CITY OF Los ANGELES

I want to commend you for your swift investig!;ltion into the allegations against inspectors .... 1-Stop JFumas App~rovea JTume 6, ::wn -JLiJJJik to GJP§ §upport.
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BOARD OF

BUILDING AND SAFETY COMMISSIONERS

CITY OF

Los ANGELES CALIFORNIA

DEPARTMENT OF

BUILDING AND SAFETY 201 NORTH FIGUEROA STREET LOS ANGELES, CA 90012

MARSHA L. BROWN PRESIDENT

ROBERT R. "BUD" OVROM GENERAL MANAGER

VAN AMBATIELOS VICE-PRESIDENT

RAYMOND S. CHAN, C.E., S.E.

...... \ILC:IQRI:I

cuE\//\~ HELENA JUBANY ELENORE A. WILLIAMS

ANTONIO R. VILLARAIGOSA ......................... MAYOR·················

EXECUTIVE OFFICER

June 24, 2011 Honorable Dennis P. Zine, Chair Audits and Governmental Efficiency Committee Honorable Ed P. Reyes, Chair Planning and Land Use Management Committee Room 395 City Hall

SUBJECT: REPORT ON IMPLEMENTING REFORM IN THE DEPARTMENT OF BUILDING AND SAFETY (LADBS) (CF#11-1074)

PURPOSE: On June 22, 2011 the City Council adopted a motion (CF#11-1074) moved by Councilmember Dennis Zine (and seconded by Council President Eric Garcetti), instructing the Department of Building and Safety to report back, "on the proposed internal performance audit and key management fundamental changes proposed by the General Manager to address accountability and oversight in the Department" (attached). BACKGROUND Following an anonymous tip alleging wrongdoing by two Building and Safety employees, we began an investigation into their actions. Upon uncovering wrongdoing, the employees were terminated and subsequently arrested by the FBI and pled guilty to soliciting bribes. I was then directed by the Mayor to continue my investigation to determine if further wrongdoing was taking place. The investigation is still ongoing and additional employees are under investigation. To date, three employees have been terminated. The Department is not at liberty to reveal the names or number of employees under investigation, nor the details of the allegations because it is an on-going personnel and criminal investigation.

REPORT ON IMPLEMENTING REFORM IN THE DEPARTMENT OF BUILDING AND SAFETY (CF#I 1-1 074)-

As the Department has proceeded with these matters, we have been guided by three key principles: 1.

ro be fortluught abol!.!t acknow~edlgung the Department faces.

pwol:!~ems

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The Department is working to be as candid and frank as possible about these matters and steps we are taking to address them. We appreciate the opportunity the Audits and Governmental Efficiency and the Planning and Land Use Management Committees are giving us to shed additional light on the Department.

The Department has an absolute "Zero Tolerance" policy for any type of corruption and violations of the public trust. The Department acted swiftly and decisively when an anonymous letter led us to the first two employees who were ultimately terminated. Unfortunately, the Department has had limited investigative skills and resources - - a shortcoming that is proposed to be remedied in the next section of this report. We have worked closely with the City Attorney's Office to guide us in our investigations and actions. And, most importantly, we have been invaluably assisted by the FBI. We were well down the road with our internal investigations before we were made aware of the separate FBI investigation. We are now fully co-operating with the FBI. The investigations are on-going and because of that, we cannot discuss the specifics of who and what are under investigation or how the investigations are being conducted. All of that information will be made public as soon as it is legally permissible to do so.

3.

To swiftly impleme1111t prevtmtative measures and! procedures to help prevent s1111ch violations of the public tmst in the futu:nre.

One benefit that can came from an incident like this is to learn from what went wrong and to take decisive action to reduce the possibility of it happening again. 2 Response

to AGE & PLUM Committees 062411-02

080310

REPORT ON IMPLEMENTING REFORM IN THE DEPARTMENT OF BUILDING AND SAFETY (CF#Jl-1074)-

Attached to this memo are the three latest transmittals that provide an update on what is now being done: 1). May ~ 3, 20~ 1 ieUer from Mayor Vmaraigosa ouWning the measures he directed the Department to prioritize 2) June ~ 3, 2011 report updating the progress we have made on these measures 3) May lADBS newsletter, which was used to help explain what was going on to the geH"Deral public am:ll our customers. It also should be noted that in order to keep the City Council and the public fully aware of what is happening at the Department, I previously sent to the full Council a copy of an April 11, 2011 memo to the Mayor and a May 17, 2011 report to PLUM. Copies of both are available from the Department's Public Information Officer, David Lara. PROPOSED ACTIONS

