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Roger Rabid

Christopher Gardner The county's independent auditor has been accused of being a political pit bull, a glory seeker and rising Starr. But to some, he's just a taxpayer's best friend. By Will Harper IN HIS 25 YEARS IN THE accounting profession, Santa Clara County's financial watchdog Roger Mialocq has been called a lot of things by the bureaucrats he investigates. Being called a Kenneth Starr is just the latest epithet, a handy insult courtesy of current events and Assessor Larry Stone, the mercurial former Sunnyvale mayor whose office is the subject of Mialocq's most recent audit. Hunching over a simulated wood dining table inside the basement cafeteria of the Government Center at 70 W. Hedding, Mialocq (pronounced My-lock) clasps a plain Styrofoam cup containing something rumored in the county building to be coffee. At least the rancid brew is brown. And it steams. With a firm grip on his caffeinated concoction, Mialocq pauses as if considering whether to dignify the Starr comparison with a retort. "I'm not a Ken Starr," he says after a moment. "I've done audits the same way for 20 years with the county. I can't control how the auditee reacts. This [the audit of the assessor] was not a criminal investigation, nor was it politically motivated." The acrimony from his well-publicized and protracted feud with Stone has for the first time in Mialocq's 18 years here brought the spotlight directly on him and his practices instead of just those of the department being audited. Never before, Mialocq says, has he encountered such resistance and rhetoric from an auditee as he has with Stone. In part that is because for most of his tenure his bosses on the Board of Supervisors have sent Mialocq and his team to uncover waste in departments directly under its control. But in the last two years, the auditor has been sent on more dangerous missions into the foreign turf of independently elected officials such as the assessor and the judiciary. When Mialocq produced a special study on the courts this fall, the judges and court administrators showed their contempt for their inquisitor in much the same way as the Clinton defense team, by blasting the report. They round-filed Mialocq's suggestions to reduce the court's prodigious backlog by creating a night court and changing the calendar system. Court chief executive Steve Love bitterly says the auditor's report "isn't worth the paper it's written on," adding that some of the changes the report prescribed were in the works already. He adds that Mialocq's assignment began as a study of jail overcrowding that ended up with an "anecdotal" critique of the court system. Love may have some strong words about Mialocq's work, but they only earn a PG rating compared to Stone's rants. The assessor, who oversees the county's property tax roll, is a call-'em-like-I-see-'em politician with a flair for quotable hyperbole. His comparison of Mialocq to one of the nation's most despised figures is the product of the assessor's characteristic idiom. Nevertheless, there are some surface similarities between the criticisms leveled over the years against the independent auditor and the independent prosecutor. Like Starr's, Mialocq's critics liken his investigations to authorized fishing expeditions that go way beyond their originally intended scope. They say Mialocq twists the facts to justify questionable conclusions or make departments look bad unnecessarily. And the "independent" auditor doesn't find it unseemly that through the years he has given thousands of dollars in campaign contributions to local politicians, most of them to his bosses on the Board of Supervisors. And even the supervisors have lectured Mialocq for including "gratuitous" details in his reports, which might seem tame by Beltway standards, but are the equivalent of thongs and cigars in the South Bay's polite win-win political culture. One example: In a generally positive 75-page 1995 report about the county's purchasing system, Mialocq included a brief mention on page 22 of a social services manager who used public funds to buy a $968 custom-made wood cabinet to fit the decor of his office (the garden-variety cabinet cost about $200 at the time). Supervisor Blanca Alvarado was so annoyed she lobbied to get editorial control over the audits before they were released so that she and other board members could put their own "spin" on them. State public-records law and the U.S. Constitution, however, got in the way, which is perfectly fine with Mialocq. For his "spin" he's been called a headline-grabber by former county executive Sally Reed and the assessor. Stone goes so far as to charge Mialocq of Starr-like leaks in which the auditor allegedly discloses juicy details of his reports before they're made public, something that Mialocq steadfastly denies. Stone has no direct evidence of such leaks, though. (And this reporter has never been the beneficiary of Mialocq's alleged premature lip-flapping. But if asked by a reporter to point out the comic highlights