2 Former Officials’ Pensions Investigated : Hearing: A former city manager and a former city attorney of San Juan Capistrano are asked to justify the amounts of their monthly retirement checks, which the retirement board has challenged.

County retirement officials are investigating whether tens of thousands of dollars in government benefits were improperly paid during the last three years to a former city manager and a former city attorney of San Juan Capistrano.

James S. Mocalis, 59, and James S. Okazaki, 63, acknowledged last week that officials with the Orange County Employees Retirement System have challenged the size of their monthly retirement checks and asked them to justify the amounts at a hearing Monday.

Other than to release an agenda of that special Board of Retirement meeting, county officials declined to provide details, saying the disputes are confidential personnel matters.

But Mocalis said retirement officials want to cut in half his $50,000-a-year pension as of Nov. 1, contending that his salary as city manager and later as general manager of the city’s water district was artificially inflated.

According to Okazaki, officials want to revoke his $20,000 annual pension and force him to repay $60,000 he has already received, contending that he was improperly classified as a full-time city attorney.

Mocalis dismissed the claim that San Juan Capistrano officials improperly increased his last year of pay to inflate his retirement pension.

“I was a really fine city manager,” said Mocalis, noting that he put in 28 years of public service in various cities and that his county pension is his primary source of retirement income. “I can’t afford to let them take it away.”

Okazaki said he has been in public service for many years, has always behaved honestly and received his retirement pension “absolutely properly.” Okazaki’s attorney, Gary J. Germann, said he intends to ask the retirement board to postpone the Monday hearing so his client can have more time to prepare his case.

The dismayed Okazaki also said that the retirement board inquiry is “coming at an awful time.”

Both Mocalis and Okazaki--once officials with the Laguna Niguel Community Services District--are suspects in a county grand jury investigation of a 1988 land transaction in which the public’s right to 96 acres of Laguna Niguel open space was deeded to a private developer. They are scheduled to appear before the grand jury two days after the retirement board hearing.

County retirement benefits for public employees are based on years of service, age and the highest annual income, which usually occurs in the last year of a worker’s employment.

San Juan Capistrano Assistant City Manager George Scarborough said five other city administrators negotiated a similar salary arrangement to Mocalis’ in 1981, which allowed them to count years of accumulated sick leave and vacation pay as part of their last year’s salary, thus inflating the retirement base.

“It is my understanding that the county officials found this to be inconsistent with the retirement law,” Scarborough said, adding that Mocalis retired in 1987 but his payments were not challenged until the county board was recently notified that the second administrator planned to increase her last year’s salary by applying sick leave and vacation.

Mocalis defended the arrangement, saying city officials offered him a better retirement package because he had told them he planned to move on and they did not want to lose his service.

He was then shifted from city manager to general manager of the city’s water district and offered the contract with the enhanced retirement benefits.

“The contract I had was a valid one,” Mocalis said. “I wanted to go on to do other things. The reason I stuck around was because they promised me a better retirement.”

The dispute involving Okazaki stems from his classification as a full-time employee of San Juan Capistrano and the Capistrano Valley Water District from 1977 to 1987. (Early in his career, Okazaki also worked for 3 1/2 years in the county counsel’s office.)

Okazaki concedes that he should not have accrued retirement benefits as a full-time employee after 1984, when he quit working for the city and began working part time for the water district. Okazaki dismissed it as a “bookkeeping thing,” explaining that he had apparently been maintained in county records as a full-time employee even after he made the switch to part time.

But Okazaki defended his right to receive benefits as a full-time employee during his previous years of service in San Juan Capistrano, noting that city officials had created a special position so they could hire him as a full-time attorney. The city was then heavily involved in litigation over development, he said.

Okazaki acknowledged, however, that while classified as a full-time city employee, he continued to handle cases for other clients.

In the Laguna Niguel land transfer case, prosecutors notified Mocalis and Okazaki earlier this month that they are potential suspects in the grand jury’s investigation.

Mocalis signed the Feb. 11, 1988, deed as general manager of the district--which preceded Laguna Niguel’s cityhood and formation of a city council--while Okazaki prepared the document and notarized the signatures of Mocalis and James F. Krembas, the district’s then-vice president.

The open space has since become a section of the Marina Hills subdivision, developed by Taylor Woodrow Homes California Ltd., and is partly dotted by houses.

Krembas has said he signed the deed by mistake, thinking that it involved another land transaction.

But Mocalis and Okazaki deny any wrongdoing and say they acted at the request of county officials and at the direction of the district board. In fact, a resolution appearing to approve the transfer is contained in city files.

All five former members of the district who voted to approve the transfer, however, have said they never authorized the transaction.

“We’ve been together since the 10th (of October) day and night putting our case together,” Okazaki said of himself and Mocalis. “I’m concerned because of the terrible, terrible allegations being made by the press.”

Mocalis said he was “stunned” to receive the letter from prosecutors and is confident that both he and Okazaki will be completely vindicated.