City Formally Asks D.A. to Review Loans to Manager : Controversy: San Juan Capistrano mayor says Julian cannot avoid repayment if he leaves the job voluntarily.
Noting that news articles have incorrectly described an aspect of City Manager Stephen B. Julian’s contract with the city, Mayor Kenneth E. Friess has formally requested that county prosecutors review the city’s loan transactions with Julian.
“This is to request that your office consider conducting a legal review of the employment agreements and loans between the City and the City Manager,” Friess said in a letter to Orange County Dist. Atty. Michael R. Capizzi. “. . . A prompt response to this letter would be most appreciated.”
For the record:
12:00 a.m. March 1, 1992 For the Record
Los Angeles Times Sunday March 1, 1992 Home Edition Part A Page 3 Column 4 Metro Desk 5 inches; 162 words Type of Material: Correction
Stephen B. Julian, city manager of San Juan Capistrano, filed a lawsuit last month against The Times and several of its employees for libel. The lawsuit claims, in part, that the articles and editorials published during January and February, 1991, accused Julian of illegal and corrupt conduct in his financial dealings with the city of San Juan Capistrano.
The Times wishes to make clear that the articles did not state and were not intended to imply that Julian is a corrupt public official. Additionally, the articles did not state, nor were they intended to imply, that Julian participated in any illegal activity or that any of the terms and conditions of his employment were illegal.
As The Times reported on March 9, 1991, the Orange County district attorney’s office declined to investigate Julian’s dealings with San Juan Capistrano, stating that it had no evidence suggesting that any crime had been committed.
Julian contends that the articles harmed him and caused him and members of his family to be the subject of harassment. The Times does not condone or encourage any harassment of Julian or his family and regrets any harm that may have occurred.
Julian, Friess and other council members who served when the loans were made have repeatedly said that they think the transactions were entirely proper. The loan debts totaled nearly $400,000 over 10 years.
The mayor, in his letter, said there is no provision in Julian’s contract that would free the city manager of financial obligations to the city if he resigned on his own accord.
Friess’ letter to the district attorney notes that some news articles describing this part of Julian’s contract have been incorrect.
“The news articles have, on more than one occasion, incorrectly reported that the City Manager’s existing loan balance would be terminated should he resign his employment from the City,” Friess wrote.
“This is false. The extinguishment provision is a severance pay provision providing that his loan would be terminated only in the event that he is terminated by City for any reason other than the automatic termination provisions of the (employment) agreement. Thus, Mr. Julian would be obligated to pay his existing loan off should he elect to leave the City.”
Julian’s contract with San Juan Capistrano does free him of loan obligations if the city terminates him--unless the dismissal is for misconduct or willful or habitual breach of duty.
The contract provision was first referred to in a Jan. 6 story in The Times that also reported that Julian had incurred loan debts with the city totaling $398,235 since 1981. Julian still owes the city about $80,000, at no interest. Of that debt, $38,500 is secured by Julian’s accrued vacation, holiday and sick leave, according to a promissory note.
Friess’ letter to the district attorney follows the council’s unanimous vote on Feb. 19 to refer the matter for review. Council members did so in an effort to obtain an independent assessment of whether Julian’s loan transactions with the city over the past decade were within the law.
In urging the referral to county prosecutors, the council in the same vote authorized the hiring of outside law and accounting firms to examine the transactions, if the district attorney decides not to investigate.
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