DART's Outside Auditor Seems Too Inside to Expose Secrets

We're over the game of hide the ball with Deloitte Touche

Here is what you need to know about DART, the regional transit agency whose recently resigned chairwoman turned herself over to the cops recently on document-tampering charges: You don't know nuthin'. And you're not going to know.

For instance, after news broke of the charges against DART chair Lynn Flint Shaw, Deloitte Touche, the company that's supposed to serve as independent outside auditor for DART, informed DART that it kinda sorta had a little Lynn Flint Shaw problem too.

Turns out Deloitte had a side deal with Shaw—the board member who had moved to approve its million-dollar contract—in which it paid her $20,000 a year to give the firm advice on how to get black high school kids interested in careers in accounting. Deloitte and Shaw had forgotten to tell anybody else at DART about the deal.

William Velasco was the only member of the DART board who dared to say that the Deloitte Touche deal with Lynn Flint Shaw smelled to high heaven.
Courtesy of Dallas Area Rapid Transit
William Velasco was the only member of the DART board who dared to say that the Deloitte Touche deal with Lynn Flint Shaw smelled to high heaven.

On the Web you can find a flowery compendium of rules and standards to which Deloitte Touche says it holds itself called "Ethics and Professional Conduct: Personal Integrity, Public Trust."

Sounds great, eh? Deloitte says, "The people of Deloitte & Touche USA are pledged to maintaining independence, both in fact and appearance, from clients of the Deloitte U.S. entities in exercising appropriate professional responsibilities."

Deloitte's promise to clients is that it will not enter into any agreement with anybody inside the client's organization that might compromise Deloitte's independence and objectivity. Specifically, Deloitte says, its rules prohibit Deloitte from any arrangement to "render any service or enter into any supplier agreement" with its clients. That way the client firm can rest easy that Deloitte is coming to the audit with clean hands.

Umm. So then. Given these very stringent rules that Deloitte Touche says it holds itself to and which it publishes so proudly on the Web, how did Deloitte happen to wind up in the smelly $20,000 side deal with Shaw that they decided to reveal only at the last minute when they learned people were getting toted down to the grand jury to answer questions?

I tried hard to get Deloitte Touche spokesman Jerry Bennett to talk to me about the situation. I wound up asking him if Deloitte actually has anything that we could call real ethical standards. He said, "I don't believe that's information that we share."

I think that may have been an honest answer, in a funny kind of way.

So Deloitte ain't talkin'. I was really hoping DART's top lawyer Hyattye (pronounced Highty) Simmons would help us understand the underlying ethical issues when he made his investigative report last week to the DART board. But he sounded worse than the Deloitte guy.

Simmons put this slide up on a screen that looked sort of like a flow chart, showing how Deloitte's headquarters are in Switzerland and they have several divisions in the United States. The service division that did the side deal with Shaw, he said, was not the same division that does DART's "independent" outside audit.

He repeated several times that Deloitte has arranged its divisions in a semi-autonomous structure designed to shield each division from the liabilities of the others. I'm sitting in the audience thinking, "Yeah, check me on this, but I think that's what Al Qaeda does too. How does this help us with the question of whether the Shaw side deal was ethical?"

Most of the DART board just sat there like stooges, apparently eating this stuff up, when, thank goodness, Dallas board member William Velasco II took Simmons to task:

"I want to give you an analogy," Velasco said. "About five years ago, prior to me being reappointed to the DART board, I had a phone call from the city secretary's office. My daughter had library debt of $17.22. I was given a choice. Go down there and pay it, and I get re-appointed."

Velasco said he didn't understand why, if he couldn't escape responsibility for his daughter's library fine, the auditing branch of Deloitte could escape responsibility for another division's $20,000 a year contract with Shaw. Pointing to Simmons' flow chart, Velasco said, "You're trying to tell me with this whole system here that only that branch should be held responsible? I take responsibility for my family and their actions. Deloitte Touche, to me, should take responsibility for their actions."

I have these little moments sitting out there in the peanut gallery sometimes when I have to fight back a powerful impulse to stab one fist in the air and shout, "Hurrah! Hurrah for this man!" This was one of those.

We taxpayers don't give a damn what kind of clever legal arrangements Deloitte Touche has cooked up to protect itself from liability. We're not liability experts. If it says Deloitte Touche on the door, it's Deloitte Touche. Velasco is right.

