Audits Accuse Two Firms of Overbilling MTA by $2.2 Million

By RICHARD SIMON

May 24, 1996 12 AM PT

TIMES STAFF WRITER

Two engineering firms working on the Los Angeles subway have overcharged taxpayers more than $2.2 million, including bills from one for country club membership, leasing of a Range Rover and air fare to London and Paris, according to MTA audits released Thursday.

The luxury items represent only a fraction of the disputed billings, but they come as Metropolitan Transportation Authority officials are trying to rein in costs on the over-budget $5.8-billion subway, the region’s biggest public works project.

“I am very disturbed,” said MTA board Chairman Larry Zarian. “If these revelations are proven to be correct, we are going to do everything within our means to recoup every taxpayer dollar owed us.”

The audits accuse Daniel, Mann, Johnson and Mendenhall of overcharging the MTA nearly $2 million from 1992-94 and Jenkins/Gales and Martinez Inc. of overbilling the agency $234,385.

Auditors contended that JGM charged the MTA for an “unreasonable bonus” of $36,000 in 1993 and 1994 to the wife of a top company executive, a $2,676 country club membership, and leases of a $1,208-per-month Mercedes and $938-per-month Range Rover.

The audit also questioned JGM’s billing of $400 for alcohol, $80 in parking fines, lobbying expenses and public relations costs, and a $7,100 trip by five executives to Europe.

“We were informed the purpose of the trip was to observe the engineering and architectural design of the London to Paris tunnel and the train system from Paris to Madrid,” says the audit report.

“We have also questioned the reasonableness of five people taking this trip.”

A woman who answered the phone at JGM’s Los Angeles office said no one from the company was available to comment.

The bulk of the audits dealt with the way the firms charged the MTA for its staff costs. Both firms defended those charges in letters attached to the audit, but the Jenkins firm did not address the luxury items.

Officials at Daniel, Mann, Johnson and Mendenhall could not be reached. But the firm disputed the findings in a letter attached to the report, calling the audit “incomplete and misleading” and saying it contained “erroneous conclusions.”

Transit officials said private contractors can be reimbursed for business use of cars, but a Range Rover was unreasonable when a less expensive Jeep could have sufficed.

Auditors said the luxury cars also were driven by the company president and vice president to and from work. That is considered personal use of the cars, a disallowable expense.

The audits follow a report issued this month that found that the MTA was paying disproportionately more for engineering services than other transit agencies nationwide because of poor oversight.

Both engineering firms are part of a consortium called Engineering Management Consultants that is providing design work for the subway.

The audit found that Daniel, Mann, Johnson and Mendenhall, when calculating indirect costs, exceeded the appropriate costs by pooling office and administration costs at divisions outside California and then passed them along to the MTA.

An MTA spokesman said accountants for the private firms and the transit agency will get together to try to resolve the billing dispute.

Joseph E. Drew, the MTA’s new chief executive officer, said the audits show that the MTA is moving aggressively to root out unallowable costs.

“These reports put everyone on notice that we will be fair in our payments. However, we expect to be billed appropriately.”