Press Release

HIGHWOOD, IL—Majority Caucus Whip and State Senator Susan Garrett (D – Lake Forest) is calling for action by Metra and the RTA after months of trying to work with officials from both agencies to bring independent oversight to Metra.

It has been over four months since news stories exposing executive compensation irregularities broke. Since that time, Metra and RTA have contracted with a series of auditors and consultants to advise the Metra and RTA Boards of Directors on revisions to its compensation and management policies to prevent abuses suspected of running for years at Metra from continuing in the future. In addition, Metra has hired attorneys who have, in turn, hired auditors on behalf of Metra to provide a management audit.

Taxpayers are on the hook for over $1.7 million this year alone for consultant services retained by Metra and the RTA.

Up to this point, no public reports, results or consultants’ recommendations stemming from any of the audits or investigations have been released to the public. The lone exception is a brief executive summary of a report describing the compensation abuses of Executive Director Phil Pagano. Neither Metra nor the RTA have made any public statements whatsoever regarding the findings from audits and investigations.

“The public deserves to know how these agencies spend money and what findings have emerged from publicly funded investigations and consulting projects,” Garrett said. “The question remains, why are written findings and reports being withheld from the public?”

Metra Board Chairman Carole Doris stated in a letter to Garrett dated September 3, 2010, “[auditors] Blackman Kallick initially planned to draft a written report with these findings; however, I determined that Metra's money was better spent by having them move directly into the testing phase rather than spend more time on a written document.”

Additionally, RTA’s Manager of Legislative and Regulatory Development indicated that Ernst & Young was to publicly release its findings and recommendations concerning its executive compensation audit and that the report was expected to be completed before the September 15th RTA Board meeting. It has now been disclosed by RTA that, by contract, any reports, presentations, or communications provided to the RTA by Ernst & Young are for internal use only and that any disclosure by the RTA of these materials externally may not refer to Ernst & Young by name.

While Metra and the RTA have contracted to spend more than $1.7 million this year in the wake of the recent scandals at Metra with very little to show for it, the RTA is now calling for fare hikes in the hopes of balancing CTA, Metra, and Pace budgets. According to Joseph Costello, the RTA’s chief financial officer and recently named interim executive director, “fare hikes make good business sense to keep revenues parallel with cost trends.”

Most troubling about the long list of consultants retained by RTA and Metra are the apparent relationships that have developed between these consultants and Metra and how these contractors came to be chosen for these projects in the first place. Auditing firms were hand-picked by Metra and RTA’s Board of Directors based on recommendations by staff and legal counsel. It appears that one firm representing Metra was given a special deal, with a discounted lease rate for office space in a Metra-owned building (see Culloton Strategies, LLC). Finally, there appears to be overlapping and excessive use of consultants by Metra and RTA at enormous expense to taxpayers (for example, Ernst & Young (RTA) and Blackman Kallick audits (Metra)).

Ironically, the most blatant contract expansion concerns Metra’s Interim Inspector General Hillard Heintze. Earlier this year, Metra executed a 1-year, $100,000 contract with Strategic Security Advisors Hillard Heintze to serve in this capacity and make recommendations as to the establishment of a permanent office of the Inspector General at Metra. Now, Chairman Doris publicly stated that Metra’s cost for Hillard Heintze will be up to $500,000 by year end. Was this enormous increase discussed and decided upon publicly? If these kinds of maneuvers are taking place with the Hillard Heintze consulting contract, could this type of maneuver also be taking place with other consulting contracts?

Metra and the RTA have been quick to hire teams of consultants and advisors. However, both agencies have been resistant in coming to an agreement about supporting an independent inspector general for Metra or for the RTA and service boards. Good government groups have recommended, and Garrett agrees, that the inspector general, tasked with actively investigating cases of fraud, waste, or mismanagement, would be appointed by a panel selected by the Governor, the Attorney General, the Auditor General, the Executive Inspector General, and the Association of Inspectors General. The RTA has already publicly rejected that proposal. And at Metra’s Board meeting on September 17, 2010, the Metra directors showed no interest in having an independent inspector general.

“The fact that Metra and the RTA will not release taxpayer funded reports on auditors’ findings is another example of why an independent watchdog is critical,” Garrett added.

