Ethical conflicts may have undone director
PUBLIC SAFETY BUILDING — Santa Monica’s former funeral director, who was fired for incompetence and possible ethical transgressions, continued to receive excellent performance reviews all the way up until being shown the door.
That’s according to testimony heard on Tuesday amid a multi-day personnel board hearing in which Michael Steen is appealing his termination. Steen was fired this past fall after three audits revealed the management of Woodlawn Cemetery’s finances was not in line with general accounting practices. In addition, City officials believe Steen was acting unethically by promoting and benefiting from his domestic partner’s monument-making business at the cemetery.
Steen has appealed City Hall’s decision to fire him on the grounds that he feels his dismissal was unjust. According to his attorney, William Becker, City Hall should have done more to address issues it had with Steen’s management of the cemetery. Instead, City Hall set up false expectations by giving Steen excellent performance reviews up until the time of his dismissal. In addition, Becker argued City Hall could have corrected particular issues it had with Steen — such as the business relationship he had with his domestic partner — which would have been more effective than firing him.
Testimony on Tuesday focused on Steen’s superiors, who were responsible for his evaluation and ultimate dismissal. The botched sale of $200,000 in burial plots was discussed, as well as Steen’s possibly shady relationship with Woodlawn Monument, a marker company owned by his domestic partner.
The hearing will continue on Jan. 19, at which time Steen and his domestic partner are expected to testify.
Steen appealed City Hall’s decision to terminate him last September after a nine-month investigation concluded there was no criminal wrongdoing on his part regarding financial discrepancies discovered at Woodlawn, a municipal cemetery located between Pico Boulevard and Michigan Avenue, from 14th to 17th streets.
Officials haven’t said specifically how much money might not be accounted for at Woodlawn or what revenue might be realized. They have, however, paid outside firms for two audits, as well as conducted their own audit, all of which have shown discrepancies in Woodlawn’s financial books.
The cemetery brings in about $450,000 a year in revenue, but it’s subsidized by City Hall because it operates at a loss.
Because Steen’s firing is a personnel matter, city officials won’t elaborate on circumstances surrounding the criminal investigation, or his termination — beyond what is said in the appeal hearing, a matter of public record.
Steen was placed on paid administrative leave in December of 2004 while City Hall investigated his financial management of the cemetery. While it was concluded he committed no criminal wrongdoing, City Hall believed it had grounds to terminate him.
As a result of his termination, Steen has taken private funeral jobs which pay between $200 and $300 a week — a fraction of the $100,000-plus annual salary Steen is believed to have earned as Woodlawn’s top administrator.
On Tuesday, Steen — wearing a dark suit — watched intently as his former superiors testified in his case.
Considering the fact no criminal charges have been filed against him, Steen hopes to clear his name and be compensated by City Hall through the course of the appeal. Testimony on Tuesday, however, indicated that while City Hall might have done more to steer his management style, Steen needed to go.
BORBOA REGRETS ‘HANDS-OFF’ APPROACH Gil Borboa, Steen’s former boss, testified that he has been the utilities division manager for more than eight years. During testimony on Tuesday, he calmly answered the attorneys’ questions.
Steen, seated a few chairs away, watched Borboa throughout his testimony, but the two rarely made eye contact.
Borboa told the personnel board he has an engineering background with little experience in cemetery operations. Therefore, he mostly had a “hands-off” approach when it came to Woodlawn.
“It was my expectation that Michael would handle the day-to-day operations of the cemetery, and do that function accurately,” Borboa said.
“That was (Steen’s) job, not yours?” asked Irma Rodriguez-Moisa, counsel for City Hall.
“That’s correct,” Borboa replied. Steen, who began working as Woodlawn’s top administrator in 1989, received just one less-than-satisfactory performance review during his 15-year tenure. That was in 1991, when he was first criticized for a messy desk and lack of organization. Otherwise, Steen’s performance reviews have been very favorable over the years, taking particular note of his communication skills.
That includes the performance reviews Borboa prepared from 2000 until Steen was put on paid administrative leave in December of 2004, when City Hall began conducting its criminal investigation.
However, it was during an audit for the 2001-02 fiscal year in which a “significant number of issues” first arose, according to testimony. A letter from the auditing firm Moss, Levy & Hartzheim informed City Hall, “The cemetery did not have adequate audit trails or records available to determine if internal controls existed. The internal controls appear to have been inadequate or non-existent...”
ML&H didn’t draw definitive conclusions about what questionable financial role Steen may or may not have played in the cemetery’s operations. Instead, its 13 findings, mirrored in two subsequent audits, examined the discrepancies and what opportunities they might have presented for the misappropriation of funds.
In light of the audit, Borboa issued a corrective action plan to address the lack of internal controls that the ML&H audit pointed out.
However, Steen didn’t accept the evaluation of his performance that year. The evaluation, generally favorable, indicated that as a manager, Steen was responsible for ensuring that internal financial controls were in place. Since they weren’t at the time of the audit, Steen didn’t receive a bonus.