inside a published report, he will gladly talk about, for instance, the $2,880 "priority requisition" used to buy jail inmates chicken fried steak.) So the comparison between the auditor and the independent persecutor goes just so far. At least the auditor can say he has something to show for the $652,000 annual contract awarded to the Harvey Rose Accountancy Corp., the San Francisco-based firm of which he is vice president. The glory of his tenure hasn't been simply exposing an administrator with a taste for expensive custom furnishings or jail guards who placate inmates with buckets of the Colonel's spicy-crispy. Mialocq estimates that during the first 15 years of the firm's contract, the auditor has saved the county $27 for every dollar they have paid for his insights into trimming fat in the sheriff's office, the jails, animal control, the property management division, the probation department, the transportation agency and social services. And that 27-to-1 figure is a conservative one, assuming the county has implemented just one-fourth of Mialocq's audit recommendations. And one of his investigations--done for a fraction of Starr's inquiry--even produced a real criminal conviction. RIDING THE ELEVATOR of the county building with Roger Mialocq is like taking a trip up and down memory lane. On the way up to his office on the 10th floor, Mialocq passes the Finance Agency, the department that oversees tax collection, makes sure the books are balanced and issues checks. The county's purchasing division now operates out of Finance, but when Mialocq first came here the General Services Agency did the county's grocery shopping. In one of his first audits for the county, Mialocq found that purchasing was doing boneheaded, cost-inefficient things like issuing checks for one penny. There was also the 45-cent check written to buy--fittingly--red tape. The elevator halts on the seventh floor, and the door opens to reveal theoffice of the Planning Department. Mialocq recalls how in classic bureaucratic fashion they used to close the office from noon to 1 p.m., the time period in which people regularly take care of errands--like getting a building permit. Now, after an audit, the planning office stays open during lunch hour. Planning officials were also forced to admit the department had never returned $5.9 million in security deposits to developers, thanks to Mialocq. The county is a big, spread-out agency with 14,000 employees, so not all of Mialocq's authorized snooping occurs in the main building. The sheer size of the bureaucracy necessitates satellite operations throughout the valley. Just recently he poked around one of those satellite operations, the communications agency. The audit began, Mialocq says, with the idea of finding out if the county could save money with a new long-distance service. While poring over phone bills, Mialocq's team found that not only were some county employees not dialing 10-10-220, but they were calling friends and relatives across the country and overseas on the public dime. "We gathered years' worth [of phone bills]," Mialocq recalls with a smile, "and I started to see all these calls to countries I've never heard of. It was like the United Nations. This is the county of Santa Clara, so I couldn't imagine a reason we would need to call Afghanistan or Siberia." Those chatty employees were lucky--they were never prosecuted for recklessly wasting the county's money. Other Mialocq targets, however, haven't been so fortunate. Court reporter Edward Von Ruden was unemployed after Roger Mialocq got done with him. During an audit, Mialocq discovered that Von Ruden was typing a little slower than he said he was, overcharging the county $6,000 for phantom transcripts. Von Ruden eventually pleaded no contest to charges that he defrauded the county, and then he resigned. But sometimes allegations of wrongdoing aren't so clear. What are presented as major crimes in the auditor's reports, his critics say, barely qualify as infractions--and certainly not as impeachable offenses. AS ASSESSOR LARRY STONE thumbed through the 10-page status memo Mialocq submitted to the Board of Supervisors in August 1998, one section heading caught his eye: "Discovery of Illegal Activities." This was the first Stone had heard of any alleged foul play in his office. As he read the fine print, Stone realized neither he nor members of his staff were being accused of breaking the law. But he feared that skim-readers might not comprehend that the "illegal activity" in the suggestive heading had nothing to do with any covert operations inside his office. "They're trying to make it sound like I'm doing something illegal," he told his trusted policy advisers, David Ginsborg and Diana Lackey. The Mercury News took the bait and ran a brief gossip item about the auditor uncovering cases where some people might be benefiting from fraudulent homeowners' exemptions, a $78 annual tax break for those who claim a property as their primary residence. The district attorney was also considering prosecuting a handful of