The Los Angeles County district attorney's office has launched an inquiry into a contract created last year between the city of Vernon and an energy firm owned by the wife of the then-city administrator, marking the second outside investigation into potential wrongdoing in the industrial city.
The probe comes after The Times reported last month that through the first half of this year Donal O'Callaghan received $243,898 in consulting payments through Tara Energy Inc., a company headed by his wife Kimberly McBride. This was in addition to O'Callaghan's yearly salary of $380,000.
After the contract was reported, Vernon placed O'Callaghan on leave to investigate the matter. David Demerjian, the head of the district attorney office's Public Integrity Division, said prosecutors were trying to determine whether the contract represented a conflict of interest.
"It would be a conflict for him to make any official decision or enter into any contract in which he had a financial benefit," Demerjian said. "We're also looking at whether he entered into any contract that financially benefited his wife."
Mark Werksman, an attorney representing O'Callaghan, said that his client had done nothing wrong and that his total compensation was "well within the salary range that one would expect for someone required to manage a utility."
"His pay was absolutely appropriate and reasonable," Werksman said. "Donal served the city of Vernon well.… It's hard to imagine that the district attorney would pursue criminal charges in a situation where a city official did so much of such great value for the community that he served."
Earlier this month, the state attorney general's office announced that it was issuing subpoenas in Vernon after a series of stories in The Times about high salaries and pensions and lavish travel by top Vernon officials, including longtime official Eric T. Fresch, who earned more than $1.6 million in 2008.
Like other top Vernon officials, O'Callaghan billed the city for extra hours worked each month. The former city administrator billed $300 an hour for time worked in excess of 160 hours a month — an arrangement equivalent to overtime that is unusual for salaried workers and all but unheard of in the public sector. The city has since scrapped the two-tier salary structure that allowed top officials to bill for "extra" hours.
O'Callaghan stepped down from the positions of city administrator and director of Light and Power in late July to become head of capital projects for the municipal power plant. Two weeks ago Vernon's City Council appointed Fire Chief Mark Whitworth as the permanent city administrator for the town of about 90 residents.
Though Vernon has a long history of being investigated by county prosecutors, there have been relatively few convictions. But last year the district attorney's office got voter fraud convictions against longtime Mayor Leonis Malburg and his wife for lying about living in Vernon while actually living in a mansion in Hancock Park.
The city owns virtually all of the homes in Vernon, and almost everyone who lives there either depends on the city for their job or has family or other connections in City Hall.
Max Huntsman, a prosecutor for the district attorney's office, said that in the past the city argued that it needed to give the few, heavily subsidized housing units to city employees, including utility workers and firefighters, in case of an emergency.
The Times has reported that in the last two years, most of those employees have been replaced by other people, including relatives and friends of department heads and council members.
In a previous interview, Whitworth said he could not talk at length about the city's housing arrangement because he is new to the position. His nephew, a college student, got one of the city-owned housing units, as did workers at a carwash run by a city councilman.
Huntsman said the arrangement was troubling.
"Their stated purpose used to be to have city employees close by in case of an emergency, but it hasn't worked out that way," he said. "It appears they get a benefit in terms of controlling the electorate so the same people in power can stay in power. They're giving housing to people they do not need to have on a moment's notice."
Huntsman said the city's awarding of heavily subsidized housing could be argued to be a gift of public funds with no public benefit, especially given who lives in Vernon now. But he added that it was not an easy case to make in court and that the district attorney's office is not probing Vernon's housing situation.
"It's one of those cases where if you put it together and won, everyone would say, 'Well, of course!' " Huntsman said. "But it's a tough case."
Demerjian said his office was just starting to look into the deal involving O'Callaghan and his wife's consulting firm.
Vernon City Atty. Laurence Wiener has said that he will investigate a three-month stint in early 2009 when Kimberly McBride got about $13,000 on a city contract as a $40-an-hour bookkeeper at the Light and Power Department, which was then overseen by her husband.
Early this year, O'Callaghan said the historically well-off city had to cut the health and life insurance of employees' spouses and children because of the struggling economy's effect on city revenue.
But even as he oversaw the cuts, O'Callaghan was one of several officials in Vernon taking trips first-class across the country and around the world and staying at luxury resorts.