The Department appreciates the opportunity to present to the Council Committees the proposed actions we are currently undertaking and to receive your thoughts on these measures and any others you believe we should consider. The actions specifically outlined in the attached June 13, 2011 letter to the Mayor include: 1. Establish an Internal Affairs Unit 2. Undertake performance Audit of all relevant employees 3. Implement GPS Tracking System 4. Review Hiring Standards 5. Improve background investigation practices 6. Update employee evaluations 7. Re-established employee training programs 8. Enhance supervisory training practices 9. Require financial disclosure (form 700) of all inspectors and engineers 10. Institute mandatory rotations COINCliJSIJO!'l

As General Manager of the Department of Building and Safety, I am working daily to address the issues we face as a Department. We are acting swiftly and decisively to identify and correct these issues. 3 Response

to AGE & PLUM Committees 062411-D2

080310

REPORT ON IMPLEMENTING REFORM IN THE DEPARTMENT OF BUILDING AND SAFETY (CF#ll-1074)-

Ultimately, we serve the people of Los Angeles and it is my hope to restore public confidence in the Department as soon as possible.

General Manager

4 Response

to AGE & PLUM Committees 062411-D2

080310

MOTION "Implementing Reform in the Department of Building & Safety."

During these tough economic times the ·City must continue to· provide adequate services and continue good governance. We must not let the economic downturn become an excuse for the deterioration of the City's organizational oversight, efficiency, and accountability to the public. Recently there have been many reports tackling corruption, further impeding a fair economic recovery, and effective governing by City officials. The Department of Building & Safety has had two field inspectors plead guilty to charges that they accepted bribes in exchange for building approvals. The Department received an anonymous letter alleging criminal misconduct by at least two inspectors. Immediately, Senior Management began in investigation of over 50 projects for anomalies such as approvals without physical inspections. Enough preliminary evidence was found to place two employees on administrative leave. The city's failure to detect these types of activities is unacceptable. While there are claims that abuse can be related to lack of staffing, the bigger concern is the lack of adequate training and oversight which could have prevented these cases. A number of comprehensive governance changes have been proposed by the General Manager tci enhance performance, accountability, and communications amongst the workforce including: • • • •

Internal Investigations Unit Hiring Standards and Background Investigations Mandatory Rotations/Improved Supervision Improved Technology/GPS tracking

These changes constitute a serious of comprehensive reform in the Department. In order to ensure full transparency there needs to be robust discussion on how and when these changes will occur. We need to commit to the public that these types of allegations do not occur again. I THEREFORE MOVE the City Council instruct the Depart,cP111rr.f to the Audits & Governmental Efficiency Committee on e prop audit and key management fundamental changes R posed address accountability and oversight in the Departme t.

ANTONIO

R. VILLARAIGOSA MAYOR

May 13,2011

Robert R. "Bud" Ovrom General Manager Department of Building and Safety 201 N. Figueroa Street, Suite 1000 Los Angeles, CA 90012 Dear Mr. Ovrom, I want to commend you for your swift investig!;ltion into the allegations against inspectors Mr. Germain and Mr. Gonzales and their prompt dismissal. I understand you began your investigation immediately upon receiving an anonymous letter alleging criminal conduct by Mr. Germain and Mr. Gonzales in January of this year. Based on your investigation, you were able to put them on administrative leave and tum your investigation over to the City Attorney for termination and prosecution before learning they were also under investigation by the FBI. I expect you to continue your own aggressive internal investigations into any and all further allegations, and that you will collaborate closely with the FBI as they investigate certain inspectors for possible criminal behavior. As you know, corruption will not be tolerated by me or my administration, within this, or any department. I take these matters very seriously and expect all of my General Managers to do the same. Residents of Los Angeles count on us to serve and we must hold ourselves, and our employees, accountable. I have read the list of recommended actions your department can take to stop corruption and abuse before they start. Please take the following measures and report back to me on your progress within 30 days: 1. Re-establish an Internal Investigations Unit within the Department to receive and review complaints, as well as audit inspections and other practices to guard against abuse and corruption within the department. In order to insure an appropriate level of checks and balances, I want you to contract with the

