Bill seeks to block Vernon’s ex-administrator from regaining pension

SACRAMENTO — State lawmakers want to block former Vernon administrator Bruce Malkenhorst from forcing the city to restore a $545,000 pension he was receiving before it was slashed by the state retirement system.

The legislators have drafted an urgency proposal to bar lawsuits against cities by any local government executive convicted of a felony for actions taken in office.

In 2005, Malkenhorst, 78, retired from a job that paid him $911,000 in his last year, just before the district attorney charged him with misappropriation of public funds. He was later convicted.

The California Public Employment Retirement System (CalPERS) reset his pension at $115,000, and Malkenhorst sued Vernon, arguing that it should make up the $430,000 difference.

“We’re going to make certain corrupt felons such as Mr. Malkenhorst don’t get a chance to rip off taxpayers a second time,” said state Sen. Kevin de Leon (D-Los Angeles), author of the bill. “I am seeking permanent and lasting reform.”

The measure, which also could affect former Bell officials, is supported by Assembly Speaker John Pérez (D-Los Angeles). Both lawmakers represent Vernon.

Under the bill, to be introduced Friday, executives convicted of felonies could appeal the reduction of retirement benefits only to the public retirement system that cuts the checks. They could sue that agency but not their former employer.

Cities would be responsible only for benefits approved by officials of the appropriate retirement system. In the case of Malkenhorst, that is CalPERS.

The measure would apply to claims pending as of Jan. 1, 2014. It could save Vernon hundreds of thousands of dollars in legal costs if the lawsuit is not resolved by then.

“Anyone who gets their hands caught in the cookie jar shouldn’t be able to make an end run in the courts in an effort to slip their hands back in for more,” Pérez said.

A representative said Malkenhorst was not available for comment. His attorney did not return calls or an email seeking a response to the bill, SB 39.

Malkenhorst worked for Vernon for 29 years before he became the highest-paid CalPERS pensioner.

He pleaded guilty in May 2011 to using public money to pay for golf outings, massages, meals and political donations.

In June 2012, CalPERS officials ruled that Malkenhorst’s pension was “illegally based on unpublished pay rates, overtime and an inflated longevity allowance.” They reset his pension based on what they said could be properly documented.

Malkenhorst’s attorney argues in court papers that Vernon paid him the high salary, so the city is responsible for keeping the retirement benefits at the higher level.

One legal expert said there might be a question about whether the state can pass a new law that retroactively affects Malkenhorst’s ability to sue his former employer.

“They might be able to say, ‘You are a crook, so you are not entitled to that income in the first place,’ ” said Edward McCaffery, a USC professor of law, economics and political science. “But to do that by passing a law that cuts off his ability to sue the city — I think that looks like a retroactive messing with a contract,” he said.

Legislative attorneys have vetted the bill, according to Dan Reeves, De Leon’s chief of staff. He said there was no contractual requirement for the city to pay any retirement benefits refused by CalPERS.

“Malkenhorst’s contract is with CalPERS,” Reeves said. “They are the payor and he needs to sue them.”

Reeves said De Leon’s bill could also affect former Bell officials if they should decide to challenge reductions in their pensions.

Bell’s former city administrator, Robert Rizzo, might have been eligible to receive a pension of about $650,000, but CalPERS cut it to $50,000 after he and seven other city officials were accused of corruption.

patrick.mcgreevy@latimes.com