"Independent" study of 121 bid shows Price Waterhouse cozy with Cintra

Link to article here.
It’s no longer a surprise to see yet more conflicts of interest and ethical violations when it comes to these highway contracts. The taxpayers are getting sold out by crooks and thieves and only through government in the sunshine, tossing the bums out, and active citizens pressing our law enforcement officials will we EVER get justice!

Cintra’s auditor assessed 121 bids
Price Waterhouse’s ties to firm it endorsed for toll road not disclosed
Saturday, June 16, 2007
By MICHAEL A. LINDENBERGER and JAKE BATSELL / The Dallas Morning News
mlindenberger@dallasnews.com; jbatsell@dallasnews.com
An accounting firm’s evaluation of rival bids to build and operate the lucrative State Highway 121 toll road may not have been as independent as first billed, according to some public officials who will vote on the bids.

Corporate records show that Price Waterhouse Coopers, which was hired to evaluate the bids, has served as outside auditor to the Spanish firm Cintra since 2003. Cintra also paid the accounting firm $100,000 to develop financial models for the controversial Trans-Texas Corridor highway project in 2004.

Mike Eastland, executive director of the North Central Texas Council of Governments, defended his agency’s hiring of Price Waterhouse. He said many council members knew about Price Waterhouse’s work as Cintra’s auditor but acknowledged that he or his staff should have informed the 39-member Regional Transportation Council about the accounting firm’s work with Cintra on the Trans-Texas Corridor.

“We did fail, apparently, to convey that to the board, and I’ll take responsibility for that,” Mr. Eastland said. “It’s an oversight on our part. I can see nothing in the [Price Waterhouse] analysis or their way of presenting it that would say we’re trying to slant this one way or the other.”

Executives at the North Texas Tollway Authority, Cintra’s rival for the Highway 121 contract, said Price Waterhouse’s assessment, delivered to the transportation council on Thursday, was biased.

“Our point is incredibly obvious,” NTTA board chairman Paul Wageman said. “The judge of a competition should not be in business with one of the contestants. How can Price Waterhouse Coopers possibly be unbiased and fair in evaluating its partner’s proposal against a competitor’s?

“What the NTTA, the RTC members and the region didn’t know is that Price Waterhouse Coopers is part of Cintra’s team on a [Trans-Texas Corridor] project worth billions of dollars,” Mr. Wageman said.

“That’s sour grapes,” said Cintra’s Jose Lopez, president of the company’s North American operations.

Cintra’s proposal came out looking better simply because it is, Mr. Lopez said. He said Cintra’s partnership with Price Waterhouse on the Trans-Texas Corridor was minor and concluded in 2005.

The council of governments paid Price Waterhouse about $200,000 for its report, which was highly critical of NTTA’s proposal.

Many members of the Regional Transportation Council had considered the report’s conclusions essential. It was to be their only chance to have an independent firm assess the bidders’ billion-dollar claims.

By Friday, however, word of the potential conflict had circulated among council members who had gathered in Arlington for an annual luncheon. Some members said they were aware of at least some of Price Waterhouse’s ties to Cintra. Others said they learned about them only Friday.

“I just found it out as we were sitting down to lunch here today,” said John Murphy, a Richardson City Council member who sits on the RTC. “I’m very disappointed, quite frankly, that we did not have that disclosure made to us, because it does change the perception, and it may change our feelings regarding what is the right picture of the Cintra and NTTA bids.”

Given Price Waterhouse’s business relationship with Cintra, it’s hard to believe the firm could render an objective analysis of the two bids, Mr. Murphy said.

The discussion about Cintra’s business relationships with Price Waterhouse comes at a critical time.

The Regional Transportation Council is scheduled to vote Monday on whether to endorse Cintra or NTTA. The Texas Transportation Commission, which sets policy for Texas highways, will meet on June 28 in Austin and is scheduled to make a final decision on the Highway 121 project.

Limited choices

Mr. Eastland said the North Central Texas Council of Governments selected the best accounting firm it could on short notice. The job entailed reviewing highly complex proposals that are hundreds of pages long. The firm had about two weeks to complete its review.

