July 13 (Bloomberg) -- San Bernardino, California’s city government, which has said it will seek bankruptcy court protection, is being investigated for possible criminal activity by the county sheriff’s department.
The investigation, which is also being conducted by the San Bernardino County District Attorney and the city’s police department, began “several months ago” at the request of city officials, the sheriff’s department said yesterday in a statement posted on its website.
The investigation was ongoing and details wouldn’t be released, according to the statement.
Interim city manager Andrea Travis-Miller said there was no evidence of fraud or criminal activity, only accounting practices “that were sloppy at best.”
The city council voted July 10 to file for municipal bankruptcy. If it files a Chapter 9 petition, it would be the third California city this year to seek court protection. A Chapter 9 filing allows the city to suspend payments to creditors while it seeks court approval for a plan that balances its revenue with its debt.
The city of 209,000, about 65 miles (105 kilometers) east of Los Angeles, is so broke it can’t cover its payroll, Travis-Miller said at the time of the vote.
San Bernardino would follow Stockton, a community of 292,000 east of San Francisco, which on June 28 became the biggest U.S. city to enter bankruptcy. Mammoth Lakes, a mountain resort of 8,200, sought court protection from creditors July 3 saying it can’t pay $43 million owed on a legal judgment, more than twice its general-fund spending for the year.
Confronting a $45 million shortfall, San Bernardino faces insolvency because of deficit spending, pension and debt costs, and a lack of revenue growth, according to a June 26 budget analysis posted on the city’s website. Officials have declared fiscal emergencies, negotiated for concessions from employees and reduced the workforce by 20 percent in four years.
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