cases, the item reported. By the time the final audit was released nearly five months later, the headings were changed to a more polite and less ambiguous "Discovery of Illegal Acts by Taxpayers" and "Illegal Exemption Claims Identified." As it turned out, of the 104 homeowners' exemption claims randomly sampled by the auditing team--there are 280,000 total claims in the county--only two were found to be improper, but not necessarily due to intentional fraud. Over a four-year period, the two homeowners saved about $277 each in reduced property taxes. The district attorney chose not to prosecute. Mialocq concludes that the county could be losing as much as $1.47 million in lost taxes because of improper exemption claims. Or it could be as low as $50,000, according to the audit report. To Stone, digging into the exemption issue was a colossal waste of time and money. To spend the staff time required to occasionally audit a $78 tax break--including printing costs, follow-up calls and site visits--isn't cost-effective, Stone argues. Besides, the state reimburses the county for all exemptions. "I believe there is a need for an auditor," Stone concedes, "but these guys are not objective or impartial, they're not honest and they don't produce a quality work product. That business about illegal activities was an obvious attempt to mislead people for reaction purposes." The assesor's response in full. For his part, Mialocq says that because of the controversy surrounding this audit he brought on several experts such as a Stanford statistics professor, a retired appraiser from the office of the San Francisco assessor and also another auditor who had in the past reviewed the CIA and FBI. Every assertion in the 300-page report, Mialocq says, has a document to support it. With that kind of backup, Mialocq feels confident in the accuracy of his report. He suspects that Stone is trying to deflect attention away from the facts in the audit by attacking the messenger. "If he'd spend more time on management of his department instead of attacking the auditor or the Board of Supervisors, the taxpayers would be better off," Mialocq says. To some extent, Mialocq is in the middle of a turf war between the assessor and the board. The supervisors wanted Mialocq to analyze the $1.4 billion property tax roll. Stone believed they were trying to muscle in on his territory and, ultimately, trying to jack up taxes so they could have more spending money at budget time. Stone claims there was no reason for Mialocq to examine property assessments because the roll had just been audited by the state Board of Equalization, which gave the assessor high marks for accurate appraisals. That didn't stop Mialocq, though. He just went in and investigated the state taxing agency's policies and procedures. (This, as might be expected, was not welcomed by the folks in Sacramento, who essentially told him to "pee off" in bureaucratese.) After all the bluster and barbs traded over the past 18 months, it's hard to say the estimated $300,000 audit was worth it. As an independently elected official, the assessor can all but round-file the report. He most definitely doesn't have to change assessments, which are his turf. But it wasn't a total lost cause for the auditor. He did get a front-page story about how the assessor was overcharging Los Gatos homeowners and giving Palo Alto's landed gentry too sweet a discount. Pencil for Hire: The county Board of Supervisors wanted an independent auditor who wouldn't have to kowtow to department heads, but critics say he now kowtows to the board instead. Christopher Gardner IT'S NOT AS IF MIALOCQ grew up dreaming of joining a notoriously dorky profession famed for its pocket-protectors and green eyeshades. He's known for his insatiable addiction to muscle cars, which he rebuilds and races as a hobby. He drives a pristine black Corvette to work, but his real baby is the 1970 El Camino he bought sight unseen from a guy across the country. Mialocq grew up in the Richmond district of San Francisco, an incurable 49ers fan. To this day, he wears a Niners ring and a red-and-gold watch. He's been a season-ticket holder since 1981, Joe Montana's first Super Bowl year. Oh, by the way, he's audited the Niners' books, too. He graduated with a master's in business administration from San Francisco State University in 1971. Afterward, he soon discovered that a business degree from a state college couldn't get him the jobs he first sought at global corporations like Standard Oil. So he took a job with the San Francisco Airport. That's where he met his mentor, Harvey Rose, the city's budget analyst, who had been given the task of auditing the airport. The two are different personality types: Roger is laid-back and soft-spoken; Rose is a hyper and glib New Jersey native known for his bad jokes. (Example: I went to my psychiatrist and said, "Doc, no one pays attention to me anymore." He said, "Next.") But Rose was impressed by Mialocq's work and offered him a job with his accounting firm. And except for a couple of years when