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Vernon paid millions to firms connected to relatives of city officials, records show

In all, Vernon has employed at least a dozen family members of city officials, documents reviewed by The Times show, either directly at City Hall or through companies that have done business with city.

June 10, 2011|By Sam Allen, Los Angeles Times
  • Vernon City Administrator Bruce Malkenhorst's daughters, among other relatives of city officials, were employed by Project Labor, a private company created in 2003 to provide engineering, security and administrative services at the city's power plant.
Vernon City Administrator Bruce Malkenhorst's daughters, among… (City of Vernon )

The city of Vernon, already under fire for oversized salaries earned by some leaders, has paid millions of dollars in the last decade to private firms connected to relatives of top city officials, according to records reviewed by The Times.

In all, Vernon has employed at least a dozen family members of city officials, the documents show, either directly at City Hall or through companies that have done business with city. The most prominent cases involved the families of three former administrators: Bruce Malkenhorst, Eric Fresch and Donal O'Callaghan, who together had seven relatives working for one of the contractors.

Details of the hirings are contained in thousands of pages of city financial records obtained from Vernon under the California Public Records Act. The state Legislature is now debating whether to disband the industrial city with a population of less than 100, which has been mired in allegations of corruption.

Many of the family members were hired by Project Labor Group, a private company created in 2003 to provide engineering, security and administrative services at the city's power plant. When the firm was established, Malkenhorst was Vernon's city administrator and Fresch its city attorney. O'Callaghan became head of the city's Light and Power Department two years later.

John Van de Kamp, the former state attorney general hired by Vernon in February to perform an ethics review of the municipal government, said that he was not aware of Project Labor Group but that he would consider recommending a new anti-nepotism policy to prevent city officials from directly hiring relatives.

Van de Kamp said he's pleased with the city's recent efforts to enact reforms, including slashing salaries and imposing term limits, but believes other policies are also needed to make the city more open. He plans to submit his report to the City Council next month.

City spokesman Fred MacFarlane declined to comment on Project Labor Group, saying that "the people who are probably most in the know are no longer with the city."

"That was then, this is now," MacFarlane said. "This is a city that's turning a corner on its past and moving in a new direction."

Malkenhorst and O'Callaghan have both left the city. But Fresch, who in 2008 made more than $1.6 million as city administrator, continues to work as a legal consultant. He's been paid more than $300,000 so far this year, according to city warrant registers.

Project Labor's principal was J.D. Hicks, an associate of Fresch who lives near his home in Marin County.

Fresch's brothers, Curtis and Patrick, both worked for Project Labor Group before being hired as contractors at the city's power department.

Malkenhorst's daughters, Rachel and Jennifer, were also employed by Project Labor, along with Jennifer's husband, Mark McNabb, according to records and multiple sources. At the time, Malkenhorst's son, Bruce Jr., was on Vernon's staff as a city clerk and deputy attorney.

Between June 2007 and December 2008, Project Labor Group employees submitted their time sheets to O'Callaghan's wife, Kimberly McBride, whose official title was "administrator of PLG employees." Among those on the payroll was her brother, Doug.

The family members were paid between $30 and $60 an hour, and they billed as much as 70 hours a week, according to time sheets.

Critics have long argued that Vernon is governed like a fiefdom for the benefit of a small group of leaders who earn large salaries. The city owns nearly all the homes within its borders, essentially making the City Council the landlord for voters. The Times reported last winter that more than a dozen friends and family members of top Vernon officials lived in city-owned residences at below-market rates, including four nephews of new City Administrator Mark Whitworth. The rents range from $136 to $472 a month.

One of the reforms the City Council approved recently called for an advisory commission to take over management of the city's housing.

Records show that millions of dollars flowed from Vernon's Light and Power Department to Project Labor Group and Hicks' other firm, J.D. Hicks & Associates. In 2008, for example, more than $3 million was paid to the two companies.

The firms were based in the Bay Area, where Fresch and Hicks both live, but most of the employees worked out of city facilities. The exact nature of the work was not detailed in documents reviewed by The Times, and Hicks did not respond to requests for comment.

Vernon officials said they could not estimate the total amount Project Labor Group was paid. But in a Chapter 7 bankruptcy action filed by the company in June 2009, it listed gross income of more than $4.4 million for the three previous years, including $2.5 million in 2007 alone.

Over its six-year history, Project Labor Group employed between 10 and 45 individuals at a given time, records show. The staffing levels varied depending on the status of construction of the city's power plant, which was its only client.

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