Post on 28-Oct-2015
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August 20, 2013
Briefing Document, Preliminary Findings Metra and Former Executive Director Alex Clifford Settlement Agreement
RTA Board Chairman John S. Gates, Jr. Statement: The RTA’s audit staff has determined that the Metra Board’s deliberative process was flawed and their decision to give Mr. Clifford a generous severance package was not a financially prudent. All costs related to the Clifford contract dispute should have been claimed under Metra’s existing insurance policy instead of being paid from tax payer funds. The RTA auditor’s conclusion supports my belief that RTA needs stronger tools and authority to prevent situations like this. Current law does not require Metra, CTA or Pace to disclose employment‐related settlements to the RTA. Nor does the RTA currently have any legal authority to cancel or modify “golden parachute” agreements. RTA’s discovery of Metra’s insurance policy, which would have covered the costs of litigation and settlement, calls into question the reasons behind Metra’s decision to pay Clifford without notifying its insurance carrier. I urge Metra to review its insurance policy and if it would still be financially prudent, Metra should immediately cancel Clifford’s severance agreement. Objective: Determine financial prudence of the settlement agreement. Process: RTA Auditors looked at thousands of pages of documents and emails; listened to multiple hours of testimony before RTA Board and the House Mass Transit Committee; listened to audio files of Metra executive sessions; interviewed certain Metra employees; met with several Metra Board members and Metra’s outside counsel. Focus of auditor review:
Actual cost and terms of the settlement
Process to arrive at the settlement
Process used to approve the settlement Status: RTA’s audit is nearly complete; information gathered has been examined/analyzed and needs to be compiled into final form. RTA expects the final work to be complete by the next RTA Board meeting on September 13. Highlights of Preliminary Results: Settlement Agreement process was inadequate and not sufficiently documented. There is a lack of justification for the generous post‐employment package. Lack of documentation: No written reports of internal investigation or 12‐hour mediation, for which Metra paid $17,000; no written report from former U.S. Attorney Roger Heaton, for which Metra paid $52,000; no overall cost‐benefit analysis of the severance agreement. Insurance Policy Could Have Covered Lawsuit Costs Beyond $150,000: A $98,000 Metra Public Official and Employee Practices Liability Policy insurance policy could have covered a Clifford lawsuit beyond
first $150,000. On July 17, 2013, RTA Board Member James Buchanan asked then Metra Board Chairman Brad O’Halloran if Metra had insurance, to which O’Halloran responded that Metra was self‐insured. Throughout this process, Metra stated it was presented a financial choice of paying the severance agreement or facing $2 to $3 million in legal fees from a protracted lawsuit. The RTA audit identified the existence of a third option, the $150,000 deductible of this insurance policy. Outside Attorneys and Consultants Complicated Process In hiring its own outside attorneys and consultants, the Metra Board duplicated efforts that possibly kept Metra staff and its internal legal team in the dark, creating confusion and increasing costs. Because those individuals reported directly to Board members independent of the agency, it’s difficult to determine whose interests they were serving. Severance Not Tied to Performance: Some board members had issues with Clifford’s job performance. Reasons included a drop in ridership numbers; failure to address Metra police overtime issue; and use of expensive consultants. These issues of poor performance were generally not communicated to Clifford, who had no formal Performance Evaluation plan.
Improving RTA Oversight Tools: How This Could Have Been Avoided
The following would allow the RTA to more effectively discharge the responsibilities that have been given to RTA under the law and potentially avoid this type of situation recurring.
Board Members Conflict of Interest and Revolving Door: Board members should be prohibited from engaging in any business relations with the RTA, any Service Board or appointing authorities during their term of service or for a two year period following the expiration of their term. Simplify the Board Member Removal Procedure: Any elected official who is granted the authority to appoint a RTA board member or Service board member should also have the authority to remove that individual from office in cases of incompetence, neglect of duty, malfeasance in office, conviction of a crime, etc. The Governor should also have the authority to remove any Service Board member upon the recommendation of a supermajority of the RTA board. Currently, neither the RTA nor the appointing authorities had the ability to take that action. Service Board Members/Fiduciary Duty: By statute, a fiduciary duty should be created for all board members who represent the CTA, Metra and Pace or RTA. This would legally obligate them to act solely in the best interest of the Northeastern Illinois transit system and riders. Current law makes it difficult for the RTA to mandate that a Service Board’s board members comply with certain RTA requests due to Board member’s potentially conflicting political interests. RTA Review of Service Board Employment Contracts: The Service Boards should be required to obtain RTA board approval prior to executing or amending employment contracts for non‐bargaining unit positions. Under current law, while the RTA has the authority to review and approve budgets, the Service Boards are not required to give notice of or disclose individual employment contracts to the RTA.
RTA Approval of All Severance Agreements, Settlements and Bonuses: All Service Board severance agreements or employment‐related settlements that exceed $50,000 should be brought to the RTA Board prior to being executed in order for the RTA Board to ensure that all agreements are reasonable and in the region’s interest. Furthermore, all Service Board non‐employment related litigation expenses or settlements over $1,000,000 should be provided to the RTA 48 hours prior to any agreement being entered or expense being paid. Strengthening Financial Oversight: The Service Boards should be required to provide the RTA with detailed budgets in categories defined by the RTA during the budget process, and additional details should be made readily available if requested. Additionally, beyond approving or rejecting a Service Board’s annual budget, the RTA should be granted line item veto power with the ability to make amendments to budget line items. Access to Financial Data and Records: The RTA should have real‐time access to the Service Boards’ financial information and other documents. Without contemporaneous access to the Service Board’s financial data, the RTA cannot provide the timely oversight required by the act and cannot immediately respond to impending problems. RTA Enforcement of Existing Law and New Oversight Powers: The RTA has been given the responsibility to provide oversight for the Metropolitan Chicago Transit System. However, we have only one tool to ensure compliance ‐ the authority to not approve the total budget of a Service Board and therefore withhold its entire funding for the year. This is a rarely utilized “nuclear option,” effectively shutting down a large portion of our transit system. The RTA should be allowed to issue fines to Service Board executives who refuse to comply with the RTA act, and suspend certain powers of Service Boards until corrective action is taken. Subpoena Powers: The RTA should be given subpoena powers when conducting audits such as that of the Metra‐Clifford separation agreement, to assure the auditor is able to review all relevant information. In this case, the lack of these powers made in impossible for the RTA to investigate allegations of ethics violations made before the House Mass Transit Committee.