Rizzo to plead guilty to tax charges

As Robert Rizzo’s salary as Bell’s city manager crept ever higher, eventually hitting an unheard-of $1.18 million a year, he still wasn’t satisfied.

So from 2005 through 2010, the year he was ousted from his job after his salary was revealed, Rizzo claimed more than $770,000 in phantom losses on his tax returns, further inflating his take-home pay.

Rizzo, who is already facing 10 to 12 years in prison for his role in the corruption scandal, agreed Thursday to plead guilty to conspiracy to file false tax returns and to cooperate with federal authorities.

The bogus losses “operated to substantially offset the increasing wages defendant received from his employment with the city of Bell,” according to the plea agreement.

Angela Spaccia, Rizzo’s second in command in Bell, who was convicted on 11 counts of corruption earlier this week, has not been charged. However, she is referred to in the charging documents as “A.S.,” along with her company, Sheffield Management Corp.

Rizzo’s plea agreement says the two of them cost the IRS more than $300,000.

James Spertus, Rizzo’s attorney, said Spaccia will eventually be indicted and that Rizzo will testify against her.

When Rizzo pleaded no contest to 69 counts of corruption in October, Los Angeles County Superior Court Judge Kathleen Kennedy said she would allow him to serve his sentence in federal prison concurrently with the time he receives on the tax charges. He faces a maximum of eight years in prison and a $500,000 fine on the federal charges.

Spertus said he has no deal with federal prosecutors for Rizzo’s sentence. Serving time in a minimum-security federal prison is vastly preferable for white-collar criminals to being in a state prison or county jail where they mix with violent felons.

“Mr. Rizzo’s sentencing in state and federal court reflect his desire to accept responsibility, pay restitution and make things right,” Spertus said.

A spokesman for the U.S. attorney’s office in Los Angeles would not say why Spaccia had not been charged. He said the investigation is continuing.

Rizzo, 59, was charged Thursday. He will appear in federal court Dec. 23.

Spertus said evidence will show that Spaccia was the one driving the tax crimes. “That’s a story Spertus has been trying to promote,” said Spaccia’s attorney, Harland Braun.

The accountant in the scheme, Robert J. Melcher of Calabasas, pleaded guilty in February to aiding and abetting the filing of a false tax return. He is scheduled to be sentenced next year.

According to the charges against Rizzo, Melcher’s firm created what are known as “S” corporations for Rizzo and Spaccia in 2002. Hers was Sheffield Management and Rizzo’s was R.A.R Inc.

Rizzo and Spaccia would “create bogus losses that they could include on their Form 1040 individual tax returns in order to fraudulently reduce their personal tax liability,” according to the charges.

From 2006 through 2009, Rizzo claimed illegal losses of $571,530 on his horse ranch outside Seattle, which he falsely said was rental property, according to the charges.

In 2009 and 2010, according to the plea agreement, Rizzo illegally paid more than $200,000 from his corporation for personal expenses, including more than $120,000 he paid for work in his Huntington Beach home.

Spertus has been saying his client and Spaccia were facing imminent tax charges since Rizzo surprised prosecutors and pleaded in the Bell case. The U.S. attorney apparently decided to wait until Spaccia’s trial was concluded before filing the case.

Spaccia is in the county jail awaiting sentencing Jan. 22. Rizzo’s formal sentencing for the Bell corruption charges is set for March 12, although the judge has said she will give him 10 to 12 years.

During Spaccia’s trial, Los Angeles County Assistant Dist. Atty. Sean Hassett said Spaccia and Rizzo exchanged emails in which they discussed “falsifying their [tax] returns.”

Braun said that his client would fight tax charges. “From what I know, there is no income tax evasion, and all this is a promotion by Rizzo to get to federal prison and to do that he has decided to deliver Angela.”

jeff.gottlieb@latimes.com