Inspector General reopens probe of MTA unit.

Internal audit department becomes focus of probe

UNION STATION - The Metropolitan Transportation Authority's Inspector General has reopened an investigation into allegations about inflated billings and possible cover-up and kickback arrangements in the MTA's internal audit department, according to a former auditor of MTA contracts.

Carl McGuire, a former auditor with Vargas & Co. who first made the allegations about a year ago, said he was summoned to the IG's office for a four-hour interview recently.

The action comes at the same time that the state's Fair Political Practices Commission has made public a set of separate allegations against the former director of internal audit at the MTA, Filiberto Martinez, including a charge that Martinez buried a 1993 audit that revealed that former MTA Risk Manager Abdoul Sesay and others had accepted gratuities from an MTA contractor. Sesay was later fired in 1995 after pleading guilty to similar charges of accepting bribes in a federal criminal case.

McGuire alleges that when he worked at Vargas, the company inflated its own MTA billings by listing employees who did audit work as having more senior positions in the company than they actually held, thereby justifying reimbursement at a higher rate. McGuire also claims that irregularities in other MTA contracts, discovered in the course of audits, were edited out of reports and kept secret from the MTA Board of Directors.

Differing views of firing

And McGuire says that when he brought these matters to the attention of the MTA's internal audit department, his concerns were summarily dismissed and he was fired. Vargas officially fired McGuire for allegedly using bogus social security numbers.

Last year, MTA Inspector General Art Sinai said it appeared there was no substance to McGuire's allegations.

It is unknown why Sinai has now reopened the probe, but the MTA is facing a probable wrongful termination lawsuit from Martinez, who was fired last February. No official reason was released for the Martinez firing, but it was believed to be related to Martinez's relationship with Sesay. Among other things, Martinez leased a car for Sesay.

The MTA is already involved in fighting Martinez's claim for unemployment benefits, and a separate investigation by the MTA's IG into the Sesay/Martinez relationship led to the Fair Political Practices Commission case against Martinez, said Santa Monica attorney Pamela Mozer, who has been hired to represent Martinez in a possible wrongful termination case against the MTA. Sinai did not return phone calls.

"They probably know they're going to lose the FPPC stuff and they're looking for a legitimate reason (for having fired) him," commented Mozer.

She already represents the former MTA controller, whose contract was terminated in the wake of an IG investigation, and safety-inspector whistleblowers involved in the Metro Rail project.

Accusations reduced

The FPPC, a state government agency with enforcement powers over violations of the Political Reform Act, originally charged Martinez with five violations, but the FPPC executive director, at a "probable cause" hearing, cut the accusations to three. Each charge carries a maximum possible penalty of $2,000.

Martinez is accused of failing to report an auto lease deal in 1992, as required under the MTA's Conflict of Interest Code. He apparently leased the car for Sesay because Sesay had credit problems. Because Sesay made payments on a car that was leased in Martinez's name, those payments constituted "income" to Martinez, according to the FPPC.

Martinez also is charged with conflict of interest for failing to disqualify himself from approving a 1993 audit done by his department that uncovered that Sesay was accepting bribes from a contractor, and with failure to report the results of that audit to his supervisors. A press release and formal accusation papers released by the FPPC said Martinez had "buried" the incriminating audit findings.

Attorney Wayne Ordos of the firm Wilke, Fleury, Hoffelt, Gould & Birney in Sacramento, who represents Martinez in the FPPC case, said Martinez did remove himself from participation in the Sesay audit because of his friendship with Sesay and did, in fact, report the results of the audit to upper management at the MTA.

"We're absolutely not going to plead this out," said Ordos. "I've already requested a hearing. Mr. Martinez feels very strongly about this, that he has been railroaded."

When McGuire first made his allegations in the summer of 1995, the state Senate Transportation Committee subpoenaed Martinez, McGuire and Rudy Vargas, president of Vargas & Co., to testify at a hearing in downtown Los Angeles. However, the men were never actually called to testify there.

It was also revealed at that time that another auditing company headed by Vargas had been found to have overcharged the California Department of Transportation by using the wrong "employee rating system" three years earlier.