MTA FIRES WATCHDOG PROCUREMENT AUDITOR LAID OFF, DEPARTMENT ABOLISHED AFTER CRITICAL REPORT.

Byline: Lisa Mascaro Staff Writer

MTA officials laid off an auditor and disbanded his oversight department days after he completed his report on finding widespread problems in how the transit agency handled major contracts, the Daily News has learned.

The contract compliance unit was created five years ago when the Metropolitan Transportation Authority was in danger of losing its federal funding because of fraud and massive cost overruns that wasted tens of millions of dollars in constructing the subway and other transit projects.

MTA officials defend their action in abolishing the unit, saying they instituted tighter controls to prevent contract abuses.

Lonnie Mitchell, the MTA's executive officer of procurement, said he never saw the audit before disbanding the compliance group but acknowledges he was told of its findings.

The report confirmed his belief, he said, that he needed to tighten and streamline the procurement system.

``We would much rather work smarter up front than harder in the end. We need to have the people doing the work making the quality check - not compliance police,'' said Mitchell, a former Navy procurement officer who joined the MTA in 2000.

The new approach was approved in October by MTA boss Roger Snoble, but it has not been formally presented to the agency board. Officials said the new procedures will be used as the MTA launches $1.2 billion in new construction projects: the San Fernando Valley Metro Rapidway and the Eastside light rail line.

Supervisor Yvonne Brathwaite Burke, an MTA board member who was instrumental in revamping the procurement department after major abuses were uncovered, supports the new procedures but said she will remain vigilant to prevent abuses.

``We've tried to avoid micromanaging the issue and to allow the management the latitude to maintain compliance as a high priority, but under a different configuration,'' said Mike Bohlke, the supervisor's assistant chief deputy.

``Nowhere would Supervisor Burke relent on maintaining compliance being a priority.''

A spokesman for the Federal Transit Administration, which approved the creation of the compliance department in 1998, said the MTA has the authority to make internal changes in its compliance system.

``Restructuring or moving around personnel - that's their business ... so long as the end result is our corrective actions are addressed in a timely matter,'' said the FTA's Ray Tellis in the Los Angeles office.

The MTA's procurement department has handled $386 million in transactions this fiscal year, including consulting contracts, bus purchases and small-ticket items.

The department has repeatedly been under scrutiny; continued, repeated problems - such as contracts including erroneous cost or price analyses, which can end up costing taxpayers - have been found in a series of FTA reviews dating from 1993.

Among the most egregious problems were $900 million in cost overruns for the Metro Red Line subway because the agency's financial controls were so weak they couldn't guarantee against waste, fraud and abuse of taxpayer money.

The MTA revamped the department and, in 1998, recruited Rudy LeFlore from Boeing Corp. as a $93,000-a-year procurement compliance director and gave him a staff of five to supervise.

In a recent interview, LeFlore said that, within three months of being hired, he began complaining to higher-ups about inadequate authority to force compliance.

In July 2002, he launched an audit of procurement activities - as promised in the MTA restructuring plan as well as the agency's response to a federal review. His team found that none of the 34 contracts made in the fourth quarter complied with MTA policies, according to a wrongful-termination claim pending with this former employer.

He reported to Mitchell on the audit and then took specific findings to the MTA's inspector general in October, according to his claim.

That month, he was laid off. His wrongful-termination claim is pending before the MTA.

``It seems that staff never intended to do what the MTA told the public, FTA and Congress we were going to do,'' he wrote in a letter to the board shortly after his dismissal. ``My final attempt to make good on the MTA's promises to review procurement files got me laid off.

``As the MTA embarks on an increased level of procurement activity with major light rail and (bus) projects, is it in the public's interest to reduce emphasis on compliance to procurement rules?''

Mitchell said it was the compliance system that needed to be changed. The department is now providing more and better training to its procurement employees.

The message to staff, Mitchell said, is that the responsibility is theirs.

``Don't expect to have compliance (personnel) come check on you at the end of the day,'' he said. ``Some of it is training; some of it is communicating expectations.''

Mitchell said that reviews of the system have not yet been conducted, but will be.

``This is a work in process. We're not done yet.''

LeFlore said there's no oversight with the streamlined system.

``The only way to verify is independent quality reviews,'' he said. ``There's no assessment of how well they're doing.''