Updated after the jump with postponement of arraignment for defendants. First posted at 10:51 a.m.
Those eight arrests of Bell city officials Tuesday weren't for nothing, if you ask the state's top budget man, John Chiang. The state controller released an audit of Bell's finances Wednesday, saying that the municipality's general fund was used “like a petty cash drawer.”
This isn't really that surprising, but it's more damning for the eight suspects (including infamous former city manager Robert Rizzo) who face charges of misappropriation of public funds. Chiang says internal finance controls were “virtually non-existent” and that the hand-in-the-cookie-jar mentality at Bell City Hall led to tax overcharges, questionable contracts and exorbitant salaries — the latter of which kicked off the city's scandal.
“Our audit found the city had almost no accounting controls – no checks or balances – and the General Fund was run like a petty cash drawer,” Chiang said. “The city's purse-strings were tied to only one individual, resulting in a perfect breeding ground for fraudulent, wasteful spending.”
That individual was Rizzo, who took the brunt of yesterday's charges and who is reported to have taken as much as $1.5 million in annual salary and benefits from the working-class town. (Maybe that's why children kicked, punched and spat on an image of Rizzo in celebration following Tuesday's charges).
According to a statement from Chiang's office, “The audit findings suggest the former CAO used public funds for personal gain.”
The audit found that $93,000 in city cash was used to pay off personal loans made to Rizzo and that he approved $1.5 million in city loans to other officials. “The Controller's audit has determined all of these loans to be gifts of public funds, as they provided no public benefit,” according to the statement.
Six top Bell administrators, the City Council, and the mayor took home $5.8 million in compensation in the last year, according to the controller's office.
A 2003 voter-approved bond measure put about $50 million in the city's coffers, but the audit found it was not earning interest and that $23.5 million was found sitting around this summer unspent. Lost: $1.7 million in interest.
The audit found some shady expenses, including:
-A $300,000 loan to a local business, which is now in default.
-$10.4 million paid to two development firms owned by a contractor who also was the city's Director of Planning Services. Payments to the firms continued even after the contract ended in June 1997.
-A $4.8 million land purchase from the city's former mayor, who purchased it for $480,000 in 1981. The city purchased the land without documentation showing how the property would be used, or why it was selected, and with only one appraisal report. The property contains a vacant store and there has been no activity on the site.
Update #1: Current city manager Pedro Carrillo issued a statement Wednesday that reads, in part:
“The findings from the Controller's audit are shocking and detail actions that are reprehensible beyond words — this audit is an invaluable tool in our crusade to correct the many wrongs from the past, bring clarity and justice to residents of Bell, and continue establishing reforms so this never happens again.”
Update #2: A judge agreed to postpone arraignment for the “Bell Eight” — those city officials accused of misappropriating funds — until Oct. 21. The defendants were all being held in lieu of bail, but it looked like council members Luis Artiga and Teresa Jacobo along with George Cole could come up with the cash and be freed Wednesday.
A judge agreed to ensure that whatever bail funds defendants in the case came up with were not derived from misappropriated funds.