OAKLAND, Calif. (AP) — Audits found that employees at one of the nation's largest ports claimed nearly $200,000 in questionable expenses in 2011, and officials are trying to determine if the spending violated federal and state laws.
The charges to credit cards issued by the Port of Oakland included Tiffany sterling silver key rings, pricey hotel rooms, U2 concert tickets, perfumes and season tickets to Oakland Raiders and Golden State Warriors games, according to two audits released by the Port of Oakland on Monday.
The port is a public agency, and the state Constitution forbids gifts or loans of public funds. In addition, federal law does not allow reimbursements for costs of gifts and certain entertainment such as tickets to sporting events.
"Many of us in the organization were shocked when we learned of the improper expenses," Acting Executive Director Deborah Ale Flint said. "The investigation reveals that we need to change our oversight."
An internal audit of $1.9 million in expenses claimed by 82 port employees and board members caught several examples of potentially unnecessary expenses.
The audit was under way in October when several reports surfaced that the port's executive director Omar Benjamin and maritime director James Kwon spent more than $4,500 at a Houston strip club in 2008.
Those revelations prompted the port board to seek a second external audit.
Amid the findings, the board also announced Monday that Kwon will resign on Dec. 28, a month after Benjamin announced his retirement. Both were accused of spending public funds while entertaining shipping industry executives at the club.
The external audit also found that Kwon charged $925 at a Minneapolis strip club in 2009 and passed it off as a "business retention meeting," even though no port customers, tenants or vendors were present.
Efforts by The Associated Press to reach Kwan and Benjamin were not immediately successful.
Both told the external audit investigators that they did not purchase any "special services" at either club, according to the San Francisco Chronicle.
Benjamin, who has not commented publicly about the spending, told investigators he now believes he and Kwon were victims in Houston of a billing scam, the newspaper reported.
Kwon's lawyer, Kenneth Katzoff, a former port commissioner, told the Oakland Tribune that he and his client would not comment until after reading the full report.
Port officials say some of the spending is part of attracting and keeping clients, but they also conceded a culture of lax oversight. Officials acknowledge that the port's finance staff had identified questionable charges for years, yet were afraid to raise questions once the expenses were approved by directors.
Flint said the port has contacted authorities about the possible state and federal violations and will cooperate fully with any inquiries.
Port Commissioner Gilda Gonzales said the port has begun setting reforms so employees are aware of its ethics policies.
The Port of Oakland is the fifth largest port in the United States, handling roughly about 2.3 million cargo containers a year and generating about $300 million in revenue. Officials, however, say the facility is $1.3 billion in debt.
The $1.9 million in credit card expenses last year are less than one half of 1 percent of the port's $437 million budget, Flint said.