By Charles Lam
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By Matt Coker
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By LP Hastings
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Prevratil responds incredulously to questions about such things.
"You're confused," he told me repeatedly in the course of our brief conversation. When asked pointedly about the $17 million disparity in rent credits, he said he was "offended" I would even ask. Any apparent problems with the Queen's finances, he said, were strictly City Hall's problems.
Whatever the truth, a number of city documents, some contradictory, show that Prevratil took rent credits for those three years—2000, 2001, 2002—that total between $1.9 million and $2.2 million. In 2002 alone, the city's annual financial statement reports that "rental income from the Queen Mary decreased $1,088,000, mainly due to a one-time rental credit related to certain capital expenditures." Significantly, those expenditures were not itemized.
"How can that be?" asks Wilson-Kleekamp. "The Queen Mary is the symbol of our city! Why would the city of Long Beach stand for such a thing?"
When Gumbiner is presented with this question, the man who once was Prevratil's partner sighs with resignation before he answers.
"As long as Prevratil keeps the Queen Mary off the backs of city officials," says Gumbiner, "they don't care how he does it."
That's certainly the way the city has reacted to Prevratil's claims to rent credits. Many of the expenses cited in the documents acquired by Wilson-Kleekamp appear to fall outside the terms of the city's lease with Prevratil. For example, in 2000, Prevratil claims to have paid business-trends guru Faith Popcorn about $1.2 million for her consulting services. The city has no receipt on file for this work—which should not qualify for a rent discount, anyway, since it's not a capital-improvement expense. In another case, repair work on one of the Queen's auxiliary attractions, the Russian submarine Scorpion, was claimed as an expense—although the terms of the lease permitted discounts only for improvements on the land around the Queen Mary. In fact, an April 2001 note from the city auditor's office points out that "sub expenditures [are] not to be included in rent credit."
But rather than call Prevratil on possible lease violations, in November 2002, the City Council approved the drafting of a new lease. Without public discussion, it ordered new wording to expand Prevratil's rent credit net so that it would include the Queen Mary and other attractions and to make these rent credits retroactive to 1997. Prevratil says he's been operating under the terms of the new lease; the council says it never actually approved the new lease and has hired an outside consultant to point a way out of the morass.
Prevratil's response? "You're confused," he says. "You are mixing up the 9 percent return I get for costs to develop the property next to the Queen Mary. The rent credits are separate from that. We would never take a rent credit we were not entitled to. Besides, the city auditors are always over here checking up on us. We have to show them financial proof of everything, and I can assure you we do."
The Long Beach city attorney's office isn't so definitive.
"Whether there is sufficient backup for the rent credits Mr. Prevratil claimed or whether his expenses meet the provisions of the lease, I don't know," says deputy city attorney James N. McCabe, who handled Wilson-Kleekamp's public-records requests. "But I sent her every scrap of records I could find. I looked in the department of finance, the auditor's office and my files."
Those records hardly suggest a businessman besieged by auditors and city bureaucrats. Assistant city auditor J.C. Squires said there has not been a thorough audit of Prevratil's bookkeeping since the rent-credit provision was inserted in the Queen Mary lease in 1998. "It's been on our to-do list for some time, but our office is so small that we have to prioritize," said Squires. "We are going to request that those documents be gathered and made available for review."
Despite Squires' mention of a 1998 public audit, the most recent audit available on the city of Long Beach website dates back to 1994. Former deputy city auditor Earl Hobbs told the Weeklyhe did an audit in 2000 that was never made public at all. "It didn't look good," says Hobbs, "so they decided not to show it to anyone."
Even the California State Lands Commission, charged with ensuring the appropriate use of Tidelands trust funds, has been unable to excavate financial records from the city. The commission has twice sent letters to the Long Beach city attorney requesting specific documents—on Sept. 6, 2001, and on July 9, 2003. The second letter from the California State Lands Commission asked pointed questions regarding the status of the Queen Mary's rental payments to the city and the rent-credit deal while requesting copies of all leases and amendments relating to the ship. According to city documents, Long Beach officials simply did not respond to either letter.
The political climate for an examination of Prevratil's accounting seems to have improved recently, if only because Long Beach is in such sad financial shape. It faces a projected budget deficit of some $105 million over the next three years. All three prongs of its tourism plan—the Queen Mary, the Aquarium of the Pacific and the Convention Center—cling to life only through subsidies from the city's Redevelopment Agency and Tidelands trust fund.