Tiny Town of Vernon Is Focus of Inquiry

The district attorney’s office served search warrants Wednesday at Vernon City Hall as part of an investigation of alleged misuse of public funds in the tiny industrial town on the southeast border of Los Angeles, authorities said.

For the last several months, investigators from the district attorney’s public integrity division have been conducting a preliminary probe of the city, which was sparked by a complaint, said Head Deputy Dist. Atty. David Demerjian. He declined to identify who was being investigated but did say it involved multiple “targets.”

“The allegation is misuse of public funds,” Demerjian said.

City Hall had “closed until further notice” signs at the entrances Wednesday afternoon, and armed investigators guarded the doors as voluminous records were being gathered. A stack of seven boxes of files marked “evidence” could be seen through one door, and investigators said they expected to continue sifting through records most of the day.

One source familiar with the probe said that among the issues being examined is whether Mayor Leonis C. Malburg actually lives in the city. The mayor, a wealthy landowner whose grandfather founded the city a century ago, owns a mansion near Hancock Park in Los Angeles. But he has said his primary residence was an apartment on top of an office building he owned in Vernon. The mayor’s wife and 36-year-old son also are registered to vote at the apartment, records show.

Malburg, 76, said Wednesday afternoon that he had “no comment on anything,” and referred questions to City Attorney Eric Fresch. Fresch could not be reached for comment. Phone calls to City Hall were routed to a taped recording.

The five-square-mile city, dotted by warehouses, railroad spurs and food-processing plants, has collected tens of millions of dollars in surplus revenue from its electric and gas utilities, according to city records. There are fewer than 100 registered voters in Vernon, many of them city employees. Nearly all of them live in homes owned by the city and must be approved for residency by the City Council before they can move in.

Since it was incorporated as an “exclusively industrial” city in 1905, Vernon has had just four mayors from two founding families. The five part-time councilmen have served an average of 34 years. Malburg, who was appointed to the City Council in 1956, became mayor in 1974 after the previous mayor died in office.

In an interview with The Times in late 2002, Malburg said the city runs more like a private corporation than a public entity.

Perhaps the most visible manifestation of that corporate philosophy is the compensation and benefits package the City Council has approved for City Administrator Bruce V. Malkenhorst, one of the highest-paid government officials in the nation. Malkenhorst has not been identified as a target of the investigation.

In recent years, Malkenhorst has collected nearly $600,000 in annual salary, bonuses and payments for unused vacation. The city has leased expensive SUVs for him, including a $50,000 Cadillac Escalade. From 1999 to early 2002, the city paid more than $120,000 for limousine services used by Malkenhorst, city records show.

On some occasions, city workers have ferried Malkenhorst’s city-leased car to his home in Huntington Beach so that he could use the limousine service after council meetings in Vernon, The Times found. One city worker would drive Malkenhorst’s Escalade while another would follow in a city-owned vehicle to bring the driver back to Vernon.

In the past, Vernon officials refused to produce records detailing where Malkenhorst went when using the limousine service, saying it was part of his personal compensation.

Malkenhorst also has had use of a city-owned apartment in Vernon, where he has freshened up after morning golf games, The Times found.

An avid golfer who has played in the celebrity Bob Hope Classic, Malkenhorst often plays 20 or more 18-hole games per month, many on workday mornings, records show.

Malkenhorst could not be reached for comment Wednesday.

Vernon officials have argued in the past that Malkenhorst helps hold costs down by performing several executive jobs and that his compensation package is comparable to private sector CEOs running corporations of similar size.

Council members credit him with successfully managing a thriving industrial and manufacturing center that has provided tens of thousands of jobs.

Malkenhorst, officials have said, has overseen a city with a top-rated Fire Department, low crime rates and affordable utility rates.

Past employment contracts have required Malkenhorst to work only on an “as needed” basis.