200 NORTH

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ANGBLBS, CALIFORNIA

90012

RobertR. «Bud.~~Ollrom __ ._~~-~·-··-~~-···~----­ May 13,2011 Page2

Personnel Department to provide oversight of the Unit and to work closely with the City Attorney and Police Department in its operation. 2. Immediately conduct a performance audit of all relevant LADBS employees in aU field Bureaus (Inspection, Engineering and Code Enforcement) in all regions of the City. 3. Use the One-Stop Fund (not General Fund) to update your existing systems and activate a GPS tracking system immediately. 4. Review hiring standards, background investigation practices, evaluation and training programs for all inspectors and supervisors. I believe the vast majority of the more than 300 inspectors who work for the Los Angeles Department of Building and Safety are honorable men and women who do their very best to ensure the safety of our residents. I appreciate your urgent and focused examination into the issues facing the department. I look forward to hearing from you on your progress. Thank you for your service to the City of Los Angeles.

s;,

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TONIO R. VILLARAIGOSA Mayor ARV:sh

CiTY OF

BOARD OF

BUILDING AND SAFETY COMMISSIONERS

Los ANGELES

DEPARTMENT OF

CALIFORNIA

BUILDING AND SAFETY 201 NORTH FIGUEROA STREET LOS ANGELES, CA 90012

MARSHA L BROWN PRESIDENT

ROBERT R. "BUD" OVROM GENERAL MANAGER

VAN AMBATIELOS VICE-PRESIDENT

RAYMOND S. CHAN, C.E., S.E. ANTONIO R. VILLARAIGOSA MAYOR

VICTOR H. CUEVAS HELENA JUBANY ELENORE A. WILLIAMS

EXECUTIVE OFFICER

June 13, 2011 The Honorable Antonio R. Villaraigosa Mayor, City of Los Angeles Room 303, City Hall 200 N. Spring Street Los Angeles, CA 90012 RE: LADBS INVESTIGATIONS Dear Mayor Villaraigosa, In response to your letter of May 13, 2011, (attached) I am pleased to report that we are moving swiftly and aggressively to implement the measures you directed us to take to protect the people of Los Angeles from auy future abuses of authority. Specifically, we are taking the following actions: 1. RE-ESTABLISH AN INTERNAl" INVESTIGATIONS UNIT The Department is currently working with the Personnel Department, City Attorney, aud Police Department to re-establish au Internal Investigations Unit, which will "receive aud review complaints, as well as audit inspections aud other practices to guard against abuse and corruption within the department." Our Department is working with the Personnel Department in developing a recruitment bulletin for attorneys or persons with similar skills experienced in conducting complex investigations of criminal aud personnel matters. Additionally, the Department has also met with the Chief of Police and City Attorney, who both have offered to provide staff assistance and guidance as needed.

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Personnel Department Oversight of the Internal Investigations Unit/Special Investigation Position

The City's Personnel Department will provide oversight of the Unit aud has identified the classification of Special Investigator, (SI), Class Code, 0602, as best suited to be the operational head of the LADBS Internal Investigations Unit. This position authority will belong to the Personnel Department and will be funded by Building aud Safety's Enterprise Fund and not by the City's General Fund. LADBS G-5{Rev.12f10)

AN EQUAL EMPLOYMENT OPPORTUNITY -AFFIRMATIVE ACTION EMPLOYER

A Memorandum of Agreement, (MOA), will be established between LADBS and the Personnel Department establishing the job duties, responsibilities and costs identified with the SI position and the operations of the Internal Investigation Unit. The MOA will be completed for the review and approval of City Attorney by the end of July 2011. .

The Department is working closely with the Personnel Department to develop a recruitment and selection process for SI. The SI will be hired by August 2011 and the Internal Investigations Unit will be fully functioning by September 2011. In addition to the SI, subject matter experts, as needed, will be reassigned and/or contract employees will be provided to serve as part of the Investigations Unit. The Department has hand selected the initial subject matter experts who are knowledgeable of operations to serve on the team. This includes one Senior Inspector (full-time), one Engineer (full-time), and one Departmental Investigation Liaison (part-time). The Internal Investigations Unit will be located at the LADBS headquarters, located at 201 North Figueroa separate from the Inspection and Engineering operations. The office will be furnished and ready for use by the end of August 2011.

The net new cost for the SI position will be approximately $200,000 which will be paid by the Enterprise Ftmd and will not be a burden on the General Fnnd. All costs associated with the implementation of this Unit will be identified by the Department and approved by the Personnel Department and City Administrative Officer by the end ofJuly 2011.

