part of this Conflict of Interest Code, the SGVCOG agrees to incorporate FPPC Regulation 18730 (2 California Code of Regulations, Section 18730) which states in part, under (9) Section 9. Disqualification; No designated employee shall make, participate in making, or in any way attempt to use his or her official position to influence the making of any governmental decision which he or she knows or has reason to know will have a reasonably foreseeable material financial effect, distinguishable from its effect on the public generally, on the official or a member of his or her immediate family… Lastly, the entire Governing Board of the SGVCOG is comprised of elected officials who are required to complete the State mandated AB1234 ethics training, which extensively addresses the very conflict of interest violations present here. 5
Despite all of this, the SGVCOG and its Governing Board have allowed Conway to operate in violation of the various conflict of interest statutes. The Governing Board and Conway have shown a total disregard for the rights and protections afforded to the public under these important statutes. I would suggest they have even shown an open disdain, both for the public and for the very statutes designed to protect the public’s interest related to these conflicts. At the recent February Governing Board meeting, after Citygate presented their finding that the appearance of a conflict of interest exists, several Board Members were heard to exclaim “so what”. Thankfully, the SGVCOG Governing Board does not get to decide which laws it will follow and which it will disregard. As the State Attorney General opines in their Conflicts of Interest Handbook – “Conflict-‐of-‐interest laws are grounded on the notion that government officials owe paramount loyalty to the public, and that personal or private financial considerations on the part of government officials should not be allowed to enter the decision-‐making process.” The San Gabriel Valley Housing and Homeless Coordinating Council (SGVHHCC) payments to AAI As previously outlined under MSA 1, the SGVCOG conducted a “Homeless Services Needs Assessment” which resulted in the SGVCOG developing and adopting a “regional homeless services strategy” as one of its strategic plan objectives. The SGVCOG developed an implementation plan and in April of 2009, the SGVCOG Governing Board voted “to form” the SGVHHCC as a “key first step of the implementation strategy”. The original funding for the SGVHHCC appears to have been obtained from the County of Los Angeles and the Los Angeles Homeless Services Authority (LAHSA), a joint powers authority established in 1993, was selected to act as the fiscal agent for the SGVHHCC. Conway participated, and was actively involved, in all aspects related to the creation of the SGVHHCC. This participation appears to have included: preparing and presenting staff reports recommending creation of the SGVHHCC, preparing and presenting the proposed budget for the SGVHHCC, participating in the identification and interviewing process of potential Board Members for the SGVHHCC, participation in the interviewing and selection process of the Executive Director for the SGVHHCC, etc. As part his recommendations to the SGVCOG and SGVHHCC Boards, Conway recommended approval of the 2010-‐11 fiscal year budget for the SGVHHCC. As part of that budget, Conway recommended that the SGVHHCC be housed at the SGVCOG offices and stated in his staff report “….the COG will provide supplies and materials for the (SGVHHCC) Executive Director on a reimbursement basis. Expenses in this category would include: rent, parking, printing, phone, computer and software, office supplies, mileage and miscellaneous.” However, LAHSA records show that payments made for these items have not been paid to the SGVCOG, instead they have been paid to AAI, the company owned by Conway. The invoices for these payments, as well as related emails, appear to somehow imply that they are being sent on behalf of SGVCOG, which is not the case. The invoices submitted to LAHSA list “COG” under the client heading section and include the SGVCOG office mailing information ostensibly for the forwarding of payments. Emails referring to the invoices contain statements such as “please find the September invoice form the SGV COG”. As well, invoices appear to be sent from the official SGVCOG email account at email@example.com by SGVCOG staff during normal SGVCOG business hours. 6
In response to my public records request, the SGVCOG legal counsel could provide no record of these payments ever being forwarded to the SGVCOG as originally represented and agreed upon. Conway participated in all aspects related to the formation of the SGVHHCC and the decision to house the SGVHHCC at the existing SGVCOG offices on a “reimbursement basis” to the SGVCOG. His participation in the making of this agreement would directly result in a financial benefit to AAI and Conway. Far more troubling is the fact that Conway in direct contradiction to what was represented to, and approved by, both boards has directed these payments from the SGVHHCC to AAI instead of the SGVCOG. (As a sidenote, Conway recently moved the SGVCOG office from Pasadena to its current Alhambra location. The property which currently houses the SGVCOG office is owned by The Ratkovich Company. The President of the Ratkovich Company