City Hall

Phoenix Mayor Phil Gordon's "Suggestion" Helps Transportation Company Muscle Nearly $30 Million From Phoenix

Phoenix Mayor Phil Gordon isn't supposed to be meddling in discussions or matters involving Veolia Transportation, the company that operates most of the city buses and has Gordon's girlfriend on its payroll.

Gordon declared a conflict of interest during several public meetings and abstained from voting on (most) council agenda items related to Veolia. But that was only in the public eye.

Behind the scenes, he was participating -- even conveyed advice to company executives that helped them muscle $27.5 million from his cash-strapped city.

Gordon suggested to Veolia executives that they tell the city they were going to walk away from their city-bus contract, a Veolia insider told New Times.
It proved an effective way to get Phoenix to pay the money Veolia had been demanding from the city.

Several Phoenix City Council members also confirmed that Gordon was present and engaged during City Council executive sessions, closed-door meetings, during which settlement agreements between Veolia and the city were being hashed out.

According to the city's Ethics Handbook, (page 13) once an elected official declares a conflict, that official isn't supposed to participate in that issue in "any manner."

It apparently does not apply to Gordon.

At the moment, Veolia is trying to negotiate contracts with the three labor organizations that represent its employees.

Despite Gordon's declared conflict and ethic guidelines that would bar his participation, Gordon called a federal mediator to set up a meeting with Bob Bean, president of the Amalgamated Transit Union (which represents bus drivers.)

"It was a waste of my time, a waste of my morning," Bean told New Times of his Monday meeting with Gordon. "For 45 minutes, he was rambling  on. I couldn't even understand him."

Bean has been firing off e-mails to everyone in the city, including City Council members, about Veolia and labor unions efforts to prevent a strike. One of his latest messages noted Gordon's involvement with Veolia, including his attendance at a private party that Veolia hosted after winning the Phoenix contract.

"He wanted me to know he wasn't involved in contract negotiations. He's basically trying to do damage control," Bean said.

Gordon stepped in when Veolia executives found themselves at odds with Phoenix transit officials over their city-bus contracts.

The issue: Veolia couldn't get Phoenix transit officials to agree to pay for Veolia employees' underfunded pension and unused sick leave. They claimed that the city still owed them money. Phoenix said that Veolia, not the city, was responsible for those costs.

It was late March, early April, when Gordon suggested to Veolia executives that they tell the city that Veolia was going to walk away from its city-bus contract.

At that time, Veolia was operating city buses under a management contract set to expire on June 30. But, Phoenix had already awarded Veolia a new contract that started on July 1 to continue operating city buses.

It was supposed to be a seamless transition for bus service in Phoenix.

With dual contracts on the table, Veolia executives agreed that they wouldn't let the pension and sick-leave issues, which were part of the old contract, to interfere with the new contract.

But Veolia negotiators weren't getting the city to ante up money they wanted to settle out the old contract, so they turned to Billy Shields, the company lobbyists and a longtime friend of Gordon.

Erica Swerdlow, a spokeswoman for Veolia Transportation, denied that Gordon spoke directly to Veolia executives, but conceded that Gordon did  make suggestions on how contract negotiations should be handled.

"He did indicate to our lobbyist, Billy Shields, that he had removed himself from any involvement in negotiations over the old contract but suggested that in order to get the matter resolved with the City, which was in everyone's interest, we needed to get it elevated to the City Manager level," Swerdlow said.

Apparently, Veolia threatening to walk away from a city-bus contract and leaving the city with only two months of guaranteed bus service and scrambling to find another transportation company to fill the void is a very effective way of getting the city manager's attention.

Important to note that the company could have abandoned their contract with the city at anytime during their months-long negotiations with the city. They didn't. Instead, they agreed several times during talks with city transit officials that they wouldn't tie up the new contract with the outstanding issues with the old contract.

After Gordon stepped in, the company changed its stance.

With the mayor on their side, perhaps they felt emboldened?

