It's common practice in the New Economy to reward executives who fail. Consider the $110,000 bonus to Wally Kreutzen, until recently the top bureaucrat at the financially troubled Transportation Corridor Agencies (TCA).
Speaking in 1996 to the U.S. Congress, Kreutzen called the San Joaquin Hills toll way the world's "blueprint" for "successful and innovative" road projects. The TCA's financial plan was, he asserted, based on "care and intelligence." Today, the cost of running the 16-mile road has exceeded its budget by more than $6 billion. When they haven't been praying for a miracle to forestall bankruptcy, agency officials have asked Caltrans to slow improvements on nearby freeways in order to force more cars onto the San Joaquin; have raised already-steep tolls; and devised upbeat, misleading PR campaigns.
If the San Joaquin troubles locals, Kreutzen's "solution" to the transportation problems of urban sprawl delights the Wall Street investment firms that profit from the road—the same firms that helped steer Orange County to its $1.6 billion bankruptcy a decade ago. Last year, with the toll road's finances wobbling badly, he proposed that the TCA borrow another $4.1 billion for the eight-year-old San Joaquin Hills toll road. The risky plan—which would have given bankers a $250 million upfront fee--was defeated after county Treasurer John Moorlach and Supervisor Chris Norby publicly deemed it insane.
Following that debacle, Kreutzen announced on June 29 he would resign from his perk-laden $161,000 annual post in November.
It might have been a difficult job to surrender. His contract had called for the agency to pay him the "maximum legally allowable deferred compensation," complete health coverage plus an extra $300 per month; a $250,000 life-insurance policy; $700 per month for a car and related expenses; club memberships; free phone; and total reimbursement for any education, seminar or convention trips.
But he left a happy man. In his resignation letter, he said he would leave office satisfied because the TCA had "reached" all the "important milestones" he sought during his seven-year administration. He did not mention that under his leadership, the agency's bonds dropped to junk status.
"After his accomplishments, he was ready to go," said agency spokeswoman Clare Climaco.
Or almost ready to go. Kreutzen—known for a love of expensive restaurants, fine clothes and secrecy—had one last objective: arranging a financial windfall for himself. At this task, he succeeded. For quitting his job and agreeing to post-employment consulting of no more than three days per month, he grabbed $110,000 in bonus "termination pay" as well as full medical benefits and a government-paid cell phone for four additional months.
The sweetheart deal approved by TCA board chairmen Bert Hack and Ken Ryan contained other perks. If Kreutzen works "in excess of 25 hours per month" as a consultant for the 80-person agency, the TCA must pay him $250 per hour—the equivalent of $520,000 annually—plus expenses.
Kreutzen seems adept at spending other people's money. During his final 40 months on the job, he handed the agency expense bills totaling more than $120,400. For example, he charged the TCA for flowers, cakes, car washes, snacks, premier club memberships, lunches with Wall Street lobbyists, dinners with Irvine Co. executives (why would a bureaucrat routinely pay the restaurant tabs for billionaire Donald Bren's lobbyists?), in- and out-of-state travel, and pow-wows with a transportation reporter at The Orange County Register.
January and February will include big paydays for Kreutzen. He'll get taxpayer-subsidized checks not just from the TCA, but also from his old employers at the city of Irvine. The city announced in late December that Kreutzen has been hired as an assistant city manager to oversee day-to-day operations of the multibillion-dollar Orange County Great Park, the region's largest public-works project since the toll roads.
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In an unintentionally funny Dec. 21 press release, city officials said Kreutzen is an "excellent match" at the Great Park because of his "talent" for managing large-infrastructure projects. City officials said Kreutzen's salary is as much as $174,420 and that he'll be a full-time city employee.
Local residents have reason for alarm: Kreutzen says he's eager to do for the Great Park what he's done for the county's toll-road system. He told the Irvine World News that working at the park is "just too exciting to pass up."
Kreutzen leaves the TCA in the path of financial catastrophe. The agency said it needed to keep Kreutzen on payroll for an extra eight months to train a new CEO—and then hired 75-year-old William Woollett as the interim replacement. Woollett was the TCA's original head and Kreutzen's friend. TCA board members say their top concern is finances, but then raised the CEO's pay to nearly $195,000. In addition to receiving a salary greater than California's Supreme Court chief justice, Woollett's pay (see chart) dwarfs that of most top-ranking local officials—including the man who shamed Kreutzen last summer, County Treasurer-Tax Collector John Moorlach.