Kickback Plots Still Boosting Pension Costs

Three years ago, authorities discovered that then-San Bernardino County Tax Collector Thomas O’Donnell and then-Public Health Administrator Michael Welsh paid kickbacks to the chief administrative officer in exchange for hefty pay raises.

And the county keeps paying for it.

Both O’Donnell and Welsh increased their annual retirement benefits by at least $9,000 -- thanks to the illicit padding of their salaries before they retired from government service.

The two are among a handful of former San Bernardino County executives and elected officials who continue to pocket generous retirement packages despite being implicated in scandals that blackened the county’s reputation, siphoned millions from the county coffers and led to a series of corruption convictions and investigations.

The highest-ranking official in the scandals, Supervisor Gerald “Jerry” Eaves, 64, announced last week that he will resign and plead guilty to one felony conspiracy count stemming from an alleged bribery scheme.

After he leaves office next month, Eaves can begin collecting an annual pension of $34,864, according to county records. That is in addition to an annual pension of nearly $15,000 he earned for eight years served in the state Assembly.

County officials say they are powerless to revoke the retirement benefits because of a state law that protects public employee pensions from most civil and criminal claims.

San Bernardino County leaders, incensed over the corruption convictions, pushed for a bill in the Legislature in 2000 that would have allowed counties to rescind the employer-paid portion of pensions earned by public employees convicted of corruption charges. But the bill was killed in committee by opponents who argued that it would unfairly punish the families of convicted public officials.

Most private pensions also include strong protections against judgments and claims even when the retiree is convicted of a crime, according to experts.

A.J. “Jim” Norby, president of the National Retiree Legislative Network, a national association of more than 2 million retired people, noted that O.J. Simpson’s retirement benefits were protected from a $33.5-million wrongful-death judgment against him for the 1994 deaths of ex-wife Nicole Brown Simpson and her friend, Ronald Goldman.

Such safeguards are based on the argument that a retiree who has worked for years for retirement benefits is entitled to live on those assets, Norby said.

Still, several states stung by public employee corruption scandals have adopted the type of legislation proposed by San Bernardino County officials.

Deputy County Counsel Michael Sachs is heading a civil lawsuit against several former county officials implicated in the scandals.

Throughout the 1990s, a handful of top county officials engaged in fraudulent deals, kickback schemes, influence peddling and bribery that cost the county at least $20 million in lost investment opportunities and fraudulent contracts, according to county reports.

At the center of most of those schemes was former Chief Administrative Officer James Hlawek, who allegedly accepted bribes and kickbacks from business owners who wanted county contracts and county employees who sought hefty pay raises.

Hlawek was earning nearly $149,000 a year when he retired in 1998 after 11 years with the county. But authorities uncovered his misdeeds, and a year later he pleaded guilty to one count of conspiracy to commit bribery. He is still awaiting sentencing. While he waits, Hlawek is collecting a county pension of more than $28,700 a year, according to county records.

Harry Mays, Hlawek’s predecessor, earned $130,000 a year and retired in 1995 after working for the county for 29 years.

Based on his salary and his long county employment, he qualified for a pension of $96,000 a year -- or nearly 75% of his highest salary.

After he retired, prosecutors charge that Mays paid bribes to Hlawek to win an exclusive trash contract for Norcal Solid Waste Systems Inc, a firm that hired Mays as a consultant. He pleaded guilty in 1999 to one count of conspiracy to commit bribery and served two years in prison.

Sol Levin, the county’s former investment officer, spent 366 days in a halfway house after pleading guilty to conspiracy to commit bribery for accepting cash and trips from a North Carolina financial consultant in exchange for routing public funds to the man’s business. Levin, who earned about $82,400 a year when he retired in 1999, is collecting a county pension of more than $37,000 per year, according to county records.

Welsh and O’Donnell paid Hlawek kickbacks in 1997 and 1998 in exchange for substantial pay raises, according to a county lawsuit filed in 2000. The suit accused Welsh of paying Hlawek at least $18,000 in exchange for a $22,225-per-year raise -- the equivalent of almost a 25% salary increase. O’Donnell allegedly paid Hlawek at least $2,000 to get a $15,000 raise, according to the county suit.

Because county pensions are a percentage of an employee’s highest annual salary, the raises boosted the pensions for Welsh and O’Donnell.

Thanks to Hlawek’s illicit raises, Welsh’s pension rose from nearly $42,000 per year to nearly $52,000, while O’Donnell’s jumped from $51,000 a year to more than $60,000, according to county records.

Hlawek, Mays, Levin, Welsh and O’Donnell could not be reached for comment.

While federal and state prosecutors have pursued criminal convictions stemming from the illegal deals, the county lawsuit sought financial restitution from 22 county employees, former officials and private citizens who were involved in the schemes. The county has since settled with 13 of the 22, including Welsh, who paid $18,500.

Eaves paid the county $7,200, but must pay an additional $10,000 fine and serve three years informal probation under the plea agreement he is expected to sign Jan. 21.

But other former county officials, such as O’Donnell, Levin, Mays and Hlawek, have yet to pay their restitution settlements and civil judgments.