Ex-Bell Officials Face Trial in California City’s Looting

By Edvard Pettersson – Jan 24, 2013 12:01 AM ET

Six former Bell, California, council members are set for trial today on allegations they looted public funds while leaving the blue-collar, Latino suburb of Los Angeles in financial distress.

They 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 six are Oscar Hernandez, 65, Teresa Jacobo, 54, George Mirabel, 63, Luis Artiga, 51, George Cole, 62, and Victor Bello, 54.

The jury trial in state court downtown Los Angeles won’t include former city manager Robert Rizzo, who was charged with 53 counts of misappropriation and conflict of interest, including for 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.

All eight of the 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.

Prosecutors allege that the six former council members going to trial today 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.

Overall Salary

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

“Mr. Cole was in the belief his salary was for the entirety of his work as city council member,” 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.

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.

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 of the city’s residents is $37,121 and 93 percent of them are Hispanic, according to U.S. Census data. Twenty-five percent live below the poverty line.

Household Income

The median household income in California is $61,632, according to U.S. 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.

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.”

Two Minutes

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.

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, 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 atepettersson@bloomberg.net.

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