“The fact was we weren’t going to get anybody that didn’t have a conflict that was capable of doing the work. And then it got down to degree of conflicts. Do we do the study, or do we not do it? … Were we better off not to have any analysis work done?” Mr. Eastland said. “Or do we take the best that we can get, the most distant from the process?”

Council of Governments transportation director Michael Morris said in an interview earlier this week that the agency had difficulty finding qualified bidders for the analysis the RTC wanted done. Mr. Morris said seven of the nine accounting firms invited to bid on the work declined.

But Barry J. Epstein, an expert in accounting standards of conduct and a lawyer specializing in cases about accounting practices, said Price Waterhouse should never have bid on the contract since it is Cintra’s auditor.

“This is beyond the pale,” Mr. Epstein said. “They should not have bid for the job, given that one of their clients was a candidate [for the road contract].”

Rigorous protocols

Price Waterhouse defended its decision to evaluate the bids for the RTC, insisting that the Spanish office that audits Cintra’s books is separate from the U.S. firm.

“The Spanish audit relationship was fully disclosed to the North Central Texas Council of Governments,” said Steven Silber, a spokesman for Price Waterhouse in New York. “In accordance with our independence standards, at no time was there any sharing, or mutuality, of personnel or project information between the teams conducting the bid analysis in Texas and the team auditing Cintra.”

Mr. Silber also said the firm rigorously evaluated its relationships with Cintra before submitting its bid.

Some NCTCOG members who agreed to hire Price Waterhouse without knowing about its work in Texas for Cintra said Friday that they might have hired the firm anyway.

“What decision would we have made had we known about the advisory services? I don’t know,” Tarrant County Judge Glen Whitley said. “That’s water under the bridge. I can’t tell you what we would have done at that point.”

Mr. Whitley said the fact that Price Waterhouse audits Cintra doesn’t concern him.

“When you talk about the separateness of that office in Madrid versus this office in this particular area, I do not think that would in any way cause there to be that conflict. The size of the fee that we’re talking about here, Price Waterhouse is not going to risk their reputation over a couple hundred thousand dollars’ worth of fees.”

Mr. Wageman said Thursday’s meeting left him and the NTTA “concerned” about the likelihood of getting a fair vote on Monday.

HIGHWAY 121 BID EVALUATIONS
Price Waterhouse Coopers wasn’t the first consultant to assess the complex proposals submitted by Cintra, a company based in Spain, and the North Texas Tollway Authority, a tax-exempt operation. Were the evaluations independent and objective? Draw your own conclusions:

• The North Central Texas Council of Governments hired Price Waterhouse to evaluate the State Highway 121 bids. Price Waterhouse is Cintra’s outside auditor and has provided financial advice to Cintra, which was awarded a state contract in 2004 for preliminary development work on the Trans Texas Corridor. Price Waterhouse found Cintra’s bid superior to NTTA.

• NTTA hired Bernard Weinstein, a University of North Texas economist, to evaluate the proposals. He concluded that NTTA’s bid is better for North Texas. He said Cintra would return Highway 121 toll profits to shareholders. By comparison, he said, NTTA would keep its excess revenue to build future roads in the region. The eight-page study did not address whether NTTA’s decision to borrow heavily to finance the 121 project would reduce its ability to borrow more money to finance future projects.

• Cintra hired Nobel Prize-nominated economist Ray Perryman of Waco. His company concluded that the region would gain almost twice as large an economic benefit if Cintra wins the contract. He argues that fewer roads ultimately will be built in North Texas if NTTA wins the 121 contract. The reason, he said, is that NTTA will have exhausted some of its borrowing capacity on the 121 project.

• Cintra hired Massachusetts Institute of Technology professor and lawyer John B. Miller, who also is associated with the powerhouse Washington, D.C., law firm Patton Boggs. Mr. Miller concluded that North Texas would benefit from Cintra’s plan to invest $763 million to build the 121 toll road as opposed to the NTTA plan to borrow all of the up-front money it has pledged to the state.