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Bell faces 'fiscal crisis' after corruption scandal, audit finds

May 22, 2013|By Shelby Grad and Kimi Yoshino | This post has been updated. See the note below for details.
  • A man walks in front of Bell City Hall. A new audit from the state controller's office showed the city is "facing significant fiscal challenges" that could lead to a "fiscal crisis."
A man walks in front of Bell City Hall. A new audit from the state controller's… (Allen J. Schaben / Los Angeles…)

Three years after a massive corruption scandal, Bell's finances have worsen considerably and the city doesn't have the money to refund millions of dollars in taxes illegally levied on residents, according to a state audit released Wednesday.

Bell currently has a negative cash balance, caused in part by the city's move to stop collecting the illegal taxes, the state controller's office found. Bell promised to refund more than $3 million in overpaid taxes to residents and busineses, but auditors found that the city has not done so.

"The city is facing significant fiscal challenges that, if left unresolved, could lead to a fiscal crisis," the audit found.

FULL COVERAGE: Corruption in Bell

Auditors also faulted the city for not following more than 20 recommendations the controller's office made after the corruption scandal.

[Updated at 10:27 a.m.: Bell released a statement saying it welcomed the audit: "The City is well aware of the financial hurdles in its path. However, there is a strategy in place which addresses a number of the [auditors'] concerns. The strategy involves pending mitigations which are unaccountable at the time of the audit’s publication. City officials are working tirelessly through the courts system to receive financial settlements and restitution, and in the process of selling property, and working around the clock to put the City back in good financial standing."]

In March, a Los Angeles jury convicted five of six former council members of stealing from the working-class city.

Former Bell City Administrator Robert Rizzo, who many believe was the mastermind of the corruption, and his assistant, Angela Spaccia, will be tried later this year.

Prosecutors charged the officials with misappropriating public funds by exceeding pay limits established in state law and the city's own charter. The prosecution had argued that the six defendants overpaid themselves by sitting on city boards and authorities that did little work and that council members in a city the size of Bell can only legally earn an annual salary of $8,076.

Defendants were acquitted on charges related to their pay from the Public Finance Authority but were convicted for money they received for sitting on the Solid Waste and Recycling Authority. That board was established in 2005 when the city already had an outside contractor for trash services. Prosecutors said the board rarely met and called it a "sham" to pad leaders' salaries.

The only defendant to win full acquittal was Luis Artiga, who faced 12 counts related to serving on phantom city boards between 2008 and 2010.

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