10:00 PM PDT on Thursday, July 21, 2011

The Press-Enterprise

Riverside officials say they don’t see anything questionable in several cases of alleged contract steering, and a city-commissioned investigation by an outside law firm has likewise concluded there was no wrongdoing.

The investigation, led by Rancho Cucamonga-based Cihigoyenetche, Grossberg & Clouse, found no evidence that contracts were steered to friends of City Manager Brad Hudson, the allegation that sparked the probe. The firm’s final report, released this week, describes in detail several cases about which questions were raised.

In one case, employees gave a marketing contract to a business at the owner’s suggestion. In another instance, the city was poised to have one firm do a study and asked for a competitive bid only after an employee questioned how it would appear.

In a third case, employees who were rating firms for a $10.5 million sewer plant design contract apparently were told by a superior that the scoring process “was going in the wrong direction” and that the City Council and management likely would not support hiring the firm that appeared to be in the lead.

The report concluded that any pressure on employees in that case was due to a city directive to hire local firms whenever possible because of the city’s high unemployment and poor economy.

The city released the law firm’s final report this week, after numerous public records requests by The Press-Enterprise. Consistent with the firm’s preliminary findings, the final report determined allegations of contract steering were unfounded, and the law firm said the contract awards in question did not violate city policies.

City Councilman Mike Gardner said Thursday he doesn’t see that any rules were broken, and the report lays out reasonable explanations for how the contracts in question were handled.

“People are looking for something that I don’t think exists,” Gardner said. “I think people are reading perfectly innocent things as something sinister.”

Contracts questioned

The issue arose in March when Deputy City Attorney Raychele Sterling sent an email to the City Council claiming several city employees told her they were directed to give contracts to Hudson’s friends, and that employees who raised questions were berated and threatened with termination.

City officials have denied the allegations. An internal probe by Chief Finance Officer Paul Sundeen also found no wrongdoing. Sterling was fired in May.

The investigation reviewed several contracts the city awarded in 2009 and 2010. In each case, Sterling’s email alleged, employees were told to give contracts to specific companies, regardless of any policies or procedures that might normally govern such an award.

According to the law firm’s investigator, the employees named by Sterling denied telling her they were ordered to steer contracts.

The incidents show how the city did business in these cases. For example, city staff apparently directed that a contract to get federal certification for a levee protecting the city’s sewer plant should be given to Albert A. Webb Associates.

Webb and other firms are part of several on-call panels the city uses for various projects. Under the panel system, the city can ask several firms for proposals or simply pick the firm with the best qualifications, so no rules would be broken by giving the contract to Webb without getting other proposals, according to the report.

At the city’s request, Webb submitted a proposal for the work, but before a contract was signed, city wastewater systems manager Gary Valladao emailed the project engineer asking whether they could “avoid the ‘one vendor’ concern” by asking another firm for a proposal. A second proposal was requested and Webb’s was determined to be better and, at $127,408, less costly.

The law firm also investigated two $20,000 marketing contracts given to Provider Contract Food Service, which operates the café in City Hall and is the “preferred caterer” at city facilities the public can rent, such as the Grier Pavilion or boathouse at Fairmount Park.

The contract with Provider gives the city a share of the company’s profits over $100,000. So far, the company has not reached that threshold and has not paid the city anything.

The investigator reported that the marketing contracts arose from a conversation between Provider’s president, Rodney Couch, and a city employee (whose name was redacted from the report) about how to increase business and the fact that Couch had use of an electronic billboard.

According to the marketing contract, the city paid Provider to advertise city venues including the café through various media, including the billboard.

The law firm’s report said that Couch and Hudson are not personal friends, Hudson had nothing to do with signing the contracts with Provider, and because of the profit-sharing agreement, “a legitimate reason existed to issue a marketing contract to increase profits.”

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