Bell's Rizzo used low-income housing funds to boost his pay, audit says

Controller's report on redevelopment agency finds $520,000 in dubious spending and $500,000 in inappropriate payments to three top administrators as the City Council provided no 'meaningful oversight.'

October 21, 2010|By Jeff Gottlieb, Los Angeles Times

Bell's former Chief Administrative Officer Robert Rizzo and two other top officials got a portion of their lucrative compensation by taking hundreds of thousands of dollars from a fund that was supposed to be used to provide housing for low-income residents, according to a state audit released Wednesday.

The audit of the Bell Community Redevelopment Agency also found that the city wrongly spent about $180,000 of the affordable housing funds on cellphones, car washes, car batteries and landscaping while City Council members — charged with overseeing the agency's budget — failed to provide "any meaningful oversight."

"Public money dedicated to increasing affordable housing and maintaining local roads were instead used as a self-indulgent slush fund to pay for excessive salaries, perks and other unlawful expenses," said state Controller John Chiang, whose office prepared the report.

The audit is the second report issued by Chiang to conclude that council members, despite earning nearly $100,000 for their part-time work, failed repeatedly to watch over the city's treasury and created an environment ripe for fraud, waste and misappropriation of public money.

Six current or former council members along with former Rizzo and his deputy, Angela Spaccia, were charged last month with misappropriating more than $5.5 million in city funds.

In the latest report, Chiang said his office found repeated management failures and at least $1.2 million of "inappropriate payments" in its audits of the redevelopment agency and its gas tax funds, which are supposed to be used for street repair, reconstruction and storm damage repair.

Chiang told Bell Interim City Administrator Pedro Carrillo that "we found apparent misuse of redevelopment funds for personal gain by the former Chief Administrator and other senior officials."

The audit found that council members were paid every two weeks as redevelopment board members even though the board sometimes didn't meet, and that a majority of the meetings lasted for three minutes or less. For two and a half years, council members were paid $55.38 every two weeks for serving on the board, though the law permits only $60 a month.

"These audit revelations bring us one step closer to a full and complete accounting of what went wrong in the city of Bell," Chiang said in a news release. 

The controller has ordered Bell to repay $521,086 to the city's gas tax fund, threatening that the state may withhold future highway tax allocations otherwise.

The controller's office had already found that Bell illegally collected $5.6 million in taxes. Nearly $3 million of that is being returned to property owners. The report described Bell as a city with no fiscal controls that had placed its treasury entirely in the hands of Rizzo.

Rizzo's attorney, James Spertus, called the audits an election ploy. Chiang is seeking re-election.

"For the state controller to issue audit reports piecemeal as the election approaches is not appropriate," Spertus said. "He uses sensational language that's designed to capture media attention so he can spend less on his campaign."

Stanley L. Friedman, Mayor Oscar Hernandez's attorney, said his client relied on professional administrators the city hired. Hernandez "believes he performed his job in a competent manner and did everything he was legally obligated to do," Friedman said.

Many of the abuses alleged by the controller's office are not unheard of in redevelopment agencies throughout the state, but the alleged lack of oversight is.

The controller's office is just one of several agencies investigating activities in Bell, including the Los Angeles County district attorney, the state attorney general,  the Securities and Exchange Commission and the U.S. Department of Justice.

All eight Bell leaders charged with misappropriation are scheduled to be arraigned Thursday in Los Angeles County Superior Court.

The controller's audit found that nearly $500,000 in redevelopment agency funds were used inappropriately to pay the salaries, vacations and holidays of Rizzo, Spaccia and Lourdes Garcia, the director of administrative services.

The auditors also found out that the redevelopment agency didn't produce a required annual report or adopt an annual budget.

The audit of nearly four years of Bell's gas tax fund found more than $520,000 in questionable expenditures, including $129,600 in overpayments for street maintenance. The largest was $301,810 to the consulting firm D&J Engineering, which was owned by Dennis Tarango, the city's planning director.

The controller's earlier audit found that the city paid Tarango $10.4 million even though he didn't have a valid contract with the city.

Times staff writer Jessica Garrison contributed to this report.

Los Angeles Times Articles