David Leibowitz, Gordon's hired spokesman, also confirmed the mayor's involvement, but called his role "minimal." He said Gordon never did anything "against the best interests of the City of Phoenix."

"What the Mayor did do in reference to Veolia is affirm their belief that, in order to resolve the matter, they should elevate the negotiation conversation up the City's chain of command, to the City Manager," Leibowitz wrote in a statement to New Times. "The Mayor's thinking was, getting this resolved was in everyone's best interests and that the time had come to "go upstairs," so to speak."

Swerdlow said that Gordon made the suggestion to Veolia. Leibowitz said that Gordon only affirmed what Veolia was already planning to do.

Either way, Gordon wasn't supposed to be involved in "any manner" in Veolia matters.

If Gordon had truly removed himself from any involvement, how could he have known the status of those negotiations? How did he develop the opinion that the city manager needed to get involved? And why was he discussing Veolia and ongoing negotiations with the company's lobbyist?

After Veolia fired off its written notice rejecting the Phoenix city-bus contract, Phoenix transit officials started negotiating with First Transit, the transportation company that placed second in the city-bus contract bid.

They didn't get far before City Manager David Cavazos flew to Chicago with several employees to strike a deal with Veolia.

To settle out the old contract, Cavazos made $27.5 million worth of concessions to Veolia for employee pension and sick leave payments and agreed not to recoup the $681,000 that the Phoenix Public Transit Department had already unwittingly paid for employee sick days.

The concessions to Veolia weren't even limited to the old, expiring contract. Cavazos agreed to alter the new contract to waive hefty sanctions that Veolia would have to pay the city for poor performance, including a $50,000 a day fine if workers go on strike.

(A priceless concession from Phoenix to Veolia that gives the company an upper hand now that it's negotiating with union leaders representing Veolia employees.)

"It was a way to get this [new] contract signed," Assistant City Manager Ed Zuercher said of the settlement.

Gordon's suggestion that Veolia walk away -- and perhaps even his participation in executive session -- greased the wheels for Veolia's nearly $30 million payout.

It raises questions about whose interests he is serving. His girlfriend's?

Swerdlow confirmed that Mullany was directly involved in the Phoenix contract awarded to Veolia. However, she characterizes that role in the company's bid for the Phoenix contract as "brief."

Mullany worked to help Veolia land the $386 million, 5-year contract that Veolia calls "one of the biggest of its kind in the United States."

"Part of Ms Mullany's ongoing duties, among many, included helping with the oral presentation preparation," Swerdlow explained. "She did assist our staff in oral presentation training for the [proposal] evaluation/interview panels. She had a brief role in a three day preparatory meeting."

Veolia insiders told New Times that Mullany was coaching company officials on what the city was looking for and what the city wanted to hear during the interview process.

Gordon weighed in behind the scenes -- even though he declared a conflict of interest with Veolia and even though the Phoenix Ethic Handbook dictates that after a council member declares a conflict of interest, "from that point on [they] may not participate in any manner (by discussing, questioning or voting) in that matter."

There did not appear to be any exceptions in the ethics policy for minimal involvement or simply making suggestions.

When New Times asked City Attorney Gary Verburg for his interpretation of the city's ethics policy and whether Gordon should have been involved in Veolia discussions, he said he only provides legal advice to his clients.

He said he wasn't answering any more questions, and also refused to disclose the names of the elected officials present during two executive session meetings where the Veolia settlement was among the agenda items.

Several council members confirmed Gordon's presence and participation, but they did not reveal the nature of any e-session discussions.

To be sure, discussions that take place during executive session meetings are protected by state law. They are supposed to afford elected officials the opportunity to collectively get legal advice on various matters.

The law does, however, require the City Council to make public the general topics of conversation during its closed-door meetings. And even those limited agenda items include the names of non-elected officials who are present during certain conversations.

Revealing the names elected officials present for those discussions should not be any different.

Keeping that information secret only serves to shield Gordon from scrutiny. It does not serve the public interest or the public's right to transparency in government.

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Monica Alonzo
Contact: Monica Alonzo