The New York investment banking firm hired by Mayor Jerry Sanders to develop a financing plan for a new Chargers stadium has been working without a contract for at least four months.
This has allowed the firm, Lazard Ltd., potentially to rack up bills without any public understanding of its duties or ultimate cost. The arrangement also could violate city policies on work performed without a contract or approval from City Attorney Jan Goldsmith — the second time Sanders has brushed up against contracting rules on a high-profile stadium issue in recent months.
In October, Sanders announced he had hired Lazard to develop a financing plan for an $800 million football stadium downtown. Sanders said the firm would cost less than $250,000 and most of its payment would be contingent on the city working out a deal with the Chargers.
At the time, Sanders said the contract’s details were being finalized.
Four months later, a contract still doesn’t exist. It’s being finalized, Sanders’ spokesman Darren Pudgil said in a text message. The firm hasn’t received any money from the city, he added.
“Lazard has not been paid anything,” Pudgil said. He did not respond to further requests for comment about why the firm had been retained without a contract.
Lazard, however, has been working.
Sanders told the U-T San Diego in January that Lazard had been in “close contact” with the NFL and local interest groups. Independent Budget Analyst Andrea Tevlin said in an interview she had a half-hour meeting with two Lazard employees in December. She said they discussed financing options, timelines and the firm’s background. A memo from Goldsmith’s office obtained by voiceofsandiego.org also said the Mayor’s Office had indicated the firm would be in San Diego in late January.
Lazard’s work raises a number of issues related to city contracting rules.
City Council policy expressly prohibits consultant work without a contract and says the city isn’t liable for any work performed prior to the council’s approval. The policy doesn’t refer to consultants hired by Sanders, but Tevlin said it applies to the Mayor’s Office as well.
“If no signed contract, they could work at their own risk,” Tevlin said.
Goldsmith has maintained that no contracts are valid without his office’s signature.
Sanders hired the firm without a competitive bid. Sanders’ request to do so said that the city had contacted three other firms to work on the deal, including Goldman Sachs, but they either had conflicts or weren’t interested.
Sanders has said he hired Lazard because of its experience working with the NFL and with New York state to develop a hockey arena. The firm’s report is expected as soon as next month.
Goldsmith’s office was unaware of any agreement between Lazard and the city until late last month when it received a draft contract, Assistant City Attorney Mary Jo Lanzafame said in a Jan. 30 memo.
Lanzafame then asked for a litany of information related to the deal, including all communication between the city and Lazard and if the firm expected to be paid for any work it already had done.
“Without all of the information requested in this memorandum, our Office cannot perform the appropriate level of legal review nor adequately advise our client, the City of San Diego,” Lanzafame said in the memo.
A Goldsmith spokesman declined to comment on the memo, saying it was attorney-client privileged, and referred all other comment to Sanders’ office.
This incident isn’t the first time Sanders and Goldsmith have clashed over contracting rules.
In a high-profile case in December, Sanders ignored Goldsmith’s request to seek council approval and an attorney’s signature before agreeing to temporarily change the name of the city’s football stadium to Snapdragon Stadium. The moved allowed local wireless giant Qualcomm, which has stadium’s naming rights, to advertise its new Snapdragon line of mobile processors.
Goldsmith eventually declared that contract void, but no one followed up on the issue.
Lazard is the second stadium consultant the city has hired to develop a plan to pay for a new downtown stadium. In November 2009, the city’s downtown redevelopment agency hired investment banker Mitchell Ziets to work on a financing plan. Ziets was paid $160,000 but he left without producing a report.
Liam Dillon is a news reporter for voiceofsandiego.org. He covers San Diego City Hall, the 2012 mayor’s race and big building projects. What should he write about next?
Please contact him directly at liam.dillon@voiceofsandiego.org or 619.550.5663.
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