A former lobbyist who spent the last year working for Los Angeles City Councilman Curren Price was charged Tuesday in what prosecutors described as an elaborate embezzlement scheme that funneled thousands of dollars in public funds to a water district board member.
Rob Katherman, 68, and his wife, Marilyn Katherman, 65, were each charged with two felony counts of misappropriation of public funds, district attorney's spokeswoman Jane Robison said. Prosecutors say that the Kathermans illegally directed money from a Torrance-based nonprofit to cover personal expenses of Ronald Smith, a board member of the West Basin Municipal Water District.
Smith had pushed for the water district to provide the nonprofit Adopt a Stormdrain Foundation with multiple paid sponsorships over a three-year period, Robison said. The Kathermans, in turn, sent checks from the nonprofit's account to pay for tuition, tennis lessons and dance classes for Smith's children, prosecutors contend. Checks from the foundation also covered rent and repairs to Smith's boat, prosecutors say.
Prosecutors also say that Smith wrote checks from his West Basin discretionary account to pay his children's school expenses. In all, the district attorney's office maintains that about $20,000 was misappropriated.
Police arrested Smith last week. He has pleaded not guilty to one count of financial conflict of interest, two counts of misappropriation of public funds and four counts of perjury. Jonathan Cruz, Smith's public defender, did not respond to requests for comment.
Katherman resigned Monday from his $107,000-a-year job advising Price on economic development. He said in an interview that he and his wife would be exonerated. "Any funds that were spent or misspent by Ron Smith, I was completely unaware of," he said. "I've written checks to nonprofits thinking they were for educational purposes, and I'm not quite sure how these checks got credited to Ron's family expenses."
A resident of Rancho Palos Verdes, Katherman has been active in the region's politics for decades. He was a lobbyist for 32 years, owning his firm for much of that time, and producing campaign slate mailers for scores of politicians. He also serves as an elected board member of the Water Replenishment District of Southern California, which manages groundwater for the southern area of Los Angeles County.
Katherman portrayed the criminal charges as the product of a vendetta being waged by Cathy Beauregard, a former board member of Adopt a Stormdrain, which seeks to reduce pollution from storm water runoff. He said Beauregard lodged allegations against him and his wife with several law enforcement agencies after he declined to make her the nonprofit's president.
Beauregard, a San Pedro resident, said she was removed from the nonprofit's board because she questioned some of the group's spending. A bookkeeper, she went to the Torrance Police Department with her concerns last fall.
"There's no vendetta," she said. "There were checks being written out by Rob and Marilyn that I questioned. They wouldn't tell me what the checks were for, so I went to the authorities."
In a court hearing Tuesday, a judge released the Kathermans on their own recognizance, rejecting prosecutors' request for $50,000 bail on each. The couple face up to four years in prison if convicted, while Smith could face a sentence of up to nine years.
Price's decision to hire Katherman last year stirred some controversy. One activist criticized Price, who represents part of South Los Angeles, for selecting a former lobbyist, one whose firm had several clients who sought alcohol permits. Price supported alcohol sales for at least three companies that had been represented by Katherman's firm. Katherman told The Times that he turned the lobbying firm over to his wife, sought advice from the city attorney and steered clear of potential conflicts.
In a statement issued Tuesday, Price thanked Katherman for his work and said the resignation is "in the best interest of my district and my constituents."
The Adopt a Stormdrain Foundation was created in 2008, operating out of the office of Katherman's lobbying firm. Paperwork submitted to the state attorney general's office in 2011 identified Katherman as the group's president and his wife as its chief financial officer.
Katherman stepped down as president last year and was replaced by Armen Ross, a former aide to Councilman Nate Holden, who left office in 2003. Katherman, now serving as the nonprofit's development director, said Beauregard was the day-to-day manager overseeing the group's finances.
"I signed the checks that went to those nonprofits and then never saw the checks come back, nor did I ever see the bank statements. Those were all things that Cathy was doing," he said.
Beauregard said that description was false. "The bank statements and all the paperwork were handled by Marilyn," she said.
Smith was elected to West Basin's board in 2006. He declared Chapter 13 bankruptcy the next year, according to court records, and was reelected in 2010. On Tuesday, he was still being held in a north Los Angeles County jail facility.
At a special meeting, West Basin's board voted Tuesday to remove Smith as treasurer, transferring his responsibilities to the agency's chief financial officer. The board also requested a forensic audit of the agency's outreach and sponsorship funds.