Since February of this year, when the Metra Board of Directors was alerted to potential problems with Metra’s former Executive Director, the following firms have been retained to offer counsel regarding management and compensation practices at Metra:

On February 15, Metra contracted with the media communications firm Culloton Strategies, LLC to “provide professional public information development, coordination and oversite (sic) services.” The 10 ½ month contract was not to exceed $400,000 and is in addition to Metra’s internal communications department. Oddly enough, on April 21, 2010, Metra leased 1,764 square feet of space on the 10th floor of its corporate headquarters location to Culloton Strategies for 3 years at a rate of $25,383.96 for the first year of the lease.
On May 6, Metra contracted with James G. Sotos & Associates as legal counsel to conduct an independent investigation of irregularities in Metra’s executive compensation practices with compensation not to exceed $100,000. An executive summary of the investigation was released May 14, 2010. However, the final report and attachments were never released to the public.
On May 26, Metra executed a 1-year, $100,000 contract with Hillard Heintze to serve as Metra’s interim inspector general. The cost of this contract to Metra now appears to have been increased to up to $500,000.
An initial 5-year contract of $325,000 with the law firm Johnston and Greene to offer legal counsel to the Metra Board of Directors was effectively replaced by a 5-year $2.5 million contract in August of this year.
The audit firm Blackman Kallick was retained by Johnston Greene on Metra’s behalf on June 21, 2010 to perform a management audit at Metra at a maximum rate of $240 per hour. Although Metra did not execute a contract with Blackman Kallick for a maximum of $100,000 as was agreed by Metra Board of Directors at its Board meeting on June 11, 2010, Metra had already paid $35,324.50 related to work performed by Blackman Kallick, apparently without a contract.
The audit firm Ernst & Young was retained by the RTA in June of this year to perform an executive compensation audit of Metra for up to $124,000. Ernst & Young was retained at the strong recommendation by RTA’s auditing department without going through the Request for Proposal (RFP) process.

