Simonian Is Silent on 29 Questions

Former Yorba Linda City Manager Arthur C. Simonian, relieved of duty in September under a cloud of scandal, asserted his 5th Amendment right against self-incrimination 29 times during a deposition to block questions about more than $300,000 in bonuses and perks he awarded himself since 1984.

Simonian exercised the right, through his attorney, when interviewed by the city’s special counsel during an eight-hour deposition Feb. 3, court records show. The city is suing Simonian to recoup the funds, which include the cost of leased luxury cars and a $1-million life insurance policy that Simonian is accused of securing without City Council approval.

Simonian also revealed in the deposition that many of his daily calendars, journals and boxes of business receipts from his years at the city were missing--accidentally picked up by Goodwill or another charity when he donated goods from his garage. He said he kept most of his expense records at home or in a personal storage locker and did not submit them to the city even when he received reimbursement.

“Either Goodwill or Salvation Army or one of those types of charities came and picked those boxes up,” Simonian told special counsel Henry Kraft. “I was somewhat distraught over the whole--the whole series of events that had taken place.”

Simonian said he discovered that the boxes were missing after he received a court order requiring him to produce the records. Along with documents related to the cars and insurance policies, the boxes included credit card receipts documenting the thousands of dollars’ worth of trips, meals and other expenses he billed to the city.

Kraft said that, even without those records, his seven-month investigation has revealed that Simonian ran City Hall almost unchecked and ordered his subordinates to cover up his wrongdoing.

“Mr. Simonian considered the City Council to be a hindrance to his management style,” Kraft said last week. “He thought he knew better than the council and, therefore, that he didn’t have to comply with the niceties of following the law.”

The City Council fired Simonian on Sept. 7 after the special counsel conducted an audit of his compensation and expenses. A Superior Court judge in November ordered the city to place Simonian back on the payroll, ruling he was improperly dismissed.

Simonian is currently on paid administrative leave.

During the February deposition, Simonian restated his long-standing defense that all of his compensation was approved by the council or spelled out in his employment contracts, including annual bonuses of up to $14,000 that he awarded himself.

The Orange County district attorney’s office reviewed the allegations and in October declined to prosecute Simonian, saying the benefits could be allowable under the very broad terms of Simonian’s contracts.

But Mayor John M. Gullixson said last week the evidence the city has compiled since the district attorney’s decision shows a clear pattern of criminal wrongdoing. The city has referred the case to the Internal Revenue Service and state attorney general’s office for investigation.

“Art was involved in a conspiracy of silence to basically embezzle funds,” said Gullixson, who led the council effort to dismiss Simonian in September. “I think what he did was a crime.”

Gullixson, an attorney who in March ran unsuccessfully for judge, was especially critical of Simonian’s decision to invoke his right against self-incrimination.

“The 5th Amendment was written to protect the guilty,” Gullixson said. “In my legal opinion, once he admitted to any of this, he would be subject to criminal prosecution.”

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Simonian’s attorney, R. Craig Scott of Newport Beach, was aghast at Gullixson’s remarks, saying they displayed a complete misunderstanding of the law. Simonian has a suit pending against Gullixson, alleging that the mayor released confidential portions of his personnel file.

Scott said he advised Simonian to exercise the constitutional right against self-incrimination in an abundance of caution, since the city had contacted the IRS about the case and was recommending criminal prosecution for tax fraud.

“With just the prospect of an IRS criminal investigation, Mr. Simonian had no choice but to take the 5th Amendment,” Scott said. “It’s not because he is guilty of anything, it’s not because he is engaged in any criminal wrongdoing.”

The city’s special counsel agreed with Scott but said Simonian’s responses cannot be completely brushed aside.

“That cannot be treated as an admission of wrongdoing, but it certainly raises suspicions,” Kraft said.

Simonian exercised his 5th Amendment right and refused to answer questions about three topics:

* Did he have City Council approval to take out a $1-million life insurance policy at city expense? The city’s lawsuit alleges that Simonian violated the terms of his 1984 employment contract, which authorized the city to buy two $500,000 term-life insurance policies on his behalf. The city was to be named as the beneficiary of one policy, and Simonian was free to pick the beneficiary of the second. City records show that Simonian bought a single $1-million policy naming only family members as the beneficiaries.

* Did he have City Council approval to personally lease luxury cars, including a 1997 BMW 540i and a 1994 Cadillac Seville, at city expense? And did he instruct employees in the city Finance Department to pay for the cars?

* Did he have City Council approval to award himself management bonuses?

The city’s lawsuit alleges that Simonian did not have the authority for any of the above.

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While Simonian’s employment contracts entitled him to a city car and an extra life insurance policy, and to incentives given to management, Kraft said the former city manager went far beyond what was permissible or reasonable.

Kraft said state conflict-of-interest laws prohibit government officials from negotiating contracts in which they benefit--a concept known as “self-dealing.” Simonian violated that law when he awarded himself bonuses, as well as when he leased luxury cars and bought life insurance policies without any oversight or approval from the council or another city official, Kraft said.

Simonian’s attorney disputes that, however. Scott said even an official from the state attorney general’s office determined that self-dealing did not occur.

During the deposition, Simonian adamantly defended his right to the leased luxury cars. He said his employment contracts specifically stated that the city was to provide him with a car, without restrictions.

City Councilman Hank Wedaa, Simonian’s strongest supporter on the council, said the former city manager has done nothing improper.

“I ran my own investigation,” Wedaa said. “He did nothing wrong. I can find no evidence that he did anything wrong. We’re going to settle with Simonian, and he’ll go away. We’ll be lucky if he doesn’t file suit against us for a couple million dollars.”

Simonian’s attorney said his client would still be agreeable to a proper settlement with the city.

“Mr. Simonian has always been open to discussions of settlement,” Scott said. “Prior settlement discussions involving Mr. Gullixson were not conducted in good faith by the city. Mr. Simonian would welcome the opportunity to sit down and have discussions that would lead to a resolution of the entire matter.”