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City of Bell lent employees, elected officials nearly $900,000

Former assistant city manager received at least $200,000. Experts say such a city loan program for employees is unusual.

August 18, 2010|By Jeff Gottlieb, Kimi Yoshino and Ruben Vives, Los Angeles Times

The city of Bell gave nearly $900,000 in loans to former City Administrator Robert Rizzo, city employees and at least two council members in the last several years, according to records reviewed by The Times.

The documents show that Bell's former assistant city manager, Angela Spaccia, received two loans of at least $100,000 each and that council members Oscar Hernandez and Luis Artiga received $20,000 loans. Rizzo, whose huge salary sparked a scandal that forced him and other city officials to step down, received two loans for $80,000 each, city officials said.


FOR THE RECORD:
Bell loans: An article in Wednesday's Section A about Bell officials' receiving loans of city funds said that documents provided by the city showed former Councilman George Bass received a $20,000 loan. City records later obtained by the Times show that Bass received the money as a settlement for retirement benefits. —

Neither Hernandez nor Artiga reported the loans on their state financial disclosure forms for 2009, which is required under state law.

"The council members should have declared any loans from the city," said David Demerjian, head of the public integrity unit of the L.A. County district attorney's office, which is investigating Bell. "I cannot think of a reason to provide loans to a council member."

In an interview, Artiga said Rizzo told him about the loan program when he was having financial problems last year. Artiga said Rizzo described the loans as a "pay advance." The city deducted money from Artiga's paychecks until it was fully repaid, he said.

Artiga said Rizzo told him some employees used the loans to buy homes.

Hernandez did not return calls seeking comment.

Bell's new city manager said it appeared that at least 50 people received loans in the last eight years. At least some appeared to have been repaid.

"Currently our city attorney has questioned their legality," City Manager Pedro Carrillo said. "What we're investigating is who authorized it, why and how does he approve it."

The loan terms varied in length. Some were repaid over years, others were open-ended, Carrillo said. The collateral appeared to be unused vacation time, sick leave and pensions.

City officials said no credit checks were conducted. The interest rate was tied to a fund managed by the state treasurer.

"We're still investigating to determine how much was loaned, how much was repaid and how much is outstanding," said acting City Atty. Jamie Casso.

Officials have not yet found any documents showing that the City Council approved the program, which appears to have been created by Rizzo.

Rizzo's attorney, James Spertus, said nothing about the loans "strikes me as unlawful." More broadly, Spertus said Rizzo has become "the target of a witch hunt" simply for being rewarded for his performance at Bell over the years as an administrator who guided the city to solvency from the brink of bankruptcy.

The attorney said that the City Council and former city attorney had approved Rizzo's salary and benefit packages. "The procedures for putting these contracts in place were very closely followed," he said.

The loans raise new questions about how officials were compensated in Bell. The Times revealed last month that top city administrators were among the highest paid in the nation, sparking outrage and investigations by both L.A. County prosecutors and the California attorney general.

Rizzo's contract for this year called for him to receive more than $1.5 million in salary and benefits. The loans appear to have come on top of that compensation.

Public finance experts said it's highly unusual for municipalities to have a loan program for employees.

Although some cities have given loans to entice city manager candidates to buy homes in the community, Bell appears to have given loans to people who already worked at City Hall.

"This is so different," said Bob Stern, president of the Center for Governmental Studies. "These people already are in California."

Stern said he' had never heard of a city with such a loan program for employees. "It's so unbelievable," he said. "I've never run across it before. Nobody would anticipate that they would do this."

The Bell financial records obtained by The Times describes the loans as "admin agreements." They show that loans ranged in amount from $3,000 to $130,000. Several were given to staffers working for Lourdes Garcia, the city's director of administrative services. Garcia, who handles the city's finances, received a loan for $100,000.

Accounting manager Anna Montoya received two loans totaling $58,000. But others outside city management also received loans for smaller amounts, $5,000 and under, including a recreation leader and a police officer.

In additional, George Bass, a former councilman, received a $20,000 while in office.

Councilman Artiga said he repaid his loan in 10 months and hadn't suspected anything was wrong with the arrangement.

"Why would I doubt it?" he said.

jeff.gottlieb@latimes.com

kimi.yoshino@latimes.com

ruben.vives@latimes.com

Times staff writers Richard Winton and Paul Pringle contributed to this report.

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