Rose was state auditor general, he and Mialocq have worked together ever since. "The reason we've stayed together all these years," Rose says, "is because Roger is a really nice guy. It's difficult not to like Roger Mialocq." Unless, of course, you happen to be the target of one of his audits. Then again, even some of the victims of Mialocq's sharpened pencil say he's not half bad. "One of Roger's partners won't even look at me or talk to me anymore if we pass each other in the hallway," says David Ginsborg, a top aide to the assessor and one-time policy director for ex-Supervisor Ron Gonzales, "but if I bump into Roger in the elevator he'll still make small talk. He's a nice guy, but as the auditor I think he's been vindictive and unprofessional." His partnership with Rose has resulted in creating what they say is the "pre-eminent" government auditing firm in the state. If his new Corvette wasn't enough evidence of Mialocq's success, there's also his weekend home in Pebble Beach to consider. Rose and Mialocq champion a relatively newer form of auditing different from the traditional type favored by the Big Six, which emphasize getting the numbers to add up correctly. Rose was schooled in the U.S. General Accounting Office, and he preached management audits. His mantra: cost savings, cost savings, cost savings. A management audit seeks to uncover the backward bureaucratic practices that result in wasted public dollars, the $70 screwdrivers. As a result, they are more confrontational than financial audits that ensure that, yes, two-plus-two does indeed equal four. "A financial auditor," Mialocq explains, "can come in and give an unqualified opinion saying that records accurately reflect the operations and conditions of a company during such-and-such a period and meet general accounting standards. Meanwhile, the company is going bankrupt." IN THE LATE '70s, Santa Clara County decided it wanted an independent auditor like San Francisco's. The county already had an internal financial auditor, but he was ultimately an underling of the county executive, which meant he was in the uncomfortable position of critiquing his boss. According to ex-Supervisor Susanne Wilson, she and the board wanted someone who would give them the straight dope without worrying about being fired for exposing something embarrassing about the unfathomable depths of government waste. In 1980 the Board of Supervisors, led by Wilson, brought on the Harvey Rose Corp. as the county's first--and, to date, its only--independent auditor. And Roger came with the package. Not everyone was overjoyed to see him. Soon after Sally Reed came aboard as county executive in 1982, she tried to get rid of Mialocq and the independent auditor's contract altogether. In a sense, the county executive and the auditor are natural adversaries. At budget time each year, the board asks Mialocq to go over the administration's budget numbers, often in hopes of finding more spending money to give to pet programs. And some administrators don't like the setup where the hired gun ultimately justifies his existence by uncovering their screw-ups. But Reed says her initial reservations went beyond the inherent structural tension between executive and auditor. The reputation of the Rose firm, she recalls, was that it was more political than the well-known accounting companies. "They weren't hired by corporations or private businesses," says Reed, now the county executive in Monterey. "They were always hired by elected officials." Reed's attempt to dump the auditor failed. AFTER 18 YEARS, Mialocq is now a fixture in the county building. Like staffers in the state Legislature, Mialocq has superior institutional memory and knows where the bodies and carryover encumbrances are buried better than any of his elected bosses or their appointed liberal arts-degree luminaries. And he should. He's been here four times longer than any current supervisor. The contract for independent auditor didn't go out for competitive bid until Mialocq's 15th year with the county in 1995, an irony, since Mialocq has championed competitive bidding as a way to ensure fairness in the system. (The county charter review committee last year recommended the auditing contract be put out for bid every four years.) Mialocq and his staff have the distinguished honor of being the only county contractor with publicly provided office space on the 10th floor next to the supervisors. The supervisors have become accustomed to having Mialocq around. Occasionally, they pay personal visits to the auditor's cubicle near the restrooms and ask their financial watchdog to sniff around some unseemly bureaucratic territory they suspect of waste. Financial waste, that is. As long as the sniffing expedition doesn't take Mialocq longer than 20 hours--all billed to taxpayers, by the way--he'll take a perfunctory look and issue a publicly available memo. ASSESSOR LARRY STONE considers the arrangement much too cozy and open for abuse by a supervisor who wants to dig up some dirt on a chosen enemy in the bureaucracy. Stone, it