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Corruption can leave cities with enormous legal bills

The costs can continue years after the accused have been ousted. And in some cases, the expenses exceed the amount of city money that officials are accused of stealing or squandering in the first place.

April 18, 2012|By Abby Sewell and Jessica Garrison, Los Angeles Times
  • Former Lynwood Mayor Paul Richards is shown with federal agents in 2004.
Former Lynwood Mayor Paul Richards is shown with federal agents in 2004. (Al Seib / Los Angeles Times )

In 2005, former Lynwood Mayor Paul Richards was convicted of funneling about $500,000 in city contracts to a company he secretly controlled. Two years later, five more then-current and former elected officials were charged with siphoning off hundreds of thousands of public dollars to boost their salaries and pay for personal expenses.

But the stolen money was nothing compared with what was to come. From 2005 to 2010, the city's annual legal costs soared, averaging $1.5 million, about 5% of the general fund budget, much of it related to the scandals. The high tab left over from the corruption leaves some residents fuming.

"The ones that went out, the ones that did the corruption and nepotism, those are the ones that should be paying, not the city," said Joaquin Mesinas, 43.

While municipal corruption and mismanagement cases have led to millions of dollars being stolen from city coffers, the biggest toll is often the enormous bills from attorneys who are paid by the hour to clean up the mess, according to a Times analysis of municipal legal bills across California.

"Unfortunately, that's the double-headed monster whenever you have wrongdoing," said Jose Pulido, the new city manager of Temple City, where legal costs roughly doubled after the mayor and other officials were convicted of soliciting bribes from a developer.

In some cases, the legal bills continue years after officials accused of corruption have been ousted or jailed, leaving the affected cities struggling beneath a heavy burden.

In Bell, legal expenses rose by at least $1 million — about 6% of last year's general fund budget — in the year after the former city administrator and other officials were arrested for allegedly stealing millions of dollars from the city by giving themselves exorbitant salaries and benefits.

The city attorney projected that higher-than-normal legal costs stemming from the scandal could continue for two to five more years.

In San Diego, outside legal expenses rose from $1.4 million in 2005 to $10.9 million in 2009 after city officials were criminally charged in two scandals, dubbed pension-gate and stripper-gate.

On top of that, a court ruled in March that the city is liable for more than $5 million in personal legal fees for six former members of the city's pension board who were indicted on charges that they boosted their own pensions. The case against them was eventually dismissed.

Determining how much a city is paying for past corruption can be difficult, since many cities do a poor job of tracking or disclosing how much they spend on legal services.

As part of a look at municipal legal issues, The Times requested the total spent on legal services for the years 2005 to 2010 from every city in Los Angeles County. Many cities did not readily provide a response.

Assessing what portion of the costs stems from a corruption scandal is even more difficult, because most cities do not specifically track those expenses. (Bell is an exception — one of the city's law firms helpfully included a line item for "corruption" in its monthly invoices).

But the data showed that many cities where officials were charged with crimes saw a spike in legal costs in the following years.

In most cases, the added legal fees weren't for defending officials accused of wrongdoing — they have to pay for their own attorneys. Instead, they were for defending the city from related lawsuits or complying with requests from investigating agencies

In some cases, the legal expenses can exceed the amount of city money that officials are accused of stealing or squandering in the first place.

In Lynwood, a May 2007 legal bill, accompanied by a letter from the city's law firm apologizing for the high tab, gave a glimpse at how the legal costs had mounted.

Along with the charges for normal city business, lawyers had racked up $15,840 that month for reviewing public records requested by the media and investigators, and $23,664 for other items related to the criminal charges, including conferences with prosecutors and research on the legality of stipends paid to council members and whether the city was required to defend them in court.

The corruption allegations also fueled a recall election and lawsuits. Among them was one filed in July 2007 by the former city manager and two other employees who claimed they had been punished for whistle-blowing.

Eventually, the plaintiffs received settlements totaling $724,000, with $156,000 of that coming from the city and $568,000 from its insurance coverage.

Current city officials said that the legal spending has finally subsided and that they are taking measures to get such costs under control. But they are facing another costly legal issue.

An appeals court decision last spring put Lynwood's redevelopment agency on the hook for up to $2.7 million in attorney's fees stemming from a lawsuit over its failure to build affordable housing as required by law.

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