NEWS
from the Illinois Senate
State Senator Susan Garrett Majority Caucus Whip, 29th Senate District
FOR IMMEDIATE RELEASE September 20, 2010	FOR MORE INFORMATION Susan Garrett (847) 433-2002
Garrett Calls on Metra and RTA to Release Audit Findings and Put an Independent Inspector General in Place Immediately No Fare Increase—Cut Spending on Consultant
HIGHWOOD, IL—Majority Caucus Whip and State Senator Susan Garrett (D – Lake Forest) is calling for action by Metra and the RTA after months of trying to work with officials from both agencies to bring independent oversight to Metra. It has been over four months since news stories exposing executive compensation irregularities broke. Since that time, Metra and RTA have contracted with a series of auditors and consultants to advise the Metra and RTA Boards of Directors on revisions to its compensation and management policies to prevent abuses suspected of running for years at Metra from continuing in the future. In addition, Metra has hired attorneys who have, in turn, hired auditors on behalf of Metra to provide a management audit. Taxpayers are on the hook for over $1.7 million this year alone for consultant services retained by Metra and the RTA. Up to this point, no public reports, results or consultants’ recommendations stemming from any of the audits or investigations have been released to the public. The lone exception is a brief executive summary of a report describing the compensation abuses of Executive Director Phil Pagano. Neither Metra nor the RTA have made any public statements whatsoever regarding the findings from audits and investigations. “The public deserves to know how these agencies spend money and what findings have emerged from publicly funded investigations and consulting projects,” Garrett said. “The question remains, why are written findings and reports being withheld from the public?” Metra Board Chairman Carole Doris stated in a letter to Garrett dated September 3, 2010, “[auditors] Blackman Kallick initially planned to draft a written report with these findings; however, I determined that Metra's money was better spent by having them move directly into the testing phase rather than spend more time on a written document.” Additionally, RTA’s Manager of Legislative and Regulatory Development indicated that Ernst & Young was to publicly release its findings and recommendations concerning its executive compensation audit and that the report was expected to be completed before the September 15th RTA Board meeting. It has now been disclosed by RTA that, by contract, any reports, presentations, or communications provided to the RTA by Ernst & Young are for internal use only and that any disclosure by the RTA of these materials externally may not refer to Ernst & Young by name. While Metra and the RTA have contracted to spend more than $1.7 million this year in the wake of the recent scandals at Metra with very little to show for it, the RTA is now calling for fare hikes in the hopes of balancing CTA, Metra, and Pace budgets. According to Joseph Costello, the RTA’s chief financial officer and recently named interim executive director, “fare hikes make good business sense to keep revenues parallel with cost trends.” Most troubling about the long list of consultants retained by RTA and Metra are the apparent relationships that have developed between these consultants and Metra and how these contractors came to be chosen for these projects in the first place. Auditing firms were hand-picked by Metra and RTA’s Board of Directors based on recommendations by staff and legal counsel. It appears that one firm representing Metra was given a special deal, with a discounted lease rate for office space in a Metra-owned building (see Culloton Strategies, LLC). Finally, there appears to be overlapping and excessive use of consultants by Metra and RTA at enormous expense to taxpayers (for example, Ernst & Young (RTA) and Blackman Kallick audits (Metra)). Ironically, the most blatant contract expansion concerns Metra’s Interim Inspector General Hillard Heintze. Earlier this year, Metra executed a 1-year, $100,000 contract with Strategic Security Advisors Hillard Heintze to serve in this capacity and make recommendations as to the establishment of a permanent office of the Inspector General at Metra. Now, Chairman Doris publicly stated that Metra’s cost for Hillard Heintze will be up to $500,000 by year end. Was this enormous increase discussed and decided upon publicly? If these kinds of maneuvers are taking place with the Hillard Heintze consulting contract, could this type of maneuver also be taking place with other consulting contracts? Metra and the RTA have been quick to hire teams of consultants and advisors. However, both agencies have been resistant in coming to an agreement about supporting an independent inspector general for Metra or for the RTA and service boards. Good government groups have recommended, and Garrett agrees, that the inspector general, tasked with actively investigating cases of fraud, waste, or mismanagement, would be appointed by a panel selected by the Governor, the Attorney General, the Auditor General, the Executive Inspector General, and the Association of Inspectors General. The RTA has already publicly rejected that proposal. And at Metra’s Board meeting on September 17, 2010, the Metra directors showed no interest in having an independent inspector general. “The fact that Metra and the RTA will not release taxpayer funded reports on auditors’ findings is another example of why an independent watchdog is critical,” Garrett added. Since February of this year, when the Metra Board of Directors was alerted to potential problems with Metra’s former Executive Director, the following firms have been retained to offer counsel regarding management and compensation practices at Metra: On February 15, Metra contracted with the media communications firm Culloton Strategies, LLC to “provide professional public information development, coordination and oversite (sic) services.” The 10 ½ month contract was not to exceed $400,000 and is in addition to Metra’s internal communications department. Oddly enough, on April 21, 2010, Metra leased 1,764 square feet of space on the 10th floor of its corporate headquarters location to Culloton Strategies for 3 years at a rate of $25,383.96 for the first year of the lease. On May 6, Metra contracted with James G. Sotos & Associates as legal counsel to conduct an independent investigation of irregularities in Metra’s executive compensation practices with compensation not to exceed $100,000. An executive summary of the investigation was released May 14, 2010. However, the final report and attachments were never released to the public. On May 26, Metra executed a 1-year, $100,000 contract with Hillard Heintze to serve as Metra’s interim inspector general. The cost of this contract to Metra now appears to have been increased to up to $500,000. An initial 5-year contract of $325,000 with the law firm Johnston and Greene to offer legal counsel to the Metra Board of Directors was effectively replaced by a 5-year $2.5 million contract in August of this year. The audit firm Blackman Kallick was retained by Johnston Greene on Metra’s behalf on June 21, 2010 to perform a management audit at Metra at a maximum rate of $240 per hour. Although Metra did not execute a contract with Blackman Kallick for a maximum of $100,000 as was agreed by Metra Board of Directors at its Board meeting on June 11, 2010, Metra had already paid $35,324.50 related to work performed by Blackman Kallick, apparently without a contract. The audit firm Ernst & Young was retained by the RTA in June of this year to perform an executive compensation audit of Metra for up to $124,000. Ernst & Young was retained at the strong recommendation by RTA’s auditing department without going through the Request for Proposal (RFP) process.

NEWS

from the Illinois Senate

State Senator Susan Garrett Majority Caucus Whip, 29th Senate District

State Senator Susan Garrett
Majority Caucus Whip, 29th Senate District