is Wayne Ratkovich who sits on the Board of Directors for the San Gabriel Valley Economic Partnership organization (SGVEP), of which the SGVCOG is also an active member. In fact, the SGVCOG website lists the SGVEP as one of its “Partners”. As part of the MSA agreement, AAI is financially responsible for providing the SGVCOG offices. If as I suspect, Conway used his official position with the SGVCOG to influence obtaining a below market rental agreement for the current offices, the result was a financial benefit to Conway. Conway has claimed that the rental agreement and/or terms is not a public record. Consequently I have been unable to obtain records to confirm my suspicion. However, I believe that your office certainly would have the authority to obtain such records.) “Intern” program In reviewing various SGVCOG check/warrant registers for the last 18 months or so, I noticed numerous checks payable to individuals, some of whom I recognized as having been previously described as SGVCOG staff provided by AAI. During a recent SGVCOG Governing Board meeting, Delegate Carol Herrera asked Conway about these payments. Conway responded by claiming these payments were made under an “intern” program and further stated that the program had been previously authorized by the Governing Board. In response to Conway’s claims, I submitted a public records request to view the agenda and minutes of any SGVCOG Governing Board meeting where approval to hire interns occurred. The SGVCOG has not been able to provide the record where the creation of this program was brought before the Governing Board for approval. Instead, the SGVCOG attorney has responded that the intern program was “discussed” in the budget and was “addressed” during the presentation on the budget. However, no record of such a discussion or evidence the issue was ever addressed is reflected in any record provided by the SGVCOG. Records indicate that between January 1, 2010 and October 11, 2011, the SGVCOG spent $56,014.00 on this “intern” program. However there is no indication of what services or staffing these interns performed. It is unclear if these interns provided staffing support for the various SGVCOG committees or if they were involved in one of the various grant programs being staffed by AAI. It would appear one of two possibilities exists. 7
Either, as Conway has represented, the Governing Board in a previous public meeting authorized the formation of, and expenditure of public funds for the intern program. This would have involved Conway, acting as the SGVCOG Executive Director, participating in the decision to create the intern program and recommending implementation of same to the Governing Board. The only other alternative is that Conway simply created the program on his own without any prior authorization of the Governing Board. I respectfully suggest that either possibility is cause for concern. The intern program appears to have resulted in providing Conway a financial benefit in the form of a reduced staffing cost to AAI. It appears there is either a conflict of interest or that public funds were misappropriated by Conway, without the required approval. I believe that it is also worth noting that after my records request and inquiry related to this program, all payments under the “intern” program appear to have ceased, without ever appearing on an agenda for public discussion. Change in the office hours for the SGVCOG office As part of the MSA agreement, AAI is required to “maintain a SGVCOG office”. As well, AAI is also responsible for the maintenance of SGVCOG records including the requirement that they “shall make all such records available for inspection by the President and/or Representatives or Alternate Representatives of the Governing Board and/or members of the public during normal business hours…” According to several sources including various SGVCOG Board Members, the normal business hours have been 8:00 a.m. to 5:00 p.m., Monday through Friday for as long as they can remember. However sometime around late October 2011, Conway unilaterally decided to change the hours of the SGVCOG offices and began closing the office on Fridays. The change was never brought before the Governing Board for discussion or approval in a public meeting. In fact, the several Governing Board members I have spoken with about the change were totally unaware the change had occurred. Upon first impression, this issue may not appear to be worthy of your consideration. However, I believe upon further review, you will determine otherwise. The closure arguably reduces the level of required staffing and/or services that AAI must provide to the SGVCOG. Such a reduction results in a clear financial benefit to AAI and Conway. As well, I would argue that a decision which results in the reduction of services provided to the public by a public agency needs to be made by the Governing Board, not unilaterally by Conway. Accuracy and oversight of AAI/SGVCOG billing related to various grants As part of the recent Caltrans review, Caltrans found that “Improper Billing Practices” existed related to the SGVCOG/AAI’s handling of the subject grant. As well, Caltrans indicates a similar finding was made in their previous review. Caltrans indicated “SGVCOG was unable to demonstrate how the monthly fee paid for MSA services reconciled to the Department billings.”
