State Starts Auditing 2 Years of South Gate Finances

State Controller Steve Westly launched an audit of South Gate’s finances on Monday, marking a crucial step forward in the city’s effort to determine if former political leaders broke any laws while depleting the city’s treasury.

The audit will cover much of the two-year reign of former Treasurer Albert Robles and his three City Council allies, who were recalled in January and left the working-class city on the brink of bankruptcy.

Westly said that such in-depth audits of local governments are rare and that he acted on an unusual request from South Gate’s new leaders. They are concerned that the former officials may have improperly authorized payments to cronies and approved an illegal gift of public funds by giving a home to the winner of a city-funded raffle.

The leaders have also questioned whether attorneys and others inflated their billing statements. Last fiscal year, about one-quarter of the city’s $23-million budget went to attorneys.

Westly said that any evidence of fraud or misappropriation of funds would be forwarded to local and state authorities. Two auditors from Westly’s office began working in South Gate City Hall on Monday.

“My aim in this process is to make certain that taxpayer funds have not been used improperly,” Westly said in a telephone interview. “Our goal is to restore public confidence in the financial stability of their city.”

The audit comes as the new administration struggles to keep the city of 96,000 residents financially afloat. More than 200 city employees are being laid off, and the community services department has been eliminated.

Mayor Hector De La Torre said more layoffs are expected. The audit, he said, would help undo the former leaders’ actions and assist in recovering any funds that were spent illegally.

“We must identify any illegal or irregular activity and be proactive in addressing those issues,” he said. “The controller’s audit is the first step in repairing any damage.”

The audit period includes the former leaders’ last week in office when Robles and former Mayor Xochilt Ruvalcaba signed more than $2 million in checks, most of them to law firms. The last-minute spending all but depleted an emergency fund that months earlier held $8 million.

In examining legal fees, the auditors will focus on billing rates and whether the firms had any relationship with the beneficiaries of the legal services. Auditors will also review the contract and billing statements of H.C. & Associates, an engineering firm, and Lou Moret, the former reorganization consultant.