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Grand jury investigating massive tax breaks for Chevron in El Segundo

Chevron owes El Segundo as much as $9.5 million in back utility taxes, according to a preliminary audit that was ignored by city officials. A former city manager was fired after raising questions about the agreement.

October 13, 2012|By Jeff Gottlieb, Los Angeles Times
  • A Los Angeles County grand jury is investigating a deal that allows Chevron to avoid paying back taxes on its refinery in El Segundo, a town the oil company helped build.
A Los Angeles County grand jury is investigating a deal that allows Chevron… (Jay L. Clendenin / Los Angeles…)

A Los Angeles County civil grand jury is investigating an 18-year-old agreement that allowed Chevron to avoid paying El Segundo millions of dollars in back taxes on its refinery, raising questions about Chevron's influence over the town it helped build.

Doug Willmore, El Segundo's former city manager who was fired after raising questions about Chevron's taxes, said he spoke to grand jury members Sept. 19 for about 21/2 hours. Grand jurors told him they expected to issue a report.

"Clearly they had a background of the issues, a detailed background," he said.

The grand jury investigation follows a Los Angeles Times article in March that detailed how El Segundo officials ignored a preliminary audit showing Chevron owed as much as $9.5 million in back utility taxes and ordered auditors to stop work on the audit.

A lawyer for the auditors wrote a letter to the city saying the firm "has never encountered resistance from its client cities regarding the collection of such substantial and much needed tax revenues."

Leland Dolley, then-city attorney, told The Times the agreement was a bad one and that the city had a good case if it sued. He said he talked to the grand jury last week for about an hour, but declined to go into details.

Mayor Carl Jacobson, who signed the 1994 agreement during a previous term as mayor, said the grand jury had not contacted him, but he wasn't worried.

"I have nothing to hide," he said.

City officials ultimately reached an agreement with the oil company that resulted in no payment of Chevron's back taxes and capped its natural gas taxes at $150,000 annually plus inflation, a fraction of what the audit said it owed.

"At best, it's one of those sweetheart deals for Chevron to do whatever they want," Willmore said earlier this year. "At worst, it's much worse than that."

City Manager Greg Carpenter, who replaced Willmore, said three grand jury members, wearing identification tags around their necks, attended two recent council meetings but did not talk to city officials.

Carpenter said he had spoken to the grand jury foreman and that the panel had asked for information about the city's finances, but added that he didn't know what was being investigated.

Grand jury advisor Jonathan McCaverty, a senior deputy county counsel, said he could not comment on what the panel was investigating.

The civil grand jury consists of 23 Los Angeles County Superior Court appointees who serve a one-year term. It serves as a watchdog of local government and cannot issue criminal charges but does present its findings to the county Board of Supervisors at the end of its term in June.

Chevron officials did not return phone calls.

The taxes Chevron pays the city on its 951-acre refinery have become a controversial issue in El Segundo. City officials found that while the city received $5 million a year from Chevron, nearby Torrance received $9.8 million from the Exxon Mobil refinery, Carson got $10.2 million from the BP refinery and Richmond, in Northern California, got $15.4 million from its Chevron refinery.

The city has been negotiating with the oil company over its taxes for about nine months.

The City Council fired Willmore after just 10 months on the job in the midst of the Chevron tax controversy. Willmore has sued saying he was fired because he tried to get the oil company to pay higher taxes. Council members have not explained why he was terminated.

jeff.gottlieb@latimes.com

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