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Vernon officials testify in probe of former administrator

Current and former employees of the city of Vernon testified Monday before a grand jury investigating the financial dealings of the city’s former top manager.

The testimony came several days after Donal O’Callaghan resigned from a job that made him one of the highest-paid public employees in the state.

O’Callaghan was placed on paid leave in August after The Times inquired about consulting fees paid to him through a company headed by his wife, Kimberly McBride O’Callaghan, and about her work as a contract employee under his supervision.

The grand jury investigation marks a major step forward in the case, which was opened several weeks ago when Los Angeles County prosecutors began looking into the couple’s financial dealings with the industrial city.

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On Monday, a Vernon employee said she was interviewed by the grand jury about O’Callaghan, but would not elaborate. City Councilman Richard Maisano also confirmed the grand jury probe, but said he was not called to testify.

“I’m aware the investigation is going on — that’s all I can say,” Maisano said.

O’Callaghan’s attorney said his client decided to leave his job under fire from Vernon officials.

“I would characterize this as a forced resignation,” Mark Werksman told The Times. “We feel the city has turned their back on Donal and pushed him out the door. … He is being forced out by the same people who reviewed, oversaw and approved the hiring of his wife.”

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A separation agreement reached between the two sides last week said the city’s position was that O’Callaghan “engaged in willful misconduct by participating in the formation and administration of city contracts involving his spouse.”

Werksman vehemently disputed that contention, saying that O’Callaghan’s hiring decisions were reviewed and approved by city officials, including then-City Administrator Eric T. Fresch, who “knew Donal and his wife” and the circumstances surrounding her work for Vernon.

“At every step of the way he was reassured that what he was doing was reasonable, appropriate and lawful, and in the best interest of the city of Vernon,” Werksman said of his client.  "It’s a betrayal of his goodwill and hard work for the city fathers to now claim that he committed crimes when everything he did was at their behest and for their benefit.”

Werksman said O’Callaghan is being unfairly penalized for a salary scandal that erupted in Bell this summer after The Times reported that City Administrator Robert Rizzo and others had been collecting huge paychecks — although none bigger than those paid to some Vernon officials.

“I think he’s being scapegoated because of a hypersensitivity that is a direct result of the scandal in neighboring Bell,” he said.

Fresch did not immediately respond to calls seeking comment.

Vernon City Administrator Mark Whitworth confirmed O’Callaghan’s resignation in a brief statement, but did not comment on the grand jury investigation.

O’Callaghan’s contract called for a salary of $32,000 a month — $384,000 a year — through May 14, 2012. The remainder of the contract is worth about $600,000.

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He is the second high-ranking Vernon official in four years to step down amid a criminal investigation. Former City Administrator Bruce Malkenhorst awaits trial on charges that he spent $60,000 in city money for personal use, including massages, golf outings, meals and political contributions.

Last December, former Vernon Mayor Leonis Malburg was convicted of voter fraud and conspiracy for lying about living in the city. Prosecutors said he actually lived in an expansive home in Hancock Park. Citing his age, a judge opted not to incarcerate the 80-year-old Malburg — whose grandfather was a founder of Vernon — but ordered him to pay more than $500,000 in fines and restitution.

No charges have been filed in the current Vernon investigation.

O’Callaghan stepped down as city administrator in July to oversee capital projects at Vernon’s municipal power plant, a job he held until the city placed him on leave.

The Times reported in August that O’Callaghan had received $243,898 in consulting fees from the city through Tara Energy Inc., a company headed by his wife. Billed at $300 an hour for overtime through the first half of this year, the fees were in addition to his annual salary.

The Times also reported that Kimberly McBride O’Callaghan had been paid about $13,000 during a three-month stint last year as a $40-an-hour bookkeeper at the light and power department. Donal O’Callaghan was director of the agency at the time.

City records show that the council passed a resolution on Jan. 12, 2009, approving a contract with her under the name Kimberly McBride. It called for her “to provide such services as requested by the director of Light and Power, or his designee” but did not note that the two were married.

Vernon officials could not explain either arrangement at the time and directed City Atty. Laurence S. Wiener to perform a “comprehensive review” of Vernon’s financial dealings with the couple. The results have not been made public.

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Donal O’Callaghan’s most recent employment agreement specifically prohibited previously sanctioned extra pay for hours worked above 160 a month, a two-tiered structure that equated to overtime and is unusual for salaried workers — and all but unheard of in the public sector.

Until its recent elimination, that system benefitted several top Vernon officials who made $500,000 to $1 million a year, or more.

Billing sheets reviewed by The Times show that O’Callaghan and other top Vernon officials logged long hours in addition to their regular work weeks.

For this year, O’Callaghan billed 100 to 126 excess hours each month from January through June and did not take a single full day off during the first six months of 2010, the records show. On New Year’s Day, he logged 13 hours.

The state attorney general also has launched an investigation of Vernon’s finances, serving a subpoena last month for a variety of records.

Despite the continuing investigations, the city and Wiener, who works on contract as its city attorney, are severing ties on Nov. 1. Neither Wiener nor city officials have disclosed reasons for the split, which comes just two months after Whitworth praised the work of Wiener’s firm, Richards, Watson & Gershon, in the city’s efforts for greater transparency.

Wiener has declined to comment. Whitworth has said only that it was a “mutual decision.”

sam.allen@latimes.com

kim.christensen@latimes.com

hector.becerra@latimes.com

Times staff writer Jack Leonard contributed to this report.


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