A public office is still a public trust.
All public servants – elected, appointed and otherwise – are subject to that truth.
The simplest and most profound way public servants can prove and maintain their respect for the public trust is to be transparent in operations and open in communications. Those qualities are key ingredients of integrity.
Such qualities are sorely lacking from the mayor’s office down at LA City Hall these days, and the situation isn’t much better in some cases at the County of Los Angeles.
I’ll swing back to that later in this column, but first let me illuminate the larger point with a positive example that shows what it looks like when a public servant operates transparently and communicates openly.
It comes from Steven Rice, who serves as chief counsel of the Pasadena-based Los Angeles County Employees Retirement Association, which oversees a nearly $57 billion pension plan on behalf of current and former workers.
Rice also serves for now as interim chief executive of LACERA, duties he assumed in the wake of the recent firing of Lou Lazatin from the post.
Lazatin’s firing came abruptly – she’d only been on the job for about six months. It also drew little attention from the LA Times, which seemed odd to me in light of the amount of money LACERA handles, its status as a public entity, and its potential to significantly affect the financial fortunes of hundreds of thousands of individuals in the newspaper’s circulation area.
It also seemed odd to me that the daily newspaper’s lone story on Lazatin’s dismissal lagged reports elsewhere – including here. Another oddity: the LA Times’ coverage did little to advance any understanding of the available facts but nonetheless managed to publicly air a suggestion from Lazatin’s attorney that she had been a victim of some sort of gender bias.
Circumstances looked odder still when I discovered that Lazatin has long been associated with LA Times’ owner Patrick Soon-Shiong.
Lazatin spent nearly 10 years as an advisor and board member for the Chan Soon-Shiong Institute for Advanced Health – the name honors the biotech billionaire-turned-publisher and his wife.
Lazatin also was chief executive of St. John’s Medical Center in Santa Monica when Soon-Shiong committed $100 million to the operation. The pledge of funds was scuttled after Lazatin’s abrupt dismissal from that post in 2012.
Those ties told me I should check if LACERA has invested significant amounts of money into any of the numerous enterprises that are owned by Soon-Shiong or count him as a stakeholder.
I didn’t necessarily think that was likely – not every dot a journalist happens to notice is connected. But there were enough dots to warrant a check.
The most efficient way to check was to ask Rice whether any of the $57 billion or so LACERA manages has found its way to any of the enterprises with Soon-Shiong as a stakeholder.
That’s not an easy question to put to a $57 billion investment portfolio – certainly not like the simple questions about money that many public officials in LA can’t or won’t answer these days.
Rice did answer in matter of a few days, though – and it’s my professional opinion that whatever happened with Lazatin at LACERA did not include her directing funds to Soon-Shiong’s operations or any other untoward ties between the billionaire and the pension fund.
I’ll let you make up your own mind after reading the following response from Rice:
Mr. Sullivan, here is the information we have located after a diligent search.
In answering your information request, LACERA points out that Patrick Soon-Shiong is one of the wealthiest individuals in the United States with an estimated net worth of over $8 billion.
With that said, determining if LACERA has any funds either directly or indirectly in any companies or enterprises affiliated with Mr. Soon-Shiong is not an easy question to answer with exact precision. An individual like this may have holdings or affiliates that we are not aware of. LACERA does not have any alignment or contact with Patrick Soon-Shiong. We believe the information provided here is complete to the best of our ability over the past two or three days.
With that clarification, our methodology was to conduct research and compile a list of organizations, companies and holdings that we believe Mr. Soon-Shiong is affiliated with, and then [list] any holdings that may be in common with LACERA.
Please see the chart below identifying LACERA holdings. The public holdings are through ownership in the funds listed.
With respect to private holdings, LACERA has exposure to NantPharma, a company founded by Mr. Soon-Shiong, through an investment made by Blackstone Fund VI; LACERA’s overall commitment to Blackstone Fund VI (not just to NantPharma) is shown.
We do want to mention that we also found a news article that said Mr. Soon-Shiong was the largest stock holder of a company called Celgene Corporation, but our research was not able to confirm this. LACERA does hold both equities and bonds in this company, but they are not listed in [the] chart below due to our lack of confirmation.
Finally, LACERA holds thousands of securities in the investable universe and there is likelihood of overlap with Mr. Soon-Shiong. None of this overlap is intentional.
Steven P. Rice
Chief Counsel
Los Angeles County Employees Retirement Association
Here is the table Rice sent along, showing a total of about $75.3 million invested by LACERA in entities that, in turn, have a fraction of their funds under management invested in enterprises that count Soon-Shiong as owner or a stakeholder.
I note that Soon-Shiong is believed to be the biggest individual shareholder in Celgene, but his stake doesn’t appear to exceed the 5% percent level that would require public disclosure under rules of the U.S. Securities and Exchange Commission.
