Parks boss steps down over secret $54 million hidden from budget makers

Obviously, we need more transparency in government. Parks boss steps down over secret funds
The state discovered $54 million hidden from budget makers
By Ashly McGlone and Matt Clark
UT-SD
July 20, 2012

The discovery of $54 million stashed away in the state parks department has resulted in the resignation of the agency’s director and the firing of a top assistant.

The state is launching an agencywide audit of the parks department — and is reviewing all 560 special funds in the state budget, which hold upwards of $33.4 billion.

...“I am floored,” said Rick Barclay, chairman of the Friends of Palomar Mountain State Park, a group that spent the last year gathering donations to insure that one of the most popular local state parks in the county would remain open. “If that money really was there and could have been used to keep parks open, then we will all be scratching our heads wondering, why did we go through all that.”

Some 70 parks were threatened with closure this year in anticipation of $22 million in cuts to the department’s $364 million operating budget.

In late June the parks department announced that, at least for the time being, enough money had been found to keep all 70 parks open. Those included the San Pasqual Historic Battlefield museum near the San Diego Zoo Safari Park, and two large state recreation areas in Imperial County: Salton Sea and Picacho on the Colorado River.

Bill Meister, president of the nonprofit Sea and Desert Interpretive Association which has been fighting to keep the Salton Sea State Recreation Area open, said he was shocked by the news.

“An awful lot of people — employees, lovers of the park — have had a lot of sleepless nights not knowing if they were going to have jobs or if the park would close,” he said. “We’ll have to see how this all plays out, but it doesn’t look good.”

State investigators in January began looking into a secret $271,000 vacation cashout program for parks staffers. Officials tapped the department’s new deputy director of administrative services, Aaron Robertson, to examine agency finances. He is credited with finding the hidden funds.

State investigators have determined that nearly $20.4 million, or 39 percent of the money in the State Parks and Recreation Fund, was not disclosed to state budget officials. Nearly $33.5 million, or 20 percent, of the money in the parks’ Off Highway Vehicle Fund was also not reported. Both accounts subsist on revenue from park visitor fees.

The finance department and the attorney general are reviewing whether criminal activity was involved in hiding the assets. Officials said preliminary findings suggest the reporting errors date back at least 12 years.

Ruth Coleman, state parks director for the last eight years, resigned Thursday, even as she said she had no knowledge of the hidden funds.

“I have always taken the public trust to heart and honored it and I am personally appalled to learn that our documents were not accurate,” Coleman wrote in her resignation letter to the governor.

Another deceptive mailer sent to Democratic voters

The flyer that was mailed to my house sure looks like it came from the Democratic Party; it says in large capital letters, "VOTER INFORMATION GUIDE FOR DEMOCRATS." It contains color photos of Jerry Brown and Barbara Boxer.

But Democrats don't support Proposition 16. So why does this deceptive flyer urge me to vote to help energy companies?

I think the flyer was paid for by friends of Pacific Gas & Electric, which is hoping to prevent municipalities from providing energy to citizens. After the energy companies caused the horrible California financial crisis of 2000-2001, they should allow citizens to defend themselves from unscrupulous corporations who are happy to plunge an entire state into crisis in order to increase profits.*

This kind of deception is why voters need good reading and thinking skills, and this deception may also explain why those in power allow (or perhaps encourage?) our failing education system to continue shortchanging children. It's shocking to me that the biggest changes have merely led to privatization of education, not real change. We now have a bunch of failing charter schools in addition to failing public schools. The success rate hasn't changed significantly, and I don't think it will until we change how teachers are evaluated.
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*From Wikipedia:

The California electricity crisis, also known as the Western U.S. Energy Crisis, of 2000 and 2001 was a situation where California had an artificial shortage of electricity. The state suffered from multiple large-scale black-outs, one of the state's largest energy companies collapsed, and the economic fall-out greatly harmed Governor Gray Davis's standing.

Artificial supply shortage was created by gratuitously taking power plants offline for (unnecessary) "maintenance" on hot summer days of peak demand. Rolling blackouts adversely affected many businesses dependent upon a reliable supply of electricity, and inconvenienced a large number of retail consumers. This demand supply gap was further exploited by energy companies, mainly Enron. Enron traders were thus able to sell power at premium prices, sometimes up to a factor of 20x its normal peak value. State cap on retail electricity charges squeezed the industry's revenue margins, causing the bankruptcy of Pacific Gas and Electric Company (PG&E) and near bankruptcy of Southern California Edison in early 2001.

