Ex-California City Officials on Trial for ‘Phantom’ Jobs

Six former Bell, California, city council members used their part-time jobs to loot public funds while leaving the blue-collar, Latino suburb of Los Angeles in financial distress, a prosecutor said at the start of a criminal trial.

“When we caught up with them, Bell city council members were making over $100,000 a year, and this did not include benefits,” Los Angeles County Deputy District Attorney Edward Miller said today in his opening statement. “Being a city council member is designed to be just a part-time job. They don’t actually run the city. They have a city manager that’s in charge of that.”

The six are accused of misappropriating about $1.2 million in public funds by getting paid almost $8,000 a month for attending board meetings that prosecutors said never took place or lasted only a few minutes.

The jury trial in state court in downtown Los Angeles doesn’t include former city manager Robert Rizzo, who was charged with 53 counts of misappropriation and conflict of interest, including giving about $1.9 million in unauthorized loans to himself and others. Rizzo and former assistant city manager Angela Spaccia will be tried in a separate case.

The accused on trial now are Oscar Hernandez, 65, Teresa Jacobo, 54, George Mirabel, 63, Luis Artiga, 51, George Cole, 62, and Victor Bello, 54.

Median Salary

Lawyers for the defendants told jurors that their clients believed they were essentially on a salary, rather than being paid for their attendance on individual committees. They said their clients had relied on the City Attorney Ed Lee, who attended every meeting and advised on every issue.

“Oscar Hernandez was paid a salary,” his attorney, Stanley Friedman, told the jury. “When he got a check, it was direct deposit. Like most of us, he got a stub. It didn’t break it down.”

George G. Mgdesyan, the attorney for Artiga, said the city council members were victimized and taken advantage of by Rizzo.

“There is no conspiracy in this case,” Mgdesyan said. “These people were not friends with Rizzo. In fact, he was trying to trick these people.”

All eight officials were arrested in September 2010 and accused of misappropriating more than $5.5 million. The Bell scandal, with Rizzo receiving $800,000 a year to run a city of 38,000, has put the pay of municipal executives under scrutiny. The median salary for California’s city managers in 2009 was $187,728, according to the state controller’s office.

‘Phantom’ Meetings

Prosecutors allege that the six former council members were paid for “phantom” committee meetings on four boards, the Solid Waste Authority, Surplus Property Authority, Public Finance Authority and Community Housing Authority, from the start of 2006 through July 2010.

Lawyers for the six defendants have said their clients were unaware that the compensation they received was tied to specific boards rather than part of their salary as council members.

“Mr. Cole was in the belief his salary was for the entirety of his work,” his lawyer, Ron Kaye, said in a phone interview. “We’re going to present evidence Mr. Cole was working beyond full time for the city of Bell.”

Cole served 24 years on the council and, in the final year, worked for free, Kaye said.

Salary Breakdown

Stanley L. Friedman, a lawyer for Hernandez, said his client doesn’t read English fluently and never had an understanding that his salary was broken down by the various boards he served on.

The defense lawyers are scheduled to give their opening statements later today.

Bell, located about 10 miles (16 kilometers) southeast of Los Angeles, has five council members who serve part-time and select the city’s mayor from among themselves.

The median household income in Bell is $37,121 and 93 percent of residents are Hispanic, according to U.S. Census data. Twenty-five percent live below the poverty line. The median household income in California is $61,632, according to census data.

Los Angeles County prosecutors said in court filings that the council members awarded themselves monthly salaries as high as $1,712 for serving on each of the boards. State law allows no more than $200 in compensation a month for attending housing authority meetings, according to prosecutors.

Full Pay

The other three authorities rarely conducted any business during the 3 1/2-year period, not meeting at all for a nine- month stretch during 2007 and 2008, while the council members received full monthly pay for serving on the boards, according to prosecutors.

“When they did meet again in June 2008, it was for the purpose of giving themselves raises,” prosecutors said in a court filing. “After passing this raise, the Surplus Property and Solid Waste and Recycling authorities never met again, while the Public Financing Authority met once more two years later.”

The Solid Waste and Recycling Authority met for two minutes in 2006 and had only one other meeting in 2008, prosecutors said.

A 2010 state audit found that the city used at least $1.2 million in funds meant for low-income housing and maintaining local roads as a “self-indulgent slush fund” to pad salaries and cover unlawful expenses.

Petty Cash

California Controller John Chiang said at the time that the city had almost no accounting controls and that its general fund was run like a petty-cash drawer.

The city issued $50 million of a $70 million voter-approved bond measure without a documented plan to use the proceeds, and then lost $1.7 million in potential interest earnings because most of the money was deposited in a non-interest-bearing account, according to the state audit.

Property-tax receipts that were supposed to pay back the bonds were deposited into the city’s general fund, its main account, rather than to a restricted debt-service fund, the audit found. Rizzo’s salary raises were contingent on a positive cash balance in the general fund, according to the audit.

Bell paid $4.8 million to buy land from a former mayor without documenting the purpose, the audit found. In addition, $10.4 million was paid to two companies owned by the city’s then-director of planning services.

The case is People v. Hernandez, BA376025, California Superior Court, Los Angeles County (Los Angeles).

To contact the reporter on this story: Edvard Pettersson in Los Angeles at epettersson@bloomberg.net

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net

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