Steen appealed the evaluation. The appeal required City Hall to bolster Steen’s performance review. Otherwise, City Hall’s position was upheld, according to testimony.
“I could have been more diligent.”
Subsequently, Steen continued to receive favorable evaluations, including a performance bonus the following year.
Borboa was asked by the personnel board if he had followed up to make sure the corrective action plan was being put into place at Woodlawn.
Borboa said he followed up with some of the plan’s steps, but not all of them. Borboa explained that he preferred to let his managers work independently. When he asked managers to make changes, Borboa expected them to do so without him following up.
Borboa said it’s that quality of self-initiative which distinguishes managers from other kinds of employees. However, in light of the controversy that came from the findings of the audits, Borboa admitted he could have taken more initiative himself regarding the cemetery.
“I didn’t ask for concrete proof (the corrective action plan) was being done,” Borboa said. “Michael told me it was done, and I took his word on it.
DEATH ON THE INSTALLMENT PLAN Borboa and top city officials began to seriously consider there may have been criminal activity on Steen’s part by November of 2004, after a City Hall audit for the previous fiscal year found that the financial controls that had been requested long ago had still not been put into place at Woodlawn.
In 2002, then-City Manager Susan McCarthy asked another outside auditing firm, KPMG, to follow up on the 2001 audit. The new audit, however, wasn’t available until two and a half years later, according to testimony. KPMG was only able to provide an unsigned draft of its audit, which it presented to City Hall in July of 2004. It’s unknown why there was a two-year delay in presenting the audit or why it was an unsigned draft.
After reviewing the KPMG audit, which mirrored many of the key findings of the ML&H audit, City Hall conducted an audit of its own.
That audit was overseen by Steve Stark, City Hall’s finance director. Stark asked Mabel Borja, a senior finance manager with the city’s Big Blue Bus, to lead the audit.
Borja — whose accounting career spans more than 20 years — developed a plan to test the findings in the previous audits. The goal was to sample between 3 and 10 percent of the 820 financial transactions for fiscal year 2003-04 at Woodlawn Cemetery.
One of the biggest discrepancies had to do with several premium burial plots Steen had evidently sold to an eccentric widow and failed to collect on the transaction. The plots, valued at $200,000, were for Rose Dimitrio’s dead husband, previously interred at a less expensive section of the cemetery.
According to testimony, Steen might have sold Dimitrio the plots on an installment plan, which is against the law. The criminal investigation attempted to determine whether Steen may have had some ulterior motive in providing Dimitrio with the plots, of which only $6,000 has been collected to date. However, investigators on the case testified they could find no evidence to support criminal wrongdoing.
City Hall plans on providing Dimitrio with a final notice to buy the plots. Otherwise, City Hall will move her husband’s remains to the plot she previously purchased.
In light of City Hall’s audit, Borboa and other city officials said they began to seriously question Steen’s professional judgment.
“I was extremely troubled by the audit’s findings,” Borboa said. “There was not only minimal improvement, but new problems that hadn’t been identified before.”
IN SEARCH OF ‘BILL STEVENS’ In the lineup to testify in coming weeks are Steen and his domestic partner of 32 years.
According to testimony, Steen’s domestic partner has been identified in promotional literature at the cemetery as “Bill Stevens.” However, that is not his real name.
Stevens, who works full time in law enforcement, often uses an alias because of the sensitive nature of his work, he told the Daily Press. In addition to his full-time job, he also is the owner of Woodlawn Monument, a company providing grave markers to families at the cemetery.
City Hall believes Steen admitted in previous interviews that Stevens paid him $1,000 a month to refer cemetery customers to Woodlawn Monument, which was operated out of their home. If true, City Hall believes Steen compromised conflict-of-interest guidelines by promoting a private business for self-gain while working as a municipal employee.
Steen and his domestic partner have admitted to engaging in many side businesses over the years, including selling guns and insurance out of their home. However, Steen denies having any ties to Woodlawn Monument except to say his domestic partner owns it.
Borboa and other city higher ups said they were unaware of Woodlawn Monument’s possible role in the cemetery until November of 2004. A month before Steen was put on paid administrative leave, a citizen complained to the city manager’s office about private businesses being referred at the cemetery.
As a result of the complaint, City Hall prohibited any businesses referred by cemetery staff.
Then, Stevens complained to City Hall about the prohibition. It was when city managers received a voice mail from Stevens that they realized he sounded a lot like Steen’s domestic partner. That’s when they said they began to make the connection that Steen may have had an unethical tie-in with Woodlawn Monument.
According to Borboa’s testimony, it was because of Steen’s possible involvement with Woodlawn Monument that he began to question his positive evaluations of Steen.
Becker, Steen’s attorney, said instead of firing Steen, City Hall might have better addressed the situation by keeping Woodlawn Monument out of the graveyard.
“Would it have been a conflict of interest if Woodlawn Monument did not operate at the cemetery?” Becker asked.
“I believe not,” Borboa said.
Originally published in the Santa Monica Daily Press print edition on January 12, 2006. Read the original PDF.