Bell and Vernon cases put focus on pensions of non-elected officials

When former Vernon City Administrator Bruce Malkenhorst was convicted of misappropriating public funds last week, the gap between two sets of numbers immediately jumped out: The $100,000 in fines and restitution that Malkenhorst was ordered to pay for his crime. And the $500,000 a year state pension that he got after retiring five years ago.

The 76-year-old former public official had one thing going for him: He wasn’t elected to his position. Had Malkenhorst been elected, it’s very likely that his state pension would have been revoked or reduced.

“The law states that pensions are revoked if an elected official is convicted of a felony, but not in the case” of a non-elected employee, said Brad Pacheco, a spokesman for the California Public Employees’ Retirement System. Malkenhorst “would continue to receive his pension according to the law.”

When Malkenhorst stepped down in 2005 amid a criminal investigation by L.A. County prosecutors, he was making about $912,000 a year. Now he collects the highest public pension in California: $509,664. His attorney, Michael Artan, said in an interview last week that Malkenhorst earned his compensation from the city, which thrived under his client’s tenure running City Hall.

The issue of the public pensions of those convicted of or charged with felonies came to the public’s attention after a massive salary scandal broke out last summer in the city of Bell, one of Vernon’s neighbors in Southeast Los Angeles County.

The Times revealed that City Administrator Robert Rizzo made about $800,000 a year, and that his total compensation swelled to about $1.5 million with other benefits. Rizzo was on track to collect $600,000 through CalPERS, though a “supplemental pension” he designed for himself and other Bell officials could have pushed his pension to $1 million a year.

Rizzo’s potential pension, in particular, fed into the heated issue of public employee pensions, and concerns that the rising costs of pensions as well as retiree healthcare could overwhelm the ability of taxpayers to fund many basic health, welfare and public safety services.

In the wake of the scandal, state Sen. Tony Strickland (R-Moorpark) proposed a bill that would strip the pension benefits of public officials who are convicted of misusing public funds. The bill, SB115, died in a state Senate committee in May, with two Republicans voting for it and three Democrats against.

The bill drew the opposition of various employee groups, including the AFL-CIO, the California Professional Firefighters and the California State Employees Assn. They and the lawmakers who voted against the bill argued that it discriminated against public employees relative to private employees and said such a law would harm the “innocent spouse and family of the convicted officer who will lose their financial security.”

Strickland said he was “shocked” that the bill was killed.

“State law affects judges and elected officials, but not people like Rizzo,” he said. “The argument about the family is a weak argument that can apply to any person convicted of a crime. Families are always affected when you talk about criminals.”

Even though the bill died, it’s still possible that Rizzo will be denied his full pension.

L.A. County prosecutors have accused Rizzo and his deputy, Angela Spaccia, of conspiring to illegally boost their pensions. The pair worked with a Wells Fargo & Co. consultant in Tennessee to craft a retirement plan that would “avoid the laws capping pension amounts,” “conceal its purpose from the public” and be “structured so that it could not be repealed or altered by any Bell City Council in the future,” prosecutors said in court papers.

Rizzo and Spaccia denied any wrongdoing. But if Rizzo is convicted of fraudulently boosting his pension, state retirement officials would have cause to consider revoking or reducing some or all of the pension.

hector.becerra@latimes.com