Governor Jerry Brown, walking through the gates to enter Casa de California in Mexico City
In April of this year, newly elected San Diego mayor Kevin Faulconer, councilman Todd Gloria, county supervisor Greg Cox, and a host of other California and Tijuana politicos and representatives of special interests — including energy giant Sempra — headed to Mexico City as part of what the San Diego Regional Chamber of Commerce billed as its "largest and high-level delegation ever" regarding cross-border trade.
"The proposed state legislation to establish a trade office in Mexico under the State of California was a hot topic," according to the chamber's Mexico Business Center website.
"We visited one of the potential sites — Casa California — which is owned by the University of California. We learned about this great resource the state owns — but has been underutilized. At the Chamber, we will continue to work on building up support for this initiative."
Unmentioned was an audit of February 2014, to this day tightly held from the public by the university, highly critical of the way the university has managed the opulent facility, which has been the scene of parties and receptions for a host of private functions.
The audit is listed on the website of the university's office of Ethics, Compliance and Audit Services with a release date of August 5. But unlike other audit reports, copies of which can be directly downloaded from the site, the Casa de California listing advises those seeking the document to request a copy via email.
Emails sent to the address drew no document. The university answered a California Public Records Act for the material on October 7 by saying, "the estimated date of production is eight weeks."
Obtained through another source, the audit portrays an operation out of control, located far from proper oversight by university officials.
"Casa de California has been operating without clear direction on the appropriate use of the property," according to the document. "There were only a limited number of academic-related activities and events hosted at Casa de California in 2013."
In addition, the findings say, "Resources allocated from [the office of the university president] to Casa de California for finance/accounting, compliance, and operations support have been very limited; this has resulted in internal control weaknesses and non-compliance with UC policy, accounting standards and Mexican and U.S. rules and regulations."
University regents approved the project, an initiative of then-governor Gray Davis, in July 2001.
"The already strong relationship between UC and Mexico will blossom in an extraordinary way by the establishment of this office," UC Santa Barbara professor Juan-Vicente Palerm was quoted as saying in a statement at the time.
"Casa de California will be an excellent place for the best minds from both nations to work together to research and solve issues of common concern."
Whether the educational function of the facility has been realized is a matter of sharp dispute.This past July Sacramento TV station KCRA made a stop there during a highly publicized trade trip led by Democratic governor Jerry Brown.
"This semester, Casa de la Universidad de California is home to about 30 university students, but there used to be more," the station reported.
“‘Eight years ago, we had about 300 [students],’” said Elisabeth LeGuin, Casa de California's study center director. “‘There's been a very, very sharp [reduction] in the enrollment for this program.’”
"Some students and their parents have been scared away by reports of violence in Mexico," the story added. "Brown is trying to change that perception by expanding student and professor exchanges in California and Mexico."
Meanwhile, private partying at the mansion has continued. "Casa de la Universidad de California is available to host a variety of academic and social events organized by the UC community as well as their partners in Mexico City, such as lectures, seminars, business meetings, reunions, banquets, and anniversaries," says the university’s website.
"Casa de California's beautiful Las Palmas Garden is ideal for social events and can also accommodate a variety of academic and business purposes."
The cost to California taxpayers of the activity has yet to be tallied, according to the auditor’s findings.
Among a host of shortcomings called out by the report are "Inadequate controls over bank accounts"; "Incomplete documentation for event billing"; "Inaccuracies in utility expenses charged to lessee"; and "Unresolved building safety and security issues."
According to the document, the university runs the operation through a Mexican corporation, La Casa de la Universidad de California, Civil Association, A.C., described as "a foreign affiliate organization of the University of California."
There have been serious lapses in the way the corporation has been run.
"Casa de California has been operating without a Director and without active participation from Casa de California board members," says the audit. "Prior board members have been termed out and, according to Casa de California management, the new board members for Casa de California have not filed the necessary paperwork in Mexico to be officially recognized."
As a result, financial issues, already problematic, have mounted.
"Casa de California has been operating at a $75K to $100K annual loss (facility rent revenue does not cover annual operating expenses), and annual budget approval has not been obtained since Casa de California’s new board members have not been officially recognized," according to the findings.
The auditors discovered even more bad news.
"We reviewed [office of the university president's] financial records and discussed Casa de California’s outstanding debt and fund balances with Capital Asset Accounting and noted Casa de California’s current outstanding debt was $3.9 million. Of this amount, $2.3 million has been funded and $1.6 million has not been funded….
"Currently there is no plan in place to address Casa de California’s future funding needs."
The way the Casa has been handling its money also fell under scrutiny.
"There are two bank accounts at Scotia Bank Mexico City associated with Casa de California — one in [U.S. dollars] and one in Mexican Pesos — and these accounts are under the sole custody of one individual. This arrangement presents significant fraud and operational risk to the University. The total balance in USD for these two bank accounts in December 2013 was approximately $190K."
A series of steps to resolve the problems are outlined in the audit document, but the university has yet to respond to a request for follow-up information regarding the current status of the building and its administration.
"We have discussed these issues with Academic Affairs management and recognize that appropriate corrective actions are greatly dependent on senior leadership decisions related to future management of Casa de California," the audit says.
"Firm decisions have not been made with respect to future academic programming and the hiring of an on-site Director for the facility. Development of President Napolitano’s UC-Mexico Initiative has begun and decisions regarding the use of Casa will now be made in that context, in consultation with the UC President and the Riverside campus which is leading the Initiative on behalf of the UC system."