Rural/Metro: Secret Memos, Campaign Donations, and An Alleged $5.8 Million Excess Withdrawal

Last week, city auditor Eduardo Luna released a report that strongly criticized the City’s management of its paramedic contractor, Scottsdale, Arizona–based Rural/Metro Corporation, finding that “the City has not adequately managed or monitored the financial activities of Rural/Metro.” The auditor concluded, “Rural/Metro appears to have withdrawn approximately $5.8 million” from a joint bank account with the City “in excess of its entitled expense reimbursement amounts.” And, according to Luna, “based on the lack of adequate financial controls and oversight over related activities, there is a significant risk that the City has not maximized its revenue from [San Diego Medical Services]. There is also a potential risk that Rural/Metro has underreported revenues or submitted unsupported or inappropriate expenses.”

Luna noted that since mid-2009, the office of city attorney Jan Goldsmith has sent a series of secret memos to Mayor Jerry Sanders and the city council regarding problems with Rural/Metro and its “public-private” joint venture partnership with the City, known as San Diego Medical Services Enterprise, LLC. “In July 2010, the City Attorney’s Office issued another confidential memo to the Mayor and City Council raising additional concerns regarding the structure, as well as financial terms of [San Diego Medical Services]; In September 2010, during the course of the audit, the City Attorney’s Office issued an additional confidential memo to the Mayor and City Council related to [San Diego Medical Services]; Finally, in December 2010, the City Attorney’s Office issued another confidential memo related to [San Diego Medical Services].”

The findings represented a sharp turn of events for Rural/Metro, which has long been a darling of Sanders, due in part to the generous campaign contributions the company and its employees have regularly doled out to the local powers that be. For instance, according to City financial disclosure records, in June 2006, the company gave $5000 for San Diegans for City Hall Reform, the committee backing a successful “managed competition” measure to outsource the performance of City services to private firms. In June 2008, Rural/Metro gave $5000 to the campaign for Props A, B, and C, which set up the extension of the so-called strong mayor initiative. Then in February 2009, there was $1000 for Safe Beaches, Yes on D committee, the beach booze ban. In March of last year, Rural/Metro gave $1000 to San Diegans for Accountability at City Hall, which ran the successful campaign to make the strong mayor arrangement permanent. And in November of last year, there came $4000 for Proposition D, the mayor’s failed bid to boost sales taxes.