DWP looking for a legal way out of paying millions to secretive trusts

The Los Angeles Department of Water and Power's board is seeking legal advice on whether it must continue to pay about $4 million each year to two secretive union-run trusts that were subject to scathing criticism in recent audits.

The two audits, released late last week by the City Controller and City Administrative Officer, found administrators of the trusts used official credit cards to spend about $421,000 over the past five years on travel, conferences, meals and gas for their vehicles.

The Joint Training Institute and the Joint Safety Institute were nonprofit trusts formed between 2000 and 2002 during collective bargaining between the DWP and IBEW Local 18, the union that represents city DWP workers.

Many DWP commissioners reacted angrily Tuesday to the audit's findings, asking for a private meeting with their legal counsel and with the City Attorney's office to go over their options for cutting off the payments.

"This is a difficult decision, whether to go ahead and continue to fund the trusts," said Commissioner Jill Barad. She called the trusts a "PR nightmare" for the DWP.

Commissioner Christina Noonan said she wanted the trust administrators barred from using official credit cards.

"I don't even want them buying bubble gum at a gas station," she said.

A representative of IBEW Local 18 did not respond to a request for comment.

DWP General Manager Marcie Edwards and IBEW Local 18 Business Manager Brian D'Arcy responded last week to the audits in a joint letter disparaging the audit findings and methodology, but promising to tighten fiscal controls of the two trusts.

Edwards apologized to the board Tuesday for signing off on the criticism, saying she had too little time to absorb the audit's details.

Despite the promise to improve fiscal controls, the board cast about for strategies to impose more oversight.

The agreements forming the trusts placed two union and two DWP managers in charge of each, ostensibly balancing power between the union and the agency. But the union board members had dominated decisions over the years.

On Tuesday, the board discussed whether DWP's two representatives on the trust boards could impose more control by withholding their votes on inappropriate spending.

They questioned whether the IRS might investigate whether individual trust administrators had failed to declare as personal taxable income any gas purchases they made on official credit cards above their $500 monthly car allowances.

The audits said the two trusts spend far less than $4 million annually on their official mission of training and safety instruction. Together, the trusts have banked $15.3 million of more than $44 million paid by DWP since 2000. 

That amount includes about $4 million added to the trust's cash stockpile last week after the audits were released, said City Controller's office spokesman Lowell Goodman. That payment was made as part of a legal settlement between the city and trusts to resolve a deadlock when the union members of the trust boards refused to open their books to auditors.

One of the commissioners suggested the trust could use its cash on hand to carry out its training and safety mission without any additional funds from the DWP. The agreements creating the trusts expire in 2017.