should be said, distrusts his elected counterparts on the board, particularly Jim Beall, whom the assessor accuses of physically pushing him during a budget dispute (which the 6-foot-plus supervisor denies). Even though Beall didn't make the initial recommendation to audit the assessor's office--Mike Honda did--Beall was a vocal advocate of the audit. Stone's paranoia aside, even Susanne Wilson, the 12-year chair of the board's audit committee, was surprised to hear of the new "custom," as Beall once put it, by which individual supervisors solicit Mialocq's ax-wielding expertise privately without the prior authorization of the full board. Wilson initially led the charge to hire an independent auditor, and she says Mialocq never performed the duties of political hatchet man during her tenure from 1979 to 1991. "He was never to be used as one who could dig up dirt," Wilson recalls. Mialocq says he is no political mercenary. As another member of the board's staff, he explains, he helps supervisors if the expertise of their own staffs comes up short. Berkeley Driessel, president of the Santa Clara County Association for Good Government, says the "custom" of having an auditor be on-call for supervisors' requests can be a good thing, keeping them informed and getting information without bureaucratic delays. "Mialocq is competent and knows as much about the county as anyone," he says. A Mialocq-provided sample of tasks assigned to him by individual board members over the past two years shows that the information he reveals is hardly blackmail material--exciting stuff like a survey of pension plans in counties throughout the state. The supervisors, of course, gladly take all the information Mialocq compiles for them. But that's not all they take from him. THE CAMPAIGN KICKOFF for mayoral candidate Ron Gonzales last year featured a cross-section of the community: whites, blacks, Latinos. And an auditor. Mialocq knew Gonzales from his eight years as a supervisor. Both valued efficient, cost-effective government. Thus, they enjoyed a friendly rapport and a financial relationship outside the confines of good, efficient government. The auditor gave $1,000 to Gonzales' mayoral campaign. That wasn't unusual--at least in the sense that Mialocq and his partner, Harvey Rose, regularly contribute money to politicians, especially those who authorize their contracts. A copy of the monetary contributions report (83k). Over the years, Mialocq has cut dozens of checks--translating into thousands of dollars--to local politicians like supervisors Jim Beall, Pete McHugh, Mike Honda and Gonzales. Giving campaign contributions is a cherished tradition among government contractors. Most contractors, however, don't brag about their objectivity and independence, sacred virtues among auditors. Mialocq and Rose deny they give contributions to curry favor with supervisors. They say they made most of those donations attending fundraising parties which they were invited to. Mialocq and Rose argue that attending the occasional overpriced rubber-chicken campaign dinner should not sound alarms of compromised independence. Rose points out that when his firm's contract with the county was renewed in 1995, he and Mialocq competed with many other companies. They eventually got the contract, he says, on the recommendation of an appointed apolitical panel including finance director Bill Parsons and San Jose city auditor Gerry Silva (an old friend of Rose's who used to work for him when Rose was auditor general). Silva, though, makes it a personal policy not to give any money to politicians. Silva says he's even turned down invitations to attend fundraising parties for free. "It would be inappropriate for me," Silva says. "I have never done anything that could be seen as political." JUST AS MIALOCQ'S BATTLE with the assessor nears its conclusion, the auditor is preparing for his next mission: to examine the county's half-billion-dollar health and hospital system. In the past, he has had his run-ins with Valley Medical Center boss Bob Sillen. The public hospital has been a sacred cow to the board's liberal members, a sympathy Sillen exploited in 1994 when he successfully prevented his empire from being audited at the time. Mialocq's been waiting a long time to tackle the VMC monster, which now includes a new $197 million hospital. He actually investigated the hospital system 15 years ago, but that went nowhere. Providing testimony to Sillen's influence, the 1983 audit of VMC is the only report of Mialocq's the Board of Supervisors has rejected, meaning the report's recommendations were never implemented. Perhaps the upcoming review of VMC won't be a contentious affair. Sillen promises he is going to cooperate fully with Mialocq and his team of bean counters. But even if this audit doesn't end up in a dogfight, somewhere down the road it is inevitable: Roger Mialocq is going to tick someone off. It's just the nature of his job. No one loves the auditor. Even if the county's penny pincher is a nice guy. [ San Jose | Metroactive Central | Archives ]