Audit Finds Costly Mistakes in South Gate

South Gate’s former leaders approved improper contracts for law firms and awarded others without competitive bidding as part of wasteful spending that cost taxpayers millions of dollars, according to an audit and statements by the state controller’s office.

The audit, released Friday, was launched shortly after voters last year recalled former Treasurer Albert Robles and his three City Council allies. The former leaders left the city nearly bankrupt, mainly because of enormous legal fees, and mired in corruption investigations.

The report states that former officials allowed some law firms to double-bill the city and to boost their billing rates without city approval. Numerous lawyers were hired by the city to fight the recall and to represent Robles and his allies in criminal investigations.

The fees ended up financially crippling the working-class city in southeast Los Angeles County. In 2003, legal fees totaled more than $6.3 million, about a quarter of the city’s $28-million annual budget.

In the last year, the city has eliminated the community services and government relations departments, and laid off about 200 employees. More layoffs are possible, said Mayor Hector De La Torre. Though declaring that bankruptcy is still a possibility, he said the city has managed to avoid cutting services to residents.

“This is a case where clearly the waste was huge,” said state Controller Steve Westly. “The former officials broke their own rules and squandered millions of taxpayer dollars. This is a shame.”

Former City Atty. Salvador Alva, who handled the city’s legal affairs, was not available for comment, nor was Robles.

The audit’s release comes almost one year to the day after voters overwhelmingly recalled Robles and his council allies: then-Mayor Xochilt Ruvalcaba, Vice Mayor Raul Moriel and Councilwoman Maria Benavides.

On Wednesday, at a celebration marking the anniversary of the Jan. 28, 2003, recall, city officials auctioned off mementos of the former leaders’ wasteful spending, including a dedication plaque for a building that never was constructed.

Many of the current troubles stem from the legal fees, which grew more than tenfold during the two-year tenure of Robles and his allies.

Lawyers were hired to fight the recall, launch investigations against foes of the City Council and represent Robles and his allies in criminal investigations.

One of the biggest contracts went for the criminal defense of Robles, who was charged with threatening to kill other elected officials. The charges were dropped after a jury failed to reach a verdict.

The state audit found that South Gate was unusual in how it handled its legal affairs. Its more than two dozen attorneys, on average, were paid more than in most cities -- about $325 per hour, and up to $625 per hour. The former administration also did not cap legal fees, and gave attorneys wide leeway in how they could bill the city.

Auditors also found that city officials paid law firms that apparently did not have contracts with the city. They also paid some law firms twice because of shoddy bookkeeping.

The auditors did not give the names of the law firms.

Current leaders have launched legal actions to recover funds from two firms. The largest lawsuit involves the firm that represented Robles at his criminal trial, Sheppard Mullin Richter & Hampton.

South Gate’s current city attorney, Raul Salinas, said that the firm’s fees were excessive and that the firm was illegally hired. The city is seeking to recover about $1 million.

Sheppard Mullin has refused to return the funds, saying the firm was legally hired by the former leaders, who approved their fees.

In another dispute, the city has refused to pay at least $373,000 to the law firm of Albright, Yee and Schmit, claiming it owes the city as much as $1.8 million for excessive billing.

In one case, a litigation specialist for the firm billed the city for 23 hours of work in a 24-hour period, Salinas said. Clifton Albright, a partner in the firm, was not available for comment.

Salinas said the city has discontinued work with most of the attorneys hired by the former officials. Current law firms, on average, bill the city $220 per hour, he said.

A lack of oversight by former officials led to the run-up in legal fees, Salinas said. “Either they didn’t want to [monitor] or didn’t know how to,” he said.

Aside from the legal bills, the audit also found that the former administration hired an engineering firm whose owner, Hector Castillo, is not a licensed engineer. The firm, which received more than $1 million in contracts, no longer works in the city.

The audit also noted that many records could not be reviewed because they already had been taken by state and federal investigators.

Robles, who was charged last year by the district attorney’s office with conspiring to violate election laws, faces trial later this year.

The FBI also is investigating various transactions involving former officials and vendors of the previous administration.

The audit was not probing criminal wrongdoing. City officials say they plan to use it as a road map for improving policies and procedures.