As well, the recent Citygate review determined that “the current fixed price retainer Management Services Contract does not provide for a breakdown of hours assigned to “core service” activities versus grant-‐funded activities performed.” Citygate reviewed the grant management and timekeeping systems employed by AAI and reported that AAI timekeeping procedures included the following: 1. The staff analysts complete activity logs, detailing activites at the .25 hour increment, and input time, by funding source, into the master timesheet on a daily basis. 2. The Lead Staff Analyst reviews activity logs for accuracy every two weeks, and provides and incorporates any corrections or clarifications to staff. 3. On the 1st of the following month, master timesheets and activity logs are finalized. 4. Master timesheets are printed and signed by staff. 5. Activity logs are input into any additional formats and separate files as required by grants. 6. Staff prepares invoices for each grant, and includes activity-‐level data as required. 7. The master timesheet, along with the total charges by fund by month, are provided to the accountant/treasurer to attach to the invoice. In other words, the accuracy and oversight of the very records which result in a financial benefit to AAI, are being controlled by the staff/AAI who stand to benefit from the grant payments. Such a situation is all the more disturbing in light of Citygate’s representation that AAI loses money in providing core services to SGVCOG. Citygate claims “the revenue generated from member dues falls short of covering Arroyo’s costs for providing “core services” under the MSA by an estimated amount of $45,286.” Citygate goes on to indicate that AAI “explained to us that the shortfall in revenues is made up from grant programs and/or income generated by Arroyo from other clients.” Certainly, the potential of losing money offers a strong motivation for AAI to provide billing statements which will benefit AAI financially and creates a situation ripe for potential abuse. It strikes me as being akin to the “fox guarding the hen house”. Citygate’s assertions are based on “cost figures” provided by AAI. It is my understanding that the actual records supporting the claimed “cost figures” were not provided to Citygate which would be consistent with Conway’s previous refusals to make such information public claiming they are solely under his control as the owner of AAI. I would also draw your attention to a SGVCOG Governing Board staff report, prepared by Chris Jeffers, Chair of the City Managers’ Committee, which recommends the Board approve MSA 2. The report is dated May 20, 2010 and states in part: “As the SGVCOG’s grants revenue continues to increase, it is important to show that all grant funds are expended. While grant funds can be used to offset existing costs, if they are eligible, grant funds cannot be kept as unexpended income by to SGVCOG to grow its fund balance. Typically, grants income can only be used on the following three expenditure categories: 1) staff labor directly associated with the administering or implementing grants, 2) direct expenses of the grants (i.e. event or printing costs) and 3) consultant costs (as the SGVCOG typically contracts out implementation of grants). As shown in 9
Attachment 1, in the coming year, after all eligible expenses described above are taken into account, there will be an estimated surplus of $55,428 in grant funds that must be expended.” Jeffers goes on to state: “The recommended expenditure for this contract amendment, $55,428, is an estimate. It represents the differential between anticipated grant funds already committed to an existing expense and anticipated grant funds that, at this time, do not have an indentified expense.” Mr. Jeffers’ recommendations seem to suggest, even recommend, that the AAI/SGVCOG needs to create billing statements which will utilize the available funding vs. creating billing which impartially and accurately reflects the staffing resources utilized to administer the program. Citygate & The Management Review Process At the July 21, 2011 Governing Board regular meeting, under item 6.7, the Governing Board was asked to “authorize president to form an Ad Hoc Committee and identify potential consultants to advise Ad Hoc Committee with respect to SGVCOG management operational services.” However, the 6th amended bylaws dated 2009, requires that the Governing Board appoint the members of the Ad Hoc Committees. By violating their own bylaws and allowing the President to “form” the committee, outside the public’s view, the public was denied an important opportunity to observe its elected officials in the deliberation of public business. The public was denied the opportunity to observe who expressed interest in participating on the committee and who did not, as well as the basis for who was selected. The bylaws also state that “no city or County District may have more than one Committee Member on as Standing Policy or Ad Hoc Committee.” However the SGVCOG President, Angel Carrillo, selected two members from the City of Azusa to sit on the Ad Hoc committee – himself and Fran DeLach. This created a situation whereby a particular member city could potentially exercise undue influence over the entire agency membership in violation of the agency bylaws. Next, the ad hoc committee determined what would be, and more importantly what would not be, included in the proposed management review. They developed a Request for Proposal (RFP) and determined who it would be sent to, without seeking any input from the Governing Board or gaining approval of the RFP by the Governing Board prior to the time it was sent out. The committee determined the RFP would be sent to only 3 firms and has been unable to provide any record of how those firms were selected or even what other firms were ever considered. Only after they had determined the scope of review to be conducted, crafted the RFP, selected the 3 firms to contact and received responses did the Ad Hoc Committee come to the Governing Board. The ultimate recommendation from the ad hoc committee included only one firm – Citygate. What was supposed to be an independent management review was actually a process controlled entirely by the SGVCOG ad hoc committee, and in large part, by Conway, himself. The public was excluded from any real participation in the process, despite the fact that the review was of a public agency and the review was paid for with public funds. 10
