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Monday, July 04, 2011
San Bernardino: Airport Needs Better Oversight, Grand Jury finds (Press-Enterprise) Friday, July 1, 2011
The man developing much of San BernardinoInternational Airport is the focus of concern in a grand jury report released late Thursday that is critical of how the public project is being managed.
San Bernardino International Airport Authority -- a group of county and city officials from San Bernardino County's EastValley -- must strengthen their financial oversight and reconsider agreements with Scot Spencer, who heads two companies that are developing much of the former Norton Air Force Base, according to the report written by an independent auditor hired by the grand jury.
Auditors also suggested the authority should stop some payments to Spencer and his companies, citing the lack of a purchase agreement for $4.1 millionworth of equipment, such as jet bridges, the authority already paid for.
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"Without immediate implementation of the recommendations, Norton Development and SBD Properties will likely continue to spend taxpayer funds without being subject to proper controls," the report said.
The report was the result of a two-year investigation involving San Bernardino County's civil grand jury -- which oversees public agencies and their practices but wields no legal power -- and an outside auditor. It was one of 14 San Bernardino County grand jury reports issued Thursday. Agencies have 90 days to respond.
Spencer was banned from the aviation industry in 2005 by the federal Department of Transportation.
The report says that his activities at San Bernardino airport are in direct violation of that ban.
"Certainly every attorney that I've ever discussed that with and every expert I've discussed it with has disagreed with that," he said when reached by phone.
As of 7:35 p.m. Thursday, Spencer said he had only had time to glance at the report that was given to him about a half-hour earlier. He said he was disappointed in the auditor.
"I spent a lot of time with them, spent a lot of time taking them around the airport, meeting with them in my offices," he said. "Just glancing at it, I've found at leasta dozen factual errors in 15 minutes."
Representatives from San Bernardino County, along with the cities of San Bernardino, Colton, Loma Linda and Highland, make up the boards that govern the Inland Valley Development Agency and San Bernardino International Airport Authority.
The two agencies have been redeveloping Norton Air Force Base since it closed in 1994 and took with it an estimated 10,000 jobs.
The price to build the airport has surged from $38 million to $142.5 million as plans ballooned from a commercial airline terminal to also include a luxury general aviation terminal, a U.S Customs building, a rehabilitated runway, parking lots and landscaping. The airport still does not have a single commercial airline offering scheduled flights.
And public records recently showed Spencer's SBD Properties and another managed by him, SBD Aircraft Services LLC, owe more than $680,000 in property and employment taxes.
Officials on the development and airport boards reached Thursday evening said they would need time to review the report before they could comment.
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Features that cost $142 million are available at San Bernardino International Airport, but the facility still does not have a single commercial airline offering scheduled flights. Add-ons include a U.S. Customs building and a luxury general aviation terminal.
"I do have full and complete confidence in our executive staff," said Ovidiu Popescu, mayor pro tem of Loma Linda and a member of both the Inland Valley Development Agency and the San Bernardino International Airport Authority governing boards.
The report listed examples of contracts where public officials deferred to airport management and Spencer's recommendations for cost increases.
Many of those increasingly costly projects included deals in which Spencer received a percentage of the contract's value.
"This created a clear conflict of interest," auditors with San Francisco-based Harvey M. Rose Associateswrote in their report.
Much of the taxpayer investment aimed at turning the air base into a bustling airport with passenger and cargo services is funneled through Norton Development and SBD Properties.
"Although most major financial matters are brought before the (airport authority) for consideration, the analysis supporting decision-making is often incomplete or vaguely stated," auditors wrote.
Auditors pointed to a $1 million settlement that the airport authority paid out to two companies -- one run by Spencer and another started by him -- over a disputed lease of a hangar. The settlement was reached 18 days after officials received the claim, and with little verification of the damages each company was rightfully owed.
Spencer's past dealings -- including a stint in a federal penitentiary -- also raised serious concerns for auditors.
He arrived at San Bernardino airport in 2003 not long after he was released from prison, having served several years for bankruptcy fraud and conspiracy to commit bankruptcy fraud related to his role at Braniff Airlines.
Within a few months of moving his Ascend Aviation Group charter airline business to the airport, it ran out of money. In 2005, the Department of Transportation accused Spencer and others of operating Ascend without the proper charter airline license. An administrative law judge fined Spencer $1 million and banned him from the "aviation industry."
Spencer appealed the default decision, alleging he wasn't able to present his case, but nothing has happened since 2006 and in the meantime the judgment has stood.
Despite the ban, Spencer signed a five-year lease on one of the largest hangars at the airport in November 2005.
Airport officials stood by him, noting that the ban was being appealed, but auditors disagreed.
"This interpretation runs counter to a plain language understanding of the judge's order and is not documented in any fashion," the report reads.
Given his tenuous tenure with the aviation ban hanging over him, auditors said airport staff should review all of their dealings with Spencer. The benefit would be that the airport authority "would limit exposure to the types of difficulties described throughout this report and would no longer be party to Mr. Spencer's apparent violation of the DOT order banning him from the aviation industry."
Other agencies analyzed and findings made by the grand jury included:
County supervisors' benefits should not exceed their salary. First District Supervisor Brad Mitzelfelt is paid $150,197, according to the report, and his benefits total $158,403. He is the only supervisor whose benefits exceed salary.
The Board of Supervisors should hire a chief audit executive as a civil-service employee to improve county auditing functions.
An outside audit should be performed of the county's Children and Family Services agency to ensure adequate oversight.
Jurors contend that fees that the public defender charges indigent clients are too low. The fees for felony defenses dropped from $500 to $150 since 2008, and for misdemeanor defenses from $300 to $100, and "the Grand Jury could not find a reason for this change."
The city of San Bernardino should try to find more money to pay for park maintenance, and the city's Police Department should "dissuade the homeless and transient populations from gathering in the parks."
The county needs more code-enforcement officers to investigate complaints.
The county needs to make security improvements at its 911 call centers in Rialto and Victorville, where jurors found no working cameras, crowding and, in the case of Rialto, a fence with alarms that had been disconnected years ago because animals were setting them off and a building that would not survive a natural disaster.
Supervisors voted this week to move the county's emergency operations center from Rialto to Hesperia out of concern that its current location could be at risk during an earthquake.