State Targets Pensioners for ‘Pig-Out’ : Audit: Orange County officials are among those found to have inflated their salaries before retirement to hike their pensions. Controller seeks jail time and fines for future offenders.

Using an Orange County case to underscore the point, state Controller Gray Davis said Tuesday that he wants to impose civil and criminal penalties against public officials who artificially inflate their salaries to receive large pensions.

Davis called for the penalties on the heels of a controller’s audit last month that found officials from Anaheim, Huntington Beach and six cities in Los Angeles County had improperly counted sick leave, vacation days, automobile allowances and other perks as part of their last-year salaries, figures from which pension payments are calculated.

Based on the audit, Davis said his office believes that the officials will receive a total of $2 million more than they deserve over the life of their pensions. Calling the “abuse” a “blight on the public sector,” the controller said he is urging the $63-billion state Public Employees Retirement System (PERS) to recover what he says are overpayments in these cases.

“These are people who are well-paid to begin with,” Davis said. “They have a moral obligation to live within the spirit and the letter of the law and yet they engaged in salary spiking.

“I feel very strongly that those of us entrusted with public office have to set the example. Public service is a privilege. It’s not a license to pig out.”

One of the cases of “pension-spiking” Davis cited during his Capitol press conference was that of former Anaheim City Manager William O. Talley, whose salary was increased from $97,390 to $159,109 before he resigned Sept. 1, 1987.

“How can someone who is, the year before, making $97,000 think it’s possibly legal to retire with a $160,000 pension?” said Davis, who never mentioned Talley by name. “I mean, you have to be out of your gourd to think that you’re entitled . . . to a pension roughly 70% higher that your salary.”

But Talley said the state Public Employees Retirement System gave him written approval for the higher figure, which was calculated when he converted a retroactive pay raise and $40,000 in benefits into straight salary. That salary helped qualify Talley, who is currently paid $99,500-a-year as Dana Point city manager, for a monthly pension payment of $7,558 as well.

“I don’t think the city did anything wrong, but it must have made a great press conference,” said Talley, who added that the controller’s office has never contacted him about the audit or for an explanation.

Asked if he was gouging the public, Talley said, “Absolutely not.”

Ironically, Davis conceded Tuesday that Talley would probably be excused under the legislation he is proposing to fight pension abuse.

Davis said he wants to create a misdemeanor that would result in a fine up to $5,000 and one year in jail for any public official who knowingly inflated his claims. Civil action would require full restitution of the pension overpayments, plus a 20% penalty and 10% interest under the legislation Davis wants introduced.

But Talley would probably be excused under a “safe harbor” provision because he can prove that PERS gave him written approval for his calculation of his salary. Davis said he wants to include such a provision to protect anyone who relies on the state’s advice, although it may be wrong.

Besides the legislation to safeguard the pension system, Davis proposed the establishment of a “pension abuse hot line” at PERS, better supervision of local agency pension managers and continued field audits.

Davis said he is proposing those tougher sanctions because of last month’s audit, which found “significant deficiencies” in the pension practices of eight Southern California cities. In addition to the two Orange County cities, the audit cited Bellflower, Culver City, Hawthorne, Torrance, Manhattan Beach, and Beverly Hills.

The audit was triggered by allegations last year of pension fraud at the American River Fire Protection District in Sacramento County. Davis said the audit findings suggest that the problems may be occurring in other cities and government agencies.

Other Orange County examples of inflated pensions cited in the audit is that paid to a second Anaheim official--identified by Davis aides as City Councilman Bob D. Simpson--who counted $61,571 in compensation and $21,400 in benefits as part of his last-year salary.

Simpson, Anaheim’s former fire chief and city manager, resigned in 1989 and receives $4,583 a month in pension payments, PERS officials said Tuesday. Simpson was out of town Tuesday and could not be reached for comment.

Davis aides also confirmed that the Huntington Beach official with an inflated pension was former Deputy City Atty. William S. Amsbary, whose salary was increased 35% for pension computations. Amsbary, who couldn’t be reached for comment, collects $2,321 a month from his city pension, PERS officials said.

In addition to Amsbary, the controller’s audit found that 15 out of 16 other Huntington Beach retirees had their pensions inflated to a lesser degree because their automobile allowances and accrued vacation time was included in their last-year salaries.

Those officials included a former city treasurer, two chiefs of police, an assistant city attorney, an inspector of water resources and other high-ranking administrators, Davis aides said Tuesday.