San Diego firm Gafcon under audit, denies wrongdoing

Company manages school bond programs

SAN DIEGO - A financial investigation is happening now involving more than $200 million that was spent on a public project managed by a San Diego firm. The firm is responding to Team 10 questions.
 
Gafcon, which manages school bond programs in San Diego County, says it has done nothing wrong and is confident it ran the project in Orange County the right way. Gafcon is a project management company and was in charge of the project's billing and subcontractors.
 
A forensic audit, which is a highly detailed audit, is underway for the Great Park project. It's an airfield converted into a massive park in Irvine. The plans were huge -- for 1,300 acres -- and included things like a state-of-the-art amphitheater and a 2.5-mile man-made canyon.
 
"It's much larger than Balboa Park, and we are proud of the work that we did there," said attorney Mike Brown, whose law firm represents Gafcon.

Why an Audit?
 
Great Park critics want to see how more than $200 million was spent over 10 years because they say plans fell short. There is no canyon -- and no new amphitheater -- in the park, which is roughly halfway between San Diego and Los Angeles.

Some sources say Great Park fell short of the plan because of issues like the recession and political fighting. They also point to cutbacks in state redevelopment agencies, which would have given the project more state money.
 
An audit in early 2014 was found to be preliminary because auditors said Gafcon and other businesses did not provide enough documentation or interviews.
 
So Irvine's City Council ordered a forensic audit, which is expected to be finished sometime this summer.
 
Team 10 sources say Gafcon's cooperation with the new forensic audit came after the council threatened to subpoena records.
 
Gafcon's legal team says that is absolutely false.
 
"We look forward to be working with the auditors to provide them with the accurate information," Brown said,  "and look forward to working with the auditors and the city to make sure the final report is accurate and properly presented to the public."
 
Gafcon is not the only company under the microscope. Other firms have been subpoenaed, but Gafcon has not.

Findings from the Preliminary Audit
 
The preliminary audit cites 50 changes to plans that added a cost of more than $42 million to the project.
 
Brown said that many changes are common in large projects.
 
"Would you say these changes are simply the cost of doing business?" Investigator Mitch Blacher asked.

"Generally speaking, yes, and would be outside of Gafcon's control," Brown said.
 
The preliminary audit also raised questions over double billing.
 
"We disagree with the assertions," Brown said.

Auditors also questioned Gafcon's qualifications in the preliminary audit, and said the company wielded political pressure and was not properly "vetted."
 
Brown said that is not true. He said Gafcon was awarded the contract solely on its merit, and there was a competitive bid process.
 
Gafcon has given political donations in Orange and San Diego counties.

"Are political contributions part of Gafcon's strategy?" Blacher asked.

"Gafcon, as a general matter, supports the candidates and causes that it believes in," Brown said.
 
The donations are legal.

San Diego Political Contributions
 
Public records show Gafcon gave $30,000 to a group that helped pass a multi-million dollar bond program in the Grossmont Union High School District in 2008. At the time, Gafcon was working for that district in a different bond program. The company still works for the district today, managing bond money.
 
Gafcon gave more than $49,000 to a group that helped the San Diego Unified School District pass a bond measure in 2008. Gafcon later got a contract with that district, which it still has today.
 
In 2012, public documents show Gafcon gave $15,000 to support the $398 million Proposition V bond measure at Grossmont Cuyamaca Community College District (GCCCD). Today, Gafcon is the project manager of that bond program.

Again, this is in compliance with political contribution regulations.

The company's CEO, Yehudi "Gaf" Gaffen, sits on the board of directors for The Foundation for Grossmont & Cuyamaca Colleges.

Another foundation board member, Ron Oberndorfer, helps to oversee how the bond money is spent by serving on the Citizen's Bond Oversight Committee (CBOC).

Reached by phone back in March, Oberndorfer said there was no conflict of interest with having Gaffen on the foundation board, and managing the district's bond program. Oberndorfer, an attorney, also said there was no issue with he and Gaffen serving on the foundation board together, while he oversees how bond money is spent on the CBOC.

"Gaf is a philanthropic fellow," Oberndorfer said. "He felt a connection to the schools" and that's why he's on the foundation board.

Forensic Audit Due This Summer

Since the preliminary audit was released in January, the City of Irvine has posted depositions and exhibits on its website related to the forensic audit, in response to a public records request.

Gafcon released this statement on the matter:

As a family-owned business with a long history of successfully managing hundreds of development and construction projects, Gafcon is appalled by the continued misinformation being released regarding the Orange County Great Park project, the Great Park Design Studio and Gafcon’s role as a consultant for development of the Park’s master plan and schematic design. The preliminary audit report that was released in January was Gafcon’s first opportunity to learn of the substantive areas of inquiry. Unfortunately, upon review, Gafcon determined that the report contains numerous factual inaccuracies, incorrect assumptions and speculative preliminary conclusions. Sadly, this approach appears to be continuing with the recent release of allegations put forward by former Great Park employees. None of these statements are true.  At best, these are gross misstatements of the facts, and at worst, they are direct lies.

Gafcon was hired on the merit of its work through an international design competition involving 24 design teams reviewed by two separate juries of experts. In addition, the Great Park Board of Directors personally vetted Gafcon and conducted site inspection visits of past projects and conducted personal interviews with Gafcon and the other three finalists. The Great Park Design Studio followed all requirements of its Great Park contract and direction given by the City of Irvine in a complete and professional manner, completing work on time and within budget. The City Council and Board were involved in every major decision regarding the Great Park and continually provided direction to Gafcon, as well as other subcontractors.  In addition, the City of Irvine imposed multiple levels of oversight over the Great Park Design Studio and its consultants. Bovis Lend Lease, one of the largest construction managers in the world, was in charge of the project and monitored all work conducted by the Design Studio and other contractors. As a part of its contract with the Design Studio, the City has also conducted several previous audits of the Design Studio’s work, none of which yielded any findings of wrongdoing by the Design Studio or Gafcon.

Gafcon has a long history of delivering quality, value-generating work for a variety of clients across the country. The company has successfully overseen more than $4 billion worth of construction projects on time and within budget, providing continual transparency to clients, public entities, oversight committees and taxpayers. Gafcon is proud of its work on this landmark project, which has received numerous national awards from key organizations for planning and vision. Gafcon continues to focus on providing the best services to its clients. The company is extremely proud of its work, which continues to be recognized for innovative and efficient planning and management, and is confident that these claims will again be found to be without merit. Gafcon looks forward to assisting the City of Irvine in the full and complete audit and investigation concerning the Great Park and ensuring the City of Irvine reaches fair, prudent and accurate audit findings.

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