I don’t scoff at $75.3 million, a sum that is hard to imagine for most of us. But it’s about one-tenth of 1% of LACERA’s assets.
That’s not insignificant – but it’s not enough, either, to hold up a red flag, given the diffused nature of LACERA’s investment portfolio.
So it seems that LACERA’s investments in Soon-Shiong’s operations are one aspect of Lazatin’s case that can be put to rest.
Kudos to Rice for living up to the public trust of his office with clear and respectful communications that combine to put integrity into practice.
At Long Last on Home at Last Website
I noticed that Home at Last Community Development Corp. has updated its website at homeatlastcdc.org.
That’s no small matter, given the sorry shape the website was in when SullivanSaysSoCal brought it to the attention of readers and officials of the City of Los Angeles and the County of Los Angeles earlier this year.
The call-out came after the city and county together decided to give Home at Last CDC at $4 million-a-year contract to operate a homeless shelter at 1426 S. Paloma Street, on the industrial edge of Downtown LA.
The website had enough problems to raise questions about the fitness of Home at Last to operate anything, let alone the lives of desperate folks and a $4 million annual budget. It was largely a boilerplate layout, with most of any specific information that was provided long out of date. The listing of its headquarters, for example, gave the address for what appears to be an abandoned building on the 7900 block of S. Western Avenue. There were many other examples of incomplete information and inconsistencies.
This column noted the poor shape of the Home at Last website numerous times. Calls to the organization were not returned. Visits to more than one of the facilities it claims to operate yielded no response to any questions.
Various officials of the City of LA declined to answer any questions about Home at Last CDC. Mayor Eric Garcetti’s office at one point adopted Home at Last’s boilerplate style, stating via email that the city is “confident in all of the service providers that have been chosen to manage our bridge housing facilities.”
A representative of the Los Angeles County Homeless Initiative – part of the office of LA County Chief Executive Sachi A. Hamai – promised to respond to questions regarding the Home at Last website, its seemingly abandoned headquarters and other matters.
That was six weeks ago, and numerous follow up emails have brought no response.
The redesign of the website came out of the blue a week or so ago.
No one from Home at Last or the city or county ever had the decency to address the matter before rolling out the improved product. They apparently don’t believe the press or the public has a right to know about an organization getting $4 million deals involving the public’s money.
They also apparently think that spiffing up a website without comment somehow answers all the questions raised by the $4 million deal with Home at Last.
They are wrong – the questions will continue on behalf of the public trust.
LAHSA’s Lapse
Here’s a question about the website of the Los Angeles Homeless Services Authority, a joint venture of the city and county.
Why is it that LAHSA has spent hundreds of millions of taxpayer dollars over the past two years but hasn’t managed as of this writing to update its “Citizen’s Guide to County and City Services” since August 23, 2017?
City Hall of Shame
Here are few examples of public officials who have failed the public trust with communications practices that have grown so constipated that the public is left to guess as the heartbreak and hazards of homelessness begin to define the city.
Garcetti, who won’t answer basic questions on matters ranging from an inexplicably favorable lease deal for the landlord of the Paloma Street warehouse to his decision to have his deputy mayor for economic development oversee the city’s Department of Building & Safety.
1st District Los Angeles City Councilmember Gil Cedillo, who agreed to accept $2 million from the developer of an upscale apartment complex proposed for Chinatown, with the money supposedly to be used to help develop or maintain affordable housing in the area. Cedillo’s office has yet to respond to requests for specifics or provide any information on how the public will be informed on the use of the $2 million.
14th District Councilmember Jose Huizar, who is currently under investigation by the FBI and IRS for unspecified reasons. He’s also stonewalling a specific request from SullivanSaysSoCal for the financials of the Night on Broadway event, which was held more than 18 months ago and drew a reported 250,000 revelers to Downtown LA and peddled sponsorships and spaces for vendors.
Oaktree’s Marks: Key Phrase Carries Caution on Economy
A caution flag on the economy has been raised on Bunker Hill – although you’ll have to go to Oaktree Capital’s website to see it.
Oaktree is an investment house with headquarters in the Bunker Hill district of Downtown LA, where it oversees $119 billion of assets under management.
Howard Marks is co-chair of the firm and globally regarded for his views on the economy – and that makes the concerns expressed in his most recent memo notable.
Marks lays out the premise that it’s time for some healthy skepticism when you start hearing folks say that our current record-long economic expansion is bound to defy historic patterns and run much longer because “this time it’s different.”
His thoughts – including nine ways such thinking can go wrong – are available to the public at https://www.oaktreecapital.com/insights/howard-marks-memos.
This Time Different on OC Mortgage Mess?
It wasn’t long after I read Marks’ piece that his thinking came to life. I was talking to a member of the local legacy business press about the recent bankruptcy of Santa Ana-born mortgage lender Stearns Lending.
I suggested the case raises memories of the mortgage meltdown that was centered in OC and proved to be a harbinger of the Great Recession.