While Citygate’s own contract, as well as professional ethics, calls for disclosure of all potential conflicts, it was not until my attorney contacted Citygate inquiring into the owner’s past relationship with Nicholas Conway, that the owner disclosed he had worked for the same company, in the same department with Conway for some 6 years. Unfortunately, this was not disclosed until after the entire review had been completed. This is even more alarming since public records indicate that the ad hoc committee, and Conway himself, reviewed the audit and made changes to it prior to its presentation to the Governing Board and public. Violations of the State’s Joint Exercise of Powers Act State Government Code Section 6500-‐6536, commonly referred to as the Joint Exercise of Powers Act (Act), sets forth a variety of regulations for agencies such as the SGVCOG. Key components of the Act set forth mandates to “provide for strict accountability of all funds…” and to insure that a layer of fiscal oversight is in place for JPA’s. As well, strict notification regulations are contained in the Act to insure that State oversight agencies such as the Secretary of State and the State Controller are kept abreast of the business operations of JPA’s, such as the SGVCOG. The SGVCOG, under the management and direction of Conway, have not and are not complying with these regulations. Section 6503.5 requires that “[w]henever a joint powers agreement provides for the creation of an agency or entity that is separate from the parties to the agreement and is responsible for the administration of the agreement, such agency or entity shall, within 30 days after the effective date of the agreement or amendment thereto, cause a notice of the agreement or amendment to be prepared and filed with the office of the Secretary of State.” While the SGVCOG originally complied with this requirement, demonstrating knowledge of such a mandate, it has not submitted the amended or restated JPAs as required. Section 6505.5 provides that the SGVCOG may use a certified public accountant to operate as the agency treasurer. Charles Conway operates as the SGVCOG treasurer and auditor. (I have been told that Charles Conway is no relation to Nicholas Conway and is known as “Chip” Conway.) However, Chip Conway is not a licensed certified public accountant in California. In addition, the SGVCOG can also provide no evidence, as required under the Act, that Chip Conway has an official bond, designed to protect the public funds involved under his supervision. Section 6505.6 provides that in lieu of using a CPA as the agency treasurer, the SGVCOG “may appoint one of its officers or employees to either or both of such positions.” Conway and the SGVCOG now claim that Chip Conway is a “contract employee”. However, Chip Conway is not an employee as defined under the law. The SGVCOG has no employment agreement with Chip Conway. The SGVCOG has no employees, as all staffing services are provided by AAI. In fact, Conway on behalf of the SGVCOG, executed an “AGREEMENT FOR BOOKKEEPING SERVICES” with Chip Conway on October 30, 2009. The agreement is a consulting contract with Chip Conway operating as an independent contractor. He receives a flat rate payment of $1,000.00 per month from the SGVCOG. No mention is made of Chip Conway operating as, or being designated the SGVCOG treasurer and auditor, in the agreement. The SGVCOG does not pay any taxes or workers compensation/disability premiums for Chip Conway. 11
The result is that millions of dollars in public funds are placed at risk due to the lack of proper and required oversight called for under State law. The Act also requires the SGVCOG to establish the “manner in which the [their] power will be exercised.” The Joint Powers Agreement which was adopted by the SGVCOG states they will exercise their power in compliance with all State and Federal Laws, as well as their own adopted bylaws. However it appears the SGVCOG, and Conway are content to simply ignore their bylaws when it is convenient for them to do so. When the SGVCOG ignores its own bylaws, it circumvents important protections provided to the public under these various laws. Conclusion It is time for a complete, accurate and thorough review of the SGVCOG and AAI’s finances, including, but not limited to all billing records supplied by AAI, and payments made, for the various grant programs. The accuracy and oversight should not, and cannot, be left to the very people who stand to benefit financially from the outcome. It is time for the SGVCOG, AAI and Conway to follow the law. The conflict of interest violations have been going on for years with the full knowledge of all parties involved. The SGVCOG and Conway do not get to pick and choose which laws they will follow and the public deserves better from our elected and public officials. I have provided various supporting records for your review and will gladly answer any questions or provide any additional information you may seek. As I previously indicated, I believe you can independently verify much of the information by speaking with several members of the Governing Board. If you would like me to provide the names of those individuals which I believe can assist you in that regard, simply let me know. My attorney is also familiar with the issues raised in this correspondence and will gladly provide you with any assistance and information she can. I have listed her contact information below for your use. I look forward to your prompt attention to this matter. Sincerely, Gil Aguirre P.O. Box 4190 San Dimas, CA 91773 626-‐991-‐5792 Duck12@verizon.net cc: Kelly Aviles, Esq. 12
Kelly Aviles, Esq. The Law Offices of Kelly Aviles 1502 Foothill Blvd, Suite 103-‐140 La Verne, CA 91750 909-‐991-‐7560 firstname.lastname@example.org
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