State widens inquiry into Vernon

The California attorney general’s office on Thursday significantly widened its probe into the city of Vernon, issuing subpoenas for information on high salaries, lavish travel bills and pension costs for six former and current officials.

The action comes two days after L.A. prosecutors filed charges of conflict of interest and misappropriation of public funds against Vernon’s former city administrator and Los Angeles County Dist. Atty. Steve Cooley suggested the scandal-plagued city be disbanded.

In addition to the Vernon action, Atty. Gen. Jerry Brown’s office Thursday unveiled plans to seek a court-ordered monitor to watch over neighboring Bell, which has been hit by a corruption scandal that has resulted in criminal charges against eight current and former officials. All eight pleaded not guilty on Thursday.

In an interview, Brown said the compensation received by top Vernon officials — which in one case topped $1.6 million — was excessive and that attorneys in his department were trying to determine whether a lawsuit should be filed.

“I’ve never seen anything like it, it’s so egregious,” said Brown, who is running for governor. “It’s clear to me that we need a state authority to set some standards and curb these excesses.”

So far, the Los Angeles district attorney’s investigation appears to have focused primarily on Donal O’Callaghan, the former city administrator who was indicted by a Los Angeles grand jury on charges regarding two contracts the city established with his wife.

The attorney general is now demanding that Vernon make officials available for testimony regarding the compensation and perks received by former city attorney and city administrator Eric T. Fresch, Finance Director Roirdan S. Burnett, former City Atty. Jeffrey Harrison, former City Administrator Bruce Malkenhorst Sr., and former City Clerk Bruce Malkenhorst Jr., as well as O’Callaghan.

Those six constitute the last decade of leadership in Vernon, a small, well-heeled industrial city just south of downtown Los Angeles. Vernon has been dogged for decades by claims that it is run by a small fiefdom of well-connected people who use the city of 90 residents to generate large incomes.

The Times reported this summer that those six officials all earned more than $500,000 in at least one of the last five years, with Fresch, a former city administrator who now works as a legal consultant, making $1.65 million in 2008.

The Times also reported on luxurious travel expenses billed to the city by Fresch, O’Callaghan and other Vernon officials. In one February 2007 trip, the two former city administrators flew first class with a financial advisor to New York, at a combined cost of $12,700. They stayed at the Ritz-Carlton and dined at the Four Seasons. Fresch alone spent $7,600 over four nights at the upscale hotel.

Fresch often commuted to work from the San Francisco Bay Area and billed the city for first-class flights. O’Callaghan was reimbursed for trips to Ireland and Sweden.

Brown’s subpoena also seeks testimony on “pension or other retirement benefits” for the Vernon officials. The exact focus of this part of the investigation is unknown. But The Times reported in September that Fresch, Harrison and other Vernon attorneys would receive an enhanced pension package typically reserved for police, firefighters and other safety workers.

Vernon reclassified its attorney positions as “safety employees” in 2004, which entitles them to more lucrative pensions and earlier retirement. In a letter signed by then-City Administrator Malkenhorst Sr., the city told CalPERS that its attorneys were “primarily engaged in the active enforcement of criminal laws.” But a former Vernon police chief told The Times that he could not recall a single instance when Vernon’s city attorneys prosecuted a case in criminal court.

Vernon City Manager Mark C. Whitworth released a statement Thursday saying the city “has fully cooperated with the attorney general’s investigation, and we will continue to do so.”

Neither Fresch nor O’Callaghan could be reached for comment.

Brown did not give a time frame for his office’s investigation into Vernon beyond the start of testimony Nov. 10. He said that the subpoena was meant to get information “on the record.” Although it requires only one designee to testify, Brown said it is possible several Vernon officials would be deposed.

“They know who knows, and they’re supposed to tell us and then we will go from there,” he said. “We want to hear who knows, and we’ll keep digging.”

Brown also said his office is pushing ahead with creating a monitor who would have wide-ranging access to city affairs in Bell, where four of the five council members were charged with public corruption.

A court hearing on the proposal was scheduled for Nov. 17.

The attorney general originally planned to ask for a receiver, a court-appointed official who would have power to veto City Council decisions or set his own city policies.

The monitor would have the right to view all city documents and investigate Bell’s finances and the authority to look into items concerning the criminal charges and lawsuit against Bell officials and “any other allegations of fraud, dishonesty or mismanagement in the affairs of the city,” according to the motion.

In addition the monitor would have to hold a forum at least monthly to answer questions from the public. The monitor would stay in place until a new City Council is elected in March.

The motion brings into the open the wariness that Councilman Lorenzo Velez and some Bell residents have toward Interim City Administrator Pedro Carrillo and Interim City Atty. Jamie Casso, both appointed by the current City Council.

Included in the motion is a two-page declaration from Velez, the one council member not facing criminal charges, supporting a monitor and attacking Carrillo and Casso. Velez said the two “have not been honest and transparent with me.”

“As far as I know, they are taking actions on their own without consulting anyone on the City Council,” he said.

“Someone is needed in City Hall with authority to ask questions and to monitor the day-to-day business because the community, including me, is not getting the information we need. We need someone who is independent and has the authority to question the actions of the city administrator.”

Velez had opposed the idea of a receiver, feeling it would dilute local control and make City Hall less accountable to the citizenry.

Casso said he had not read Velez’s declaration and declined to comment. Carrillo did not return a phone call.

On Thursday, prosecutors filed two more charges against former City Administrator Robert Rizzo. Rizzo, 56, is already faces 53 felony counts of misappropriation of public funds, conflict of interest and falsification of documents.

The latest charges involve Rizzo’s connection to Dennis Tarango, the city’s privately contracted planning director. The state controller’s audit found the city has paid Tarango’s engineering firms more than $10.4 million since 1995. Tarango and Rizzo owned racehorses together.

Deputy Dist. Atty. Jennifer Lentz Snyder said it was a conflict of interest because Rizzo could not influence a decision in which he may have had a financial stake. Tarango is not a public official and will not be charged, she said.

sam.allen@latimes.com

jeff.gottlieb@latimes.com

Times staff writers Corina Knoll, Hector Becerra and Kim Christensen contributed to this report.