I have heard little tidbits about this "situation" in San Francisco over the past few months. The story is this — Five Star Parking has been running a couple of garages in the city since 2002. During that period at least some of their staff on site have been dipping into the till to the tune of Millions of Dollars. Read all about it here.
The city discovered that there was a loss and called in outside auditors to review the garages. The losses were incredible. My information is that the losses are much greater than the $4.8 million that Five Star is putting forward. That number was negotiated by Five Star’s lawyers in the negotiations with the city of SF.
The result is that Five Star paid the $4.8 million, and that the senior management of the company (read that Joe Lumer) has moved out of the picture and new management is in place. My understanding is that they agreed to the 4.8 fairly quickly.
Read the article carefully — The city controller, the one responsible for auditing the garages says "there are always problems when cash is involved." Yep — that’s right. And its a bigger problem when its a parking facility. The auditors need to know what they are doing and what to look for. I have had experienced parking auditors tell me that they can sit outside a garage for two days and tell within 10 percent how much money should be in the till every night. And they are usually right. City auditors, used to looking at bank statements and columns of figures aren’t equipped to do that. Note that it took "outside" consultants to really find the problems and suggest solutions. I know who those consultants are and if you want to know, drop me a line.
The next part of the article is more telling. The city has agreed to let 5 Star continue working with the city on its contract thru 2008 and then EXTEND the contract another year to 2009. HUH? Lets see — I have a company that cleans an office building. It comes out that many of my staff, including some managers, are stealing regularly from the offices in the building. How long do you think my company would be working at that building, or for that matter, any other building that the developer owned. Five Star’s new CEO must be one great salesman. He walked into a meeting with his company accused of malfeasance and under suspicion of a huge theft and walked out with an extension on his contract after paying a fine which is rumored to be less than the total actually missing and admitting no guilt. Also, it seems that the company had been playing fast and loose with its billing practices with the city. That’s just been forgotten.
I have some sympathy for Five Star. I understand the problem with managing garages. However the parking industry’s reputation doesn’t get any better if we are not held to any normal business standard. I’m not sure what happened behind closed doors, but it looks like the City of SF decided to "take the money and run." If I was the operator, I would have said, "Look, without admitting much, we’ll change our senior management, pay you a bunch of money and all you have to do is let us continue to work for you and in the future to bid on jobs as they come along. And we won’t fight the amount of the fee we are paying. If you don’t agree and litigate, it will cost you millions and we’ll probably end up here anyway."
When Lockheed got sideways with the City of New York a few years ago, they were banned from dealing with the city for, I think, 5 years. In this case, the operator is being allowed to continue as if nothing has happened.
I’m not for a moment saying that the leaders of the operator should be flogged in the courthouse square, however I do think the company should pay the price for having done a bad job. That price is being fired and not being allowed to bid on future deals, at least for a time. If that was the result of doing a poor job, maybe we as an industry would be forced to clean up our act.
And what about the City of SF? Everyone seems to be ducking and diving. The parking Commission isn’t returning reporter’s calls. The City Attorney says it sends "a strong message. What message is that? The City Controller agrees that "its an issue." Next week the Transportation Board will agree to the deal and by Friday it will be forgotten.
This doesn’t help our industry at all. If there is no real consequences
for running an operation that can’t do its job properly and after all,
what is a parking operators job except to be certain that it collects
all the money and puts it in the owners bank?
If the free market isn’t allowed to work, how can we clean up our act. This, by the way, isn’t just Five Star. Virtually every major parking company, has, at one time or another, been able to adjudicate a problem by paying a large amount of restitution and kept their jobs. There is so much money involved, the owners feel that if they can get some of that lost money, they are ahead. That may be true in the short term, but does it make us better?
I think not.
I would like to hear from anyone who disagrees.
JVH
3 Responses
5 Star had a similar “problem” at the Hollywood/Highland garage (owned by the City/County of Los Angeles) last year, and it’s quite possible that this “problem” may have played a big part in why their contract at LAX was not renewed.
Wonder what 5 Star’s policy is when they catch a cashier stealing a few bucks? Would SF apply the same reasoning if one of their employees was charged with stealing a few million from the tax collector’s office? I’ve seen situations where an operator has discovered internal problems, gone to the client and made them aware of it and then negotiated a settlement that included a continuation of the operating contract. But I have yet to see a case where the client is the one who uncovers the theft and doesn’t include a change in operators as part of the settlement.
This only makes one believe that there was (or is) so much stealing in the Parking Industry that a Company will pay whatever amount simply to stay in business so that they can either steal the “Fine” somewhere else, or maybe the $4.8 million was only “the tip of the Iceberg”. Not a bad deal, steal $8 or $9 million, give back $5 million, make $3 – $4 million and extend the contract! Sure beats having to rebid the deal and risk losing it to someone else and what a great return on the investment!
Maybe their should be some kind of Parking Commission much like the Casino Gamming Commissions in Las Vegas and Atlantic City to keep the crooks out and make this an honest business.
Oh, since this is a Public City Garage, does that mean the Audit Report is Public under Freedom of Information or City/State “Sunshine” rules??? If so PT, why not request and print the Audit report in your next issue.
Maybe the Court of Public Opinion will have the strenght to do what the City of San Francisco would or could not do! Regardless, it would make for interesting reading and may force the Operator to clean up their act or close it’s doors, a “win win” no matter which way it works out.