Government Gone Wild: In the Hot Seat

Tonight we bring you the latest in our exclusive investigation into the scandal at the Los Angeles Housing Authority. After our exposé on lavish spending for perks and meals, the interim CEO is out and a new CEO has been named. But the drama this week was at City Hall, as the former CEO was called to account for excessive spending. Some city officials were outraged that they learned of this scandal from SoCal Connected — not city auditors. Here's correspondent Laurel Erickson.

TRANSCRIPT:

Ken Simmons/Los Angeles Housing Authority: My name is Ken Simmons, and I'm soon to be the COO this afternoon.

Laurel Erickson: Pardon the cliché, but it was time for Ken Simmons to face the music this week — or at least the chorus at city hall.

Paul Koretz/L.A. City Councilman: These kinds of things keep on happening.

Dennis Zine/L.A. City Councilman: It is washing money so we can spend it the way we want.

Bill Rosendahl/L.A. City Councilman: Is that a slush fund sort of game?

Simmons: I'm not going to be able to address why the commission set this up.

Erickson: Simmons appeared at the Los Angeles City Council to answer questions about the lavish spending at the Housing Authority of Los Angeles (HACLA), which we were among the first to report.

Zine: What government agency gives employee incentives where there's gifts and there's cards with $15,000 expenditures? What's your response to that?

Simmons: My response is that I didn't agree with them from the beginning that I arrived there. I took that argument to my CEO. I pressed my argument as much as I could. It gets to a point where you argue with your boss and your boss says, "This is the way we are going to do it." It is not illegal. It is then policy and I implemented it accordingly.

Erickson: Simmons says for years he implemented policies and rules that allowed for big spending — rules he now describes as "extremely loose."

Simmons: One of the expenditures, for example, that KCET brought forward was limousines. Well, limousines actually are in our current travel policy an allowable expense. We are well behind in trying to remedy this.

Rosendahl: Why did you use it? Why did you even do it to begin with?

Simmons: It wasn't my initiative, sir. I don't approve of it. I don't agree with it.

Erickson: Simmons told the council he reported his concerns about spending to authorities earlier this year.

Simmons: For those expenses where I did believe that it violated the use of public funds, I reported those to the City Attorney's office, the HUD Office of Inspector General, as well as the District Attorney's office, and I've been working with all three agencies for the last nine months.

Erickson: Nine months ago? Is it a coincidence that's when we first reported on the agency's excessive spending? And it's our report which contributed to former CEO Rudolf Montiel's firing in March.

Erickson [to Craig Takenaka]: Ken Simmons says that he went to the City Attorney's Office about what he considered to be inappropriate, and when did he do that?

Craig Takenaka/Assistant L.A. City Attorney: He did come to our office earlier in the year. I couldn't tell you, exactly.

Erickson: But it's 2011.

Takenaka: Yes.

Erickson: It wasn't when this was going on for the last five years?

Takenaka: Yes, we are unaware of that.

Erickson: While he disagreed with the spending, Simmons says public funds were not tapped. Instead, those limo rides and fancy dinners were paid for with revenues from something called LOMOD. LOMOD is a nonprofit set up by HACLA to do much of its business. And LOMOD now has the attention of many city leaders.

Zine: You talk about the funds from the nonprofits; to me that is washing money.

Rosendahl: How many foundations are we talking about where this money in my opinion was abused?

Richard Alarcon/L.A. City Councilman: Something fishy was going on with these nonprofits.

Erickson: Until last year, Mary Maher was one of the highest-ranking officials at one of HACLA's nonprofits. She remembers when Ken Simmons was hired.

Mary Maher: He seemed to be Rudy's boy. I mean, Mr. Montiel hired him and brought him on to the Housing Authority — another person with not a lot of background in affordable housing.

Erickson: She says money meant for the poor didn't always end up in the right hands.

Maher: It should have been used to help housing programs, help the people of Los Angeles that need the help, but it seems like it's been used as a slush fund. I didn't see any evidence it was being used for anything to help the people in the housing.

Erickson: Maher says Simmons knew how the nonprofit's money was being spent.

Maher: He was very involved. He was very aware of how much income we were generating and how it was being used.

Erickson: Earlier this week, Simmons said he clashed with Montiel repeatedly over spending. He says he even went to the authorities with certain issues. But Ken Simmons also signed a settlement agreement which gave Rudy Montiel more than a million dollars of walkaway money.

Erickson: As part of the settlement, Simmons and the agency claim they do not have knowledge of any impropriety in plaintiff's business expense reimbursement and believes that all payments to plaintiff were proper.

Erickson [to Simmons]: In the meeting today, you said that you had had big arguments with Montiel and the Board about their inappropriate expenditures, and yet you signed the $1.2 million deal for Montiel saying that there had been no inappropriate action by the Housing Authority leaders. Which is it?

Simmons: I didn't accuse him of inappropriate action.

Erickson: You said you had knock-down, drag-out arguments about expenditures.

Simmons: I did not accuse him of inappropriate action. You are wrong.

Erickson: Well, today, you told the council that you thought much of what was going on was wrong, that you didn't want to go on out-of-town trips — you thought it was lavish spending. Which is it?

Simmons: That is not inappropriate from a legal standpoint.

Erickson: Simmons seemed reluctant to answer the question. Why? Because if he says anything disparaging about Rudolf Montiel, it is a violation of the settlement agreement, and it could cost the agency even more money.

Erickson: Do you think Mr. Montiel threw all the HACLA employees under the bus?

Maher: Yes, I think that, in particular, that certification he made us all sign on everything, on everything we sent to him for action. I think he came in saying, "I am not going to be responsible for anything, and in case something comes up, I'm going to be able to point to that employee and they can take the blame."

Erickson: The blame game is alive and well as officials try to explain why hundreds of thousands of dollars were spent on sweaters and filet mignon.

And now, the HACLA Board has approved its third CEO this year, Doug Guthrie to be the new interim CEO. He moves over from the L.A. City Housing Department.

Erickson [to Guthrie]: Should any of the people who are working for HACLA right now be afraid you're going to fire them?

Doug Guthrie: It's too early to say. I haven't had an opportunity to dig into the details on this, but I will be empowered to do that.

Erickson: Do you have the guts for that? Do you have the stomach for it?

Guthrie: What kind question is that? Uh, I will do what needs to be done.

Erickson: The first to lose their jobs? Apparently, union workers. They sounded off at the most recent HACLA board meeting.

Unnamed Speaker: Now we are talking about layoffs, retirements. We're going to be losing about 100 to 120 people. The two departments that are not cited for cuts in their departments is administration and HR. If we have 120 fewer employees, and we're not hiring anybody, then why do they need so many people in HR?

Erickson: Meanwhile, this week the city council asked the state and federal governments to give it more control over HACLA, an agency that is seemingly out of control.

For SoCal Connected, I'm Laurel Erickson.