2. JP'EIRFORMANICJE AUIDIK'Jf The Department is in the process of establishing the methodology to conduct a performance audit of inspectors and engineers that are working in one of the following three bureaus: Inspection Bureau (IB), which primarily provides new construction inspections; Code Enforcement Bureau (CEB), which responds to complaints of code violations and armual inspections of various establishments (e.g., auto repair, recycle centers, etc.); and Engineering Bureau (EB), which provides plan check and permitting services. This audit will be involved with approximately 460 employees that have been divided into four functional groups: Group 1 - Inspection Bureau, Residential Inspectors (houses and duplexes) Group 2 - Inspection Bureau, Commercial Inspectors (commercial buildings and apartments) Group 3 - Code Enforcement Bureau, Code Enforcement Inspectors Group 4- Engineering Bureau, Engineers

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For Group I, we are creating computer programs with criteria to automatically search relevant computer records associated with inspection work of the past 12 to 24 months for performance anomalies or irregularities. Then all occurrences of performance anomalies will be carefully investigated by the new special investigations and subject matter experts from the Internal Investigations Unit. If needed, appropriate disciplinary action will be carried out. Similar but different criteria will be established to search computer records for the other three groups. The Department will complete its review of Group 1 by June 2011, Group 2 by August 2011, Group 3 by August 2011, and Group 4 by September 2011.

3. GJP§ 1'1RACJKJING §1!§1'1EM The Department has been in discussions with the City Attorney, Los Angeles Police Department, Fire Department, and the Information Technology Agency regarding the best combination of technology and reporting tools available and compatible with the City's infrastructure and the legality of utilizing these tools. The City Attorney has indicated that, since GPS will be utilized to track the whereabouts of City equipment (e.g., cell phone and/or laptop), it does not have to confer with the affected employee unions. However, the Department is informing these unions of its intentions.

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1-Stop JFumas App~rovea JTume 6, ::wn -JLiJJJik to GJP§ §upport

The City Council and Mayor approved a request to use 1-Stop funding to replace an old inspection call-in and response system components and rebuild the requisite data structure. Approval of this request ensures that, among other things, inspection data will be safely stored and retrievable as needed, including to conduct ongoing performance audits and enhance GPS tracking capabilities.

LADBS has detennined that the most feasible solution (technological and cost effective) is to utilize GPS on the cell phones the Department purchases and assigns to staff. Currently, there are 491 cell phones issued to LADBS employees. The Department is in the process of identifying the appropriate phones, service plans, and GPS software needed to fully implement GPS using cell phones and the related initial and ongoing costs. LADBS is still in the research/negotiation phase. But, it appears that the new costs will be as follows: llnitial outliay for equipment will range from $239,000 to $273,000 (phones/accessories and for data storage/software) and aJJJI ammal ongoiJJJig cost olf !lppro:dmately $196,803 to add a GPS/data plan. These costs fluctuate depending on factors such as the discounts and trade-in allowances available at the actual time of purchase. All costs associated with the purchase of the phones will be paid for by the Department's Enterprise Fund or other sources, including 1-Stop, but no GenerallFumrll money will be userll.

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'lfnme lLine to lim[Jlieme!lllt GJP§

Due to the City's annual year-end closing and switchover to the City's new financial management system, no purchases of equipment can be processed until about mid July 2011 (assuming FMS is operational). LADBS will begin swapping out the old cell phones by mid September and complete the process within 90 days. We are currently taking action on items 1 and 2 below (will be completed by the end of July) and will complete approximately 25 percent of the phones associated with Items 3 and 4 by the end of September: 1. 2. 3. 4.

Meet with and testing phones of AT&T, Sprint, Verizon, T-Mobile Update Department cell phone usage policies and procedures Purchase GPS suppmt devices, software, and service plans Distribute phones and train staff on new devices

July July September September

4. RJEVlilEW :mill Uli'JilA'lflE li'lERSONNlEIL ll'RACUCJE§

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Review Hiring §t:mdanlls

Since hiring standards (minimum job qualifications) are set by the Personnel Department, LADBS will meet with the Personnel Department's Examining Division to seek advice for ways to ensure that entry level candidates for engineering and inspection positions are of the highest caliber. Joint recommendations will be issued by the end of July 2011.

When a candidate is considered for employment, LADBS' current practice is to conduct a background review of the candidate. First, prior employers listed on the candidate's employment application form are contacted. We also review information available on the Contractors State License Board website as it relates to inspection applicants. Then the Personnel Department schedules a fingerprint background review to check for any prior convictions. From now on, LADBS will also use new media as additional tools to assist in employment background checks. In addition, LADBS will meet with the Personnel Department to seek advice for ways to enhance our background investigation practices. Our recommendations will be issued by the end of July 2011.

The Department is in the process of bringing all evaluations from 2010 to present up to date as part of our effort to ensure that employee performance is recorded and monitored. This will be completed by the end of June 2011. Thereafter, the Department will be proactively following up on any negative evaluations and deal with them in an appropriate manner.

