Port tells panel it's making changes; auditors disagree

OLYMPIA — Port of Seattle officials on Wednesday sought to assure state lawmakers that they are taking seriously the explosive findings of a recent state audit, and that they've already begun to implement reforms.

But the auditors who unearthed evidence of waste and possible fraud said the continuing denials and defensiveness they've seen from some Port officials call into question whether the agency will really change.

The 334-page audit released by State Auditor Brian Sonntag on Dec. 20 blasted the Port's management of construction contracts, largely at Seattle-Tacoma International Airport. The audit said the Port's poor record-keeping and cozy relationships with contractors wasted at least $97 million, violated competitive-bidding requirements and invited fraud and abuse.

The audit led the U.S. Justice Department this week to announce a criminal investigation.

In testimony to a legislative committee, David Cotton and Patti Jones, the private consultants who conducted the Port audit for the state, made three broad recommendations to the Legislature on contracts and policy. They also disputed soothing comments from Port CEO Tay Yoshitani that the Port largely agrees with the audit's conclusions.

In fact, the Port has formally agreed with just six of the audit's 23 findings and 20 of its 51 recommendations, Cotton and Jones said in written testimony to the Joint Legislative Audit and Review Committee.

Yoshitani and other Port officials have repeatedly said they have "zero tolerance" for fraud — a sentiment they echoed again to lawmakers Wednesday. But Cotton and Jones said the Port's actions "contradict this assertion." The Port, they noted, did not respond specifically to any of the 47 indicators of possible fraud listed in the audit report.

And while Yoshitani has said the Port will hire an independent investigator to determine whether fraud occurred in at least one construction contract singled out by auditors, Cotton and Jones noted that the Port has known of the audit's findings for more than three months, but is yet to hire an investigator.

Yoshitani on Wednesday said he disagrees with some of the audit's findings, but does not want to focus on those differences any more. He said he embraces the audit and vowed to move swiftly toward enacting needed changes, such as hiring a chief procurement officer to manage all Port contracts. The procurement officer would be in place by June 1, Yoshitani said.

"We'll get it done and we'll be a better Port for it," he said.

Several critics told lawmakers Wednesday they don't trust the Port to implement reforms and said the Legislature should force the agency to change.

Chris Gower, an opponent of the Sea-Tac third runway who has scrutinized the Port for years, said the agency's response at a public hearing Tuesday at Port headquarters amounted to "denial, obfuscation, grandstanding and finger-pointing." He called on lawmakers to eliminate the Port's property-tax levy.

Some Port defenders also showed up Wednesday, saying the audit had unfairly characterized an agency they believe has been good for the economy and the public.

"In our experience the Port has been a wise steward over its resources," said Robert Luxa, general manager for SSA Marine, a major Port tenant. When SSA Marine wanted to expand its business at the Port, Luxa said he found Port managers to be "tough but fair" in negotiations.

In an interview, Sonntag said Port CEO Yoshitani is in a difficult position.

"I believe him to be a stand-up guy and very responsive," Sonntag said. "I think he's caught in a position where on one hand he wants to be very responsive, on the other hand he's got staff who have been there a long time and he continues to work with them. He doesn't want to be trashing them, and he doesn't want to be trashing the audit. He winds up doing a little bit of both."

Cotton and Jones made three major recommendations to lawmakers. They said the Legislature should:

• "Clarify" how much competitive bidding should be required when local agencies such as the Port want to hire consultants.

• To prevent "bid-rigging" schemes, eliminate a loophole in contracting rules that allows ports to award small-works contracts without notifying all potential bidders.

• Make it clear that the Port cannot ignore or waive established policies without at least checking with its elected commissioners.

Staff reporter Bob Young contributed to this report. Jim Brunner: 206-515-5628 or jbrunner@seattletimes.com.