Then-Bell City Manager Robert Rizzo gave city loans of nearly $400,000 to two businesses without public discussion, approval from the City Council or collateral to back the loans, according to documents reviewed by The Times.
One of the loans, $300,000 to a local Chevrolet dealer in 2008, is the subject of a court fight because the dealer went out of business within a year of receiving the loan, having repaid nothing.
Although other cities sometimes lend money to local businesses for economic development, Rizzo granted the loans in a highly unusual way, with no statement of economic benefit to the city -- a step that is commonplace in municipal loans.
Several experts said the secret loans violated basic tenets of municipal government and appeared to violate Bell's charter, which requires that all contracts be approved by the City Council.
"This is a complete breakdown of checks and balances," said veteran municipal lawyer Michael G. Colantuano. "It's plainly illegal."
The loan to the Chevrolet dealership marked the second time its owner, Randy C. Sopp, had received money from Bell. The city granted Sopp a $500,000 loan when he moved his dealership into Bell in 1990, according to court records. It is unclear whether Sopp paid any of that loan back. In 2006, the city agreed to "forgive the outstanding loan," the court documents show, and the dealership said it would try to stay in Bell.
The loans offer new evidence of the sway Rizzo held over the small, working-class city. Rizzo stepped down this summer following 17 years as Bell's city manager after The Times revealed that he was making an annual salary of $787,637, a figure that rose to more than $1.5 million when additional benefits were included.
The Times has previously reported that Bell gave employees and two councilmen loans totaling nearly $1.5 million, a program that public finance experts said was unheard of. City officials have not found evidence that the council approved the loans. That loan program also appears to have been run by Rizzo, who himself received $160,000 in loans.
James Spertus, Rizzo's attorney, said his client was authorized to make loans under a resolution the council passed in early 2006 that allowed Rizzo "to manage the affairs of the city without council approval."
Jamie Casso, Bell's interim city attorney, said that he could find no such resolution in the city's records and that giving the city administrator such sweeping powers would have violated the City Charter.
Some cities, he said, pass ordinances that allow the city manager to sign off on routine expenses, "but a loan of almost any kind to almost anyone of city money is so extraordinary that I can't understand why it was not taken to the council."
Sopp's attorneys either declined to comment or did not return calls. Sopp did not return calls or respond to a message left at his Palos Verdes Estates home.
A review by The Times found no mention in council or redevelopment agency minutes or agendas of the May 2008 loan to Sopp.
Council members Teresa Jacobo and George Mirabal and then-council member Cole said in interviews that they didn't remember approving the loan to Sopp.
Records show that when the loan was due for repayment, Rizzo extended it for seven months without going to the council or informing the public.
Shortly before Rizzo stepped down, the city negotiated a settlement with Sopp that would have ended the lawsuit over the loan. Details of the settlement were not disclosed. But Bell's new city management team put the settlement on hold, saying they had questions about the loan.
"I haven't seen anything that indicates the council voted on this transaction or on the settlement that involves this transaction," Casso said. "My client would have to approve it in open session. That hasn't happened."
Giving a loan to a car dealer is not unusual for cities, particularly during the recession. Both Victorville and Norco, for example, have approved aid to dealers in recent years.
The deal between Bell and Sopp Chevrolet was quite different, though: There was no public notice or discussion; Bell gave the loan not to a business or corporation but directly to Sopp, identified in loan documents as "business owner"; the dealership is not mentioned in the two-page promissory note that was signed May 28, 2008; and the loan was extended until June 30, 2009.
The loan documents did not give the city the right to look at the dealership's financial records, and a document attached to the loan shows that its sales tax revenues had dropped 20% in the last year.
According to the lawsuit Bell later filed against Sopp, the loan was provided after Sopp approached Rizzo, telling him the dealership was in jeopardy of failing.
Little is known about the loan to the Steelworkers Old Timers Foundation. Documents don't explain the reason for the loan or why it would be in the city's interest.
In addition to the loan, Bell gave a city contract worth $38,000 a month to the group to provide Dial-A-Ride services for senior citizens. Cole said last month that the group has held the Dial-A-Ride contract for 15 years and considered the price the city was paying to be fair.
The documents say the loan, which had 4% interest, would be repaid by the city's reducing its monthly payment for the Dial-A-Ride service.
Casso said he has been unable to find council approval of the Old Timers Foundation loan in a preliminary look through Bell's files.
Times reporters also reviewed agendas and minutes and were unable to find any public notice of the loan.
Casso also said he's found no analysis by the city of potential conflicts of interest given Cole's dual roles as head of the foundation and a City Council member.
"We believe there should have been," he said.