Former Bell City Administrator Robert Rizzo and his assistant spent seven years conspiring to illegally boost their pensions, created fake contracts, secretly increased their benefits and then filed workers' compensation claims as they were being ousted from their jobs last year, according to a grand jury indictment unsealed Wednesday.
The indictment adds eight charges to the sweeping public corruption case against Rizzo and seven current and former Bell officials. It also sheds new light on Rizzo's extensive efforts to build himself a lucrative retirement fund that The Times has estimated could total $1 million a year.
Although the earlier charges focused on the lavish salaries paid to top Bell officials, the new indictments look at Rizzo's and former Assistant City Manager Angela Spaccia's attempts to manipulate state pension rules to push their retirement compensation well beyond accepted levels.
"Time and time again we find Mr. Rizzo and Ms. Spaccia acting in a way that will conceal what they're doing from the public," Deputy Dist. Atty. Max Huntsman said. "That's a theme in the charges here, as well as charges already presented in court."
The indictment accuses Rizzo and Spaccia of conspiracy, falsification of documents and conflict of interest. In addition, prosecutors Wednesday charged Rizzo with perjury, saying that he failed to disclose on his annual statement of economic interest that he and the city's contract planning director owned a horseracing business.
Rizzo and Spaccia pleaded not guilty in Los Angeles County Superior Court on Wednesday. James Spertus, Rizzo's attorney, downplayed the new charges.
"The evidence is untested when presented to a grand jury so a prosecutor can also attain an indictment against a ham sandwich," he said.
The indictment comes six months after The Times revealed that Rizzo had created a supplemental plan that allowed employees to circumvent retirement limits set by California. Employees who worked in Bell for 25 years and retired at the age of 55 could get 90% of their salary — far more than most public employees who retire at the age of 60. But prosecutors allege that Rizzo and Spaccia schemed so that they alone would be the prime beneficiaries of the generous pension plan.
The pair worked with a Wells Fargo and 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the laws capping pension amounts," "conceal its purpose from the public" and be "structured so that it could not be repealed or altered by any Bell City Council in the future," prosecutors said in court papers.
Emails reviewed by The Times showed that the financial consultant discussed funding a pension for Spaccia and Rizzo using $7 million to $14 million in city funds. The consultant, Alan Pennington, warned of a backlash if the plan became public.
Pennington sent Spaccia a May 2009 email noting the public uproar after The Times revealed that the former city administrator in neighboring Vernon was receiving a $500,000-a-year pension, then the highest in the state retirement system.
"I guess with the spotlight on, city of Bell could show up [once] you and Bob have retired. Not sure there's anything you should do or anything anyone else could do (to reduce future benefits) but thought you might find it interesting none-the-less."
Spaccia replied: "Yes we have discussed it as well. You are right, there is nothing to do than watch and see how it plays out."
On July 19, four days after The Times revealed Rizzo's salary, Rizzo signed an IRS form to set up the fund.
A spokeswoman for Wells Fargo declined to comment Wednesday.
Rizzo and Spaccia also directed a subordinate to create a policy on sick time and vacation time "that would benefit only them without appearing to do so." The policy gave Rizzo 26 weeks annually so that when he cashed out his time each year, his total compensation would be $1.5 million annually.
The indictment also takes aim at the $457,000 contract signed by former Police Chief Randy Adams, saying that the council never approved it, as the City Charter requires.
Rizzo and Spaccia are charged with trying to keep Adams' huge paycheck a secret. He made $215,000 a year in his previous job as police chief of Glendale.
Huntsman said he could not discuss all of the problems with Adams' contract because the grand jury evidence is not public.
However, court records show that in June 2010, as several public records requests seeking Adams' salary were submitted to Bell, Rizzo and Spaccia were trying to split his pay into two contracts to conceal his real salary. His police chief contract paid him $200,000 a year and one as special police counsel paid him $257,000 annually. Anyone who asked for Adams' police chief contract could receive one showing he was paid far less than his actual salary.
Prosecutors previously charged that Rizzo engaged in a similar scheme by splitting his pay into five contracts, one as chief administrative officer and the other as head of four city authorities.
The indictment also charges the two city leaders hid Adams' contract and an agreement with the chief to allow him to retire on disability.
Those who qualify for a disability pension do not have to pay taxes on half their earnings. The Times has reported that meant Adams could have qualified for millions of dollars of tax-free income when he retired.
The indictment also raises questions about a downtown Los Angeles law firm that earned hundreds of thousands of dollars working for Bell from 2005 through 2010. Rizzo is charged with conflict of interest because he hired Brown, White & Newhouse to defend him when he was charged with driving under the influence in March 2010. Ken White, a partner at the firm, said the district attorney's office instructed them not to comment.
Spertus, Rizzo's attorney, accused prosecutors of exaggerating the scope of the Bell case by continuing to file charges against his client and others. Spaccia's attorney, Russell Petti, said Spaccia had only limited dealings with the issues raised in the indictment.
Times staff writer Ruben Vives contributed to this report.