LA County Accuses Auditing Firm of $8.5M Scam

LOS ANGELES (CN) – Los Angeles County has sued an auditing firm for $9 million over claims it defrauded the county by failing to detect the embezzlement of millions in public funds.

In 2015 the Los Angeles County District Attorney’s Office charged three executives of the nonprofit Chicana Service Action Center with misappropriating $8.5 million in public funds. The criminal case against executives Sophia Esparza, Silvia Gutierrez and Thomas Baiz is still pending.

Now pointing the finger at Vasquez & Co., the county claims in a civil complaint that the auditor knew or should have known that Chicana Service Action Center – which offered services for domestic violence victims, the homeless and the jobless – was bilking the county.

“Defendants, and each of them, were aware that plaintiff county was relying upon their audit work and purported independence to provide accurate reports on the financial condition and operations of CSAC so as to enable the county to ensure that public monies were properly being used,” the complaint states.

The county says its investigators found that Vasquez’s audit reports for the fiscal years beginning in 2009 and ending in 2012 failed to disclose that Chicana Service Action Center had used public money to pay the auditor’s managing partner Gilbert Vasquez $8,500 for a yacht trip.

In addition, the auditor knew that Esparza had used public funds to pay for rent on two homes, that the nonprofit had spent $150,000 on two Jaguar convertibles, and that it had charged $35,000 in miscellaneous expenses, the county says.

“When questioned why certain of Vasquez, LLP’s negative findings were not included in final audit reports, Gilbert Vasquez, on behalf of Vasquez, LLP, stated that defendants would simply accept Ms. Esparza’s explanations at face value and not test the veracity of the explanations with any further inquiry,” the 14-page complaint states.

According to county prosecutors, Esparza directed public funds toward personal loans and annuities, a San Marino residence, luxury sports cars and season tickets to the Los Angeles Dodgers and the Los Angeles Clippers.

Her colleagues Gutierrez and Baiz used public money to purchase meals and vehicles and to pay child support, prosecutors said.

The county seeks $9 million in damages from the auditing firm for fraud and deceit and negligent misrepresentation.

It is represented by attorney Stephen Wiman.

 

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