Last year, L.A. officials awarded four contracts worth $545,000 to Managed Career Solutions for workforce development services. Backing the company was then-Councilman Eric Garcetti, a longtime supporter.
“There is a great need to support the efforts of Managed Career Solutions Inc.,” Garcetti wrote in a motion to approve one of the contracts, which provided veterans’ services.
It turns out that the company has also been a longtime supporter of Garcetti and other officials. The company’s principals, employees and their families have contributed at least $44,000 to Garcetti’s campaigns, including his successful bid for mayor last year, campaign finance records show. That’s more than three times the nearly $13,000 those contributors have put into election campaigns for other city races.
Now, a former employee is alleging that MCS’ owner, Philip Starr, coerced employees to donate to political campaigns in an show. That’s more than three times the nearly $13,000 those contributors have put into election campaigns for other city races.
Now, a former employee is alleging that MCS’ owner, Philip Starr, coerced employees to donate to political campaigns in an effort to secure contracts, and illegally reimbursed contributions made by employees and their family members to get around contribution limits. The allegations were made in a lawsuit filed by Richard Galope, MCS’ former director of planning and development who is also former executive director of the Los Angeles City College Foundation.
Starr and his employees made contributions despite the 2011 passage of a ballot measure banning contractors from donating to city election campaigns. That appears to be due to the timing of the contracts, and because the new regulations only apply to the principals of a contractor. Starr made three contributions in 2011 and 2012, before his contracts were up for consideration, which is permitted. Still, nearly half of the known contributions related to MCS came after the new regulations went into effect.
“People can always find a way to make contributions or support candidates they want to support,” said Randy Keen, an attorney at Manatt Phelps & Phillips who reviewed the legal case for the Business Journal. “I think laws like this a lot of times don’t capture the activity they were intended to capture.”
An attorney representing Starr declined to comment, citing pending litigation.
A spokesman for Garcetti said the Mayor’s Office would look into MCS but did not provide a comment.
MCS was co-founded as MCS Rehabilitation Inc. in 1987 by Esteban Magallanes, Jeffrey Charitan and Starr, and renamed Managed Career Solutions Inc. in 2002. Starr, who holds a doctor of psychology degree, is also well-known in the local gay rights community. His mother, Adele Starr, was a prominent activist, who, following his coming out, founded the L.A. chapter of Parents and Friends of Lesbians and Gays.
MCS relies on government contracts for workforce development from city, county, state and federal authorities. It helps workers get jobs and training at 10 locations across Los Angeles County, often focusing on disadvantaged workers and veterans. MCS has received more than a dozen contracts from the city dating back to 1997, according to online records.
The company drew investment interest in the mid-’90s, with Starr outlining to a business magazine in 1998 the reasons that he had rejected a roll-up bid.
“We got a three-year contract, then at the end we were ‘at-will’ employees, so we could be terminated anytime,” he said. “That was on top of finding out that the principals of the (acquiring) company were going to get a whole lot more stock than I was.”
Campaign finance records show MCS has long been an active campaign donor in city elections – not unusual for a contractor.
But Galope, who worked for the company from March 2011 to last July, claims that Starr orchestrated contributions to circumvent campaign contribution limits, which are now $1,300 a donor for each election cycle for citywide candidates and $700 for City Council candidates.
In his Los Angeles Superior Court complaint, filed last month against MCS and Philip Starr, Galope claims he generated more than $18 million in government contracts for the company. But he says that he was told by Starr that his job was contingent on supporting the political campaigns of Garcetti, Councilman Joe Buscaino and unsuccessful City Council candidate Matt Szabo, as the candidates’ campaign officials expected Starr to raise specific sums of money within specific time frames.
“Starr repeatedly told Plaintiff that his employment and potential ownership of MCS were entirely dependent on the election of Mayor Eric Garcetti, Councilman Joe Buscaino and City Council candidate Matt Szabo, and that Plaintiff’s financial support of these candidates was essential,” it states.
He claims that he and five family members made a total of 15 campaign contributions amounting to $9,950 and were secretly reimbursed by Starr.
Galope’s allegation that the company’s owner reimbursed employees’ campaign contributions would be a clear breach of campaign finance laws.
A City Ethics Commission spokeswoman said the commission did not comment on whether or not an investigation is ongoing. A Los Angeles County District Attorney’s Office spokeswoman said that a case has not been presented to its public integrity division.
Despite making the contributions, Galope claims, he said he was fired in July of last year.
“The stated reason for plaintiff’s termination was that plaintiff was no longer needed because contracts would be easier to obtain after the election of MCS’ preferred candidates to city offices,” the complaint further alleges.
Galope’s attorney, Lisa Maki, did not return requests for comment.
Records show he donated a maximum of $1,300 to Garcetti’s mayoral campaign and $500 to Buscaino’s campaign in 2012. Two other people with the Galope surname donated an additional $2,800 to Garcetti, for a total of $4,600. Records show that $1,000 was later returned by the Garcetti campaign.
After Galope’s hiring in March 2011, records show at least 18 employees of MCS or its subsidiaries donated to city election campaigns. An additional seven people sharing addresses with MCS employees or otherwise believed to be family members also made contributions, for a total of $24,400. Of this, $21,100 went to Garcetti, with the rest going to council members Buscaino, Mitch O’Farrell and Herb Wesson.
Additional alleged contributions by Galope’s family would bring the total amount of contributions connected to MCS in the last three years to $29,750 to a variety of candidates.
In all, records going back to 1999 show that at least 33 MCS owners, employees and their family members, along with MCS itself, have donated at least $56,875 to city election campaigns. Of that, $44,450 went to Garcetti and $4,000 to Councilman Jose Huizar. Receiving smaller amounts were campaigns for current council members Buscaino, O’Farrell, Wesson and Tom LaBonge; the City Council campaigns of Richard Alarcon, Victor Griego, Janice Hahn, Conrado Terrazas, Ferris Wehbe and Scott Wildman; and the mayoral campaigns of Antonio Villaraigosa and Xavier Becerra.
Starr has personally given $8,800 to various city campaigns since 1999, while his partner and son have given $7,350. Founder Esteban Magallanes and Laurel Magallanes, who share an address, have donated $13,200. MCS director of finance Proceso Maturan and Luisa Maturan, who share an address, donated $7,000.
City officials awarded MCS four contracts last year. The City Council allocated $250,000 in federal grant money to train dislocated workers in Hollywood, $100,000 to establish a resource center for startups and small businesses in Hollywood, $150,000 to establish another business resource center in Koreatown and $45,000 for veterans’ services.
Though city of L.A. voters passed a 2011 measure, Measure H, banning city contractors from donating to city election campaigns, the new law does not appear to have applied to the contributions related to MCS. The ban only applies to contract bidders and their principals, defined as the equivalent of a board chair, president, chief executive, chief operating officer, 20 percent owner or someone authorized to represent the contractor before the city.
Furthermore, the ban only applies to contracts worth more than $100,000, and then only for a limited time, beginning once a bid is submitted and ending 12 months after a contract is signed. Bans on unsuccessful bidders are lifted once their bids are eliminated.
Starr made campaign contributions in 2011 and 2012, before the first of four potential MCS contracts was brought to the City Council in June 2012. His employees and family members continued to make contributions after that.
Robert Stern, a local campaign finance law expert and former president of the Center for Governmental Studies, said it is important to keep contractors from appearing to gain an advantage because of campaign contributions, but that Measure H had limits because it can be hard to monitor.
“Keeping track of contributions coming in and contracts going out is difficult,” he said.
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