My colleague dismissed any concern and told me that “this time it’s different.”
Perhaps, but stay tuned on this one, which has already produced a fender-bender between a couple of behemoths of the investment world – New York-based private equity firm Blackstone Group, which holds a majority stake in Stearns Lending, and Newport Beach-based bond house Pimco.
It seems that Stearns had been issuing junk bonds and was facing a cliff on $183 million worth of them due to mature next month.
Pimco holds about two thirds of the junk bonds, and reportedly pressed Blackstone to either cash them out in full or liquidate Stearns Lending, which employs about 2,700 workers.
Blackstone filed for bankruptcy protection instead, and now proposes to increase its stake in the mortgage lender to 100%. That would mean paying $60 million for the 30% it doesn’t already own.
The $60 million would go to settle on the junk bonds – and Blackstone contends that payment of about 1/3 of the face value of the junk bonds is more than the holders would likely get in a liquidation.
Pimco contends Blackstone is trying to engineer a cheap deal to get 100%of Stearns Lending.
The two sides appear to have reached a truce of sorts – and we’ll see if that holds.
Consider, in the meantime, this revelation amid the mess: The size of Blackstone’s stake in Stearns Lending was undisclosed previously, but now has been reported as 70%. That point, along with Blackstone’s offer to buy out the remaining 30% for $60 million, values Stearns Lending at $200 million.
That’s a steep drop from the buzz around OC about a valuation in the $600 million-to-$800 million range when Blackstone first bought into Glenn Stearns’ operation back in 2015.
A housing market that looks to be coming off a peak and a big drop in value for a mortgage lender – maybe it’s not so different in OC or anywhere else these days.
Pimco’s Edge?
A power hire that went overlooked by the local legacy press and might have significant bearing on the Blackstone-Pimco standoff came nearly a year ago.
That’s when Pimco lured dealmaker extraordinaire John Studzinski – known in the world of high-finance as “Studs” – from his vice chairman’s post at Blackstone.
Studzinski is now a managing director and vice chairman at Pimco, reporting directly to Chief Executive Emmanual Roman.
AAA+: Arlene Always Answers
What keeps Brentwood-based Arlene Howard Public Relations at the top of the PR game?
A founder who shows up through thick and thin.
That’s what agency boss Arlene Howard did last week when it came time for the funeral and memorial services for her former client and longtime friend Lee Iacocca, a legend of America’s automotive industry.
Howard joined auto industry execs, famous political faces and celebrities who traveled to Michigan last week to give Iacocca a proper sendoff.
Howard is pictured here with another friend, Gerald Greenwald, who went from duties as Iacocca’s right-hand man at Chrysler Corp. to the chief executive’s post at United Airlines from 1994 to 1999. Greenwald remains chairman emeritus of the airline.
Howard paid tribute to Iacocca on her Facebook page, saying his funeral services were “classy and dignified, worthy of his legacy.”
“He was the last of the great and authentic leaders, and he will be missed by society as a whole,” Howard wrote.
OC Engineering Exec to ULV Board
An OC-LA crossover came with the recent appointment of Martha Daniel, founder and chief executive officer of Aliso Viejo-based Information Management Resources Inc., to the board of trustees for the University of La Verne.
Daniel is a veteran of the U.S. Navy whose company provides expertise in cybersecurity, engineering services, and network security to clients from around the world, including various units of the U.S. Armed Forces and a number of Fortune 500 companies.
It’s a homecoming of sorts for Daniel, who earned an MBA at ULV to go with a bachelor’s degree in computer information systems from Cal Poly-Pomona, located nearby on the eastern edge of LA County, just north of OC.
John Raffoul, president of Adventist Health White Memorial in Boyle Heights, also was appointed to the ULV board.
RIP Peter Bren; KBS Carries On
A bittersweet LA-OC crossover with the thought that Newport Beach-based KBS Realty Advisors will start a $20 million renovation of the Union Bank Plaza in Downtown LA without Peter Bren around to see what comes of the place.
The brother of Irvine Company boss Donald Bren was linked with two other prominent names from the SoCal real estate scene as a KBS cofounder – the K is for the late Don Koll, and Chuck Schreiber accounts for the S.
Peter Bren died in April, according to recent reports by real estate publication Bisnow.com and newyork.funeral.com in New York.
UCLA’s Ziman Center for Real Estate, founded by Peter Bren, made reference to his passing but deleted the information shortly after Bisnow.com posted its story, according to the digital publication.
KBS’ website now refers to Peter Bren as a former chairman and notes that he served in the post until April.
Not sure what to make of all that, but here’s offering condolences to the late executive’s family, friends and colleagues in any case.
Sullivan Says
Kudos to developer Robhana Group Inc. on its new Ostium Medical Hub in the Westlake district, which includes the freeway-facing “Prelude-DTLA,” a multi-story LED artwork that was conceived as an abstract rendering of the Downtown LA skyline.