The financial crisis was possible because of deregulation legislation instituted in 1996 by Governor Pete Wilson (Republican). Enron took advantage of this deregulation and was involved in economic withholding and inflated price bidding in California's spot markets. The crisis cost $40bn to $45bn...

Would Lorie Zapf bring "strategic fraud" to City Council?

Would Lorie Zapf bring "strategic fraud" to City Council?
by Pat Flannery
Blog of San Diego
May 24, 2010

Lorie Zapf, a candidate for City Council District 6, is attempting to turn a bust into a boon. Last week Dave Maass of CityBeat broke a story busting her for being in default on her family home in Clairemont. Responding to CityBeat Ms. Zapf tried to paint herself as the champion of all families who are attempting to negotiate a modification of their mortgage with their lender.

Maass asked me for my (real estate) opinion on the veracity of Zapf's claim, that "strategic defaults" are now commonplace. I told him it was "B.S." Lenders do not modify loans for borrowers who have the means to make their payments. Modification is for families who have genuine hardship, not slick real estate professionals like Zapf's husband.

Before responding to CityBeat I pulled the relevant Deed of Trust and the Notice of Default from the County Recorder. The loan on which the Zapfs are in default is an interest-only Home Equity Line of Credit (HELOC). A quick look confirmed that Zapf's "explanation" to CityBeat was indeed B.S. HELOC rates are already the lowest rates available.

Reporter Maass was now caught between two opinions on "strategic defaults". Mark Goldman, a real estate lecturer at SDSU, was telling him "In order to just have the bank consider your request, they pretty much force you into going into default. There’s a lot of people in that situation.” A classic example of "Those who know, do. Those who profess to know, teach". But the journo handbook requires that reporters call know-all professors.

Then CityBeat asked me to research another Zapf Notice of Default, this time in Las Vegas. Was this too a "strategic default"? So I dug out all the Zapf documents on their property at 2446 Craigie Castle St., Henderson, NV. It is a 4 bedroom, 2 bathroom single-family house built in 2004. The Zapfs bought it from the builder, Dell Web of Arizona, on September 10, 2004 for $511,875 as a second home.

It was a "second home" because they used "second home" financing. They got a $417,950 first loan and a $52,277 second, both from Countrywide. Wife Lorie would have to be intimately involved. A husband can't get "second home" financing without a wife's full cooperation. Their combined 1st and 2nd loans, $470,277, was 92% financing. That kind of loan-to-value ratio is not available for investment properties. If Eric rented out this property as an "investment", he defrauded his lender and Lorie was equally responsible. Yet that is exactly what Lorie told Channel 10 they did. She said it was an investment property, owned by her husband...

Risk factor for fraud: employees (like SEDC's Carolyn Smith) who never take a vacation

Why didn't Carolyn Smith take a day off? Maybe she was afraid fraud would be uncovered.

Why No Vacation is a Risk Factor
September 11, 2008

...The [SEDC] audit states that Smith claimed not to have taken a day off for sick leave or vacation because she enjoys her position.

The audit then says this:

A risk factor for fraud in any organization is present when key employees work for many years without taking time off.

I talked to a source of mine who is familiar with these kinds of issues and asked the source why this is a fraud risk.

The source said one reason why certain employees don't go on vacation is because they're afraid that someone will step in their place and "their whole scam will unravel."

"It is very common in fraud situations that you will find people will either not go on vacation or not relinquish their duties to someone else," the source said.

The audit did find fraud in SEDC's hidden system of bonuses; Smith continues to maintain that the documentation her agency provided was sufficient.

Update: I heard back directly from Denise Callahan, the Macias Consulting Group partner that led the audit. This is what she had to say:

A risk factor becomes present when employees do not take vacations because there could be a desire to hide or conceal inappropriate activity. In fact, fraud tends to be uncovered when key employees had to be on leave/vacation and were not able to continue to conceal the activity.


-- ANDREW DONOHUE