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The Department is in discussions with the Ethics Commission to provide on-line ethics training for all engineers and inspectors. The training will most likely start in August and complete by the end of September 2011.

Additionally, the Department will strengthen supervisory monitoring protocols to ensure that follow up procedures and work quality is maintained. Protocols will be established by August 2011. Training will be provided to all supervisors by the end of September 2011.

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lFillllailllciai ])lisdosures

A proposal to require inspectors and engineers to file the Form 700 Statement of Economic Interest is also being discussed with the Ethics Commission, City Attorney, and CAO. A determination on this proposal is expected by the end of July 2011. If the proposal is agreed upon, then inspectors and engineers will file the form by the end of August 2011.

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Mamlllltory JRotatiolils

The Inspection Bureau is drafting a protocol, which will in effect rotate approximately twenty percent of staff in each division or group every twelve months. That protocol is the result of a staffing analysis, which takes into accotmt the time an employee has served in this department and how long each has been in their current assignment. For this first year, because there have been so few rotations in recent years, the number of employees rotated will likely exceed 20%. One of the challenges this department faces is consistency of interpretation and enforcement. While rotation of staff provides cross training and needed opportunities, which can work to minimize inconsistencies amongst staff, it can also dilute the experience pool in a given division section or group. To that end, a twenty percent annual rotation provides for staff to be in their assigrrment for up to five years. Some rotations and reassigrrments have already begun, but the bulk will take place systematically so as to minimize disruptions to our customers. We will begin the rotation of staff by September 2011. The actions of a few employees have placed the entire Department, and hundreds of hard working employees, in a very negative light. We are hopeful that these very transparent and assertive actions to address our internal problems will help regain the public trust.

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I will provide your office with another progress report by August 15,2011. Sincerely,

ROBERT R. OVROM General Manager

Cc: Jeff Carr, Chief of Staff Matt Karatz, Senior Managing Director Brian Currey, Legal Counsel to the Mayor

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Message from the General Manager to 1) pursue termination and 2) turn our internal investigations over to the City Attorney and Police Department for possible criminal prosecution.

The tag line for our monthly newsletter has always been "Good News from LADBS". Unfortunately, some of the news we have to report this month is not good. In early April, two of our Inspectors were arrested by the FBI for allegedly taking bribes. One pled guilty and the other pled not guilty. On behalf of the Department I apologize to the Mayor, City Council, our customers and to all the people of Los Angeles for these alleged outrageous violations of the public trust. I hope we can regain the public's trust by forthrightly explaining what happened and by taking swift action to try to make sure it doesn't happen again. First, let me tell you what happened. In January, the Department received an anonymous letter alleging criminal misconduct by at least two inspectors. Immediately, we began an investigation of over 50 projects involving such things as approvals without physical inspections. Enough preliminary evidence was found to place two employees on administrative leave. During February and March we worked closely with the City Attorney

On April 8, the same two employees were arrested by the FBI for allegedly taking bribes during an undercover "sting" operation. LADBS did not know about the FBI sting until it was reported in the media. Although our actions were well down the road, the FBI's investigative resources are much more sophisticated than ours. We appreciate the work of the FBI because it will assist us in identifying and implementing corrective and preventative measures at the local level, as the Department of Justice pursues its cases at the federal level. If anyone has knowledge of any criminal activity, they are encouraged to contact the FBI at (310) 477-6565 or by e-mail at [email protected] One benefit that can come from an incident like this is to learn from what went wrong and to take action to prevent similar occurrences in the future. On April 11, I sent a report io the Mayor explaining the situation and outlining the next steps we would be taking. We will provide additional public updates in the future. Because it involves a criminal investigation and personnel actions, we can not disclose everything going on, but we will openly disclose all that we can in order to demonstrate our commitment to dealing with this situation.

The actions we are already taking include upgrading our supervisory practices, improving our employee training, exploring enhanced technology, increasing our resources for internal investigations and performance auditing. In the last two weeks I have often been asked if I believe this type of corruption is pervasive in the Department. I do not! I do think our o~­ going investigation might lead beyond just these two inspectors. But, 1 also firmly believe the overwhelming majority of our employees are honest and hard working. All of us hold our heads lower today because of the shadow a few employees have cast over the entire department. It is my belief that by dealing with these few accused employees all of our other employees will be able to stand a little taller knowing that we openly, swiftly and decisively identified our problems and corrected them. And from those actions, I hope our customers and the public will regain their confidence that the LADBS employees you see at work every day are the best in the business and that you can have confidence in their abilities and honesty.

Robert R. "Bud" Ovrom General Manager