Of course, if Deloitte Touche thinks it has got some kind of super-technical clever system that allows it to do side deals with directors of the entities it audits, then the free market remedy is for DART to go get a new auditor who will promise not to jack around.

But what about DART? That's the part that we own. That's what belongs to us. So why is DART's top lawyer defending this crap to the board and, by extension, to us? Who the hell is he working for?

Let me give you another example of what I'm trying to get at. When Dallas Mayor Tom Leppert ran for office, his top campaign consultant in southern Dallas was Willis Johnson, a radio personality on KKDA-104 FM and a businessman with diverse interests. I knew that Johnson had lucrative contracts with DART, some of which Lynn Flint Shaw had a hand in, and I wanted to know more about them. Shaw, by the way, was another major player on Leppert's campaign team.

I filed an open records request for contracts, specifically including so-called "third-tier" contracts like Johnson's. After much grinding of wheels, DART did produce thousands of pages of documents for me to peruse, one of which was a computer search purporting to show that none of Johnson's companies had contracts with DART.

The problem was that I had already seen descriptions of his contracts from other sources, including Johnson's own Web pages. And I had discussed them with Johnson on the phone. I told Johnson I was having a hard time getting DART to admit that it had any contracts with him. He agreed to talk about the contracts.

"There's no mystery to me," he said. "My company is a telecom company." He said he won a competitive bid to supply DART with two-way radios and other communications systems, "in August of 2006, before I ever heard of Tom Leppert, period." He said he had won no new contracts since Leppert's election.

So what's with DART? Why all the implacable stone-walling and the snowdrifts of paper and the so-called computer searches, all designed to hide the ball?

Why is it always DART's instinct to shrink from public scrutiny? And I'm not talking only about DART staff here. The members of the DART board of directors have some very bad habits, where candor and transparency are concerned—so much so that one wonders if the culture at DART may not seep down from the top.

For instance: You've heard all about their billion-dollar goof in the budget by now. The story is supposed to be that the DART board had no idea at all that the agency only has half the amount of money it's going to need to build two new rail lines promised to the suburbs of Irving and Rowlett.

Last week, DART's internal auditor director, Albert Bazis, gave the board his report on why the board got sandbagged with the news about the billion-dollar shortfall. DART president Gary Thomas "announced" it to the board last November, according to Bazis. (By the way, that happened a few weeks after I filed my open records request looking for evidence of the shortfall.)

While Bazis spoke, all the board members except Velasco sat there nodding and holding up their hands helplessly in the universal gesture of who knew?

They knew.

The documents I did get my hands on show that the board knew by July of last year that major components of its rail plan had increased in cost by 68 percent and 85 percent—more than enough to signal to them that the overall plan was funded at half what it was going to cost to build.

There's a very important game being played here. The suburbs know all about the shortfall. They want to get their projects out to bid and under contract before the Dallas projects. That way the suburban projects will have first dibs on the money, and Dallas will have to go fish.

While Leppert's pal Shaw was busy advising Deloitte Touche on how to get black high school kids into accounting, she seems to have missed the whole game about the suburban lines. As has Leppert, apparently. Now Dallas is probably screwed.

When Dallas' two new lines come up—downtown and in South Oak Cliff—Dallas will have to go hat in hand and beg the suburbs to vote for the money. Good luck.

The suburban board members have been screaming about all the taxes they have poured into DART over the decades without getting their rail lines built. What they don't want to talk about is the $192 million they sucked back out of DART in so-called "local assistance" funds during those same years, which they used on their own street repairs. Hey, I could use some street repairs in my neighborhood in East Dallas.

Here's the problem. Everybody at DART, from the board on down, has some kind of game going and a reason not to talk about it. At least at City Hall when we run into this stuff, we can vote people out of office.

But DART is a kingdom unto itself—the kingdom of tricks and whispers. And do you know what their next big trick is? They want to get the Legislature to change the law so we taxpayers won't even be able to vote on DART bond issues anymore.

Oh, that's just what we need. More insulation from the voters. Then maybe the whole board can get secret contracts. They could advise Deloitte Touche on how accountants can have more fun. Tricks, whispers and whoopee.

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