$4.5 million turns up in Bell account

A special pension fund set up by Bell City Administrator Robert Rizzo and his top aide to boost the already generous compensation paid to city employees contains $4.5 million, according to grand jurytranscripts obtained by The Times, providing a potential lifeline to a city on the brink of insolvency.

According to grand jury testimony, Rizzo established two pension plans designed to provide retirement income -- above the level he and other employees would receive from the state pension system. One retirement account covered about 40 employees, giving them benefits that exceeded those allowed by California’s public employee pension rules. A second was just for Rizzo and his deputy, Angela Spaccia, according to the transcripts, allowing them to get around IRS regulations capping government pensions.

The discovery of the money could be a huge boost for the finances of Bell, whose entire operating budget is about $13 million and is faced with major budget cuts in the wake of a corruption scandal. City officials said Monday that they were looking into whether they could use the $4.5 million to reduce the city’s budget deficit.

FULL COVERAGE: High salaries stir outrage in Bell

In 2008, Rizzo said he wanted the city to spend $14 million to fund this second retirement account. Lourdes Garcia, the city’s director of administrative services, testified that Rizzo said the city needed to place $2 million a year into the account, even as Bell’s finances were deteriorating.

“My reaction was ‘That’s a lot of money,’ ” Garcia testified. “The city doesn’t have that kind of money.... He knew that money was getting tight.”

According to the transcripts, even after Rizzo left office last summer following The Times’ disclosure of his enormous salary, he called Garcia on her cellphone on a Saturday and told her to move money into the Wells Fargo account set up for his and Spaccia’s retirement. Garcia balked, telling him he was on administrative leave.

“I’m still the CAO,” Rizzo told her, according to the transcripts.

The revelations come six months after The Times reported that Rizzo had created the supplemental pensions, which 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 secretly schemed to give themselves an even richer supplemental pension.

“What’s important is that ... they didn’t just write a plan in which everybody got the same thing,” Deputy Dist. Atty. Max Huntsman told the grand jury last month. “They very carefully crafted a plan to benefit themselves.... He planned to receive a heck of a lot of money further down the road. That was always his plan.”

The&nbsp grand jury last month charged Rizzo and Spaccia with conspiring to illegally boost their pensions, creating fake contracts and secretly increasing their benefits.

The district attorney previously charged them as part of a sweeping corruption case that also includes six other former Bell officials.

Email shows that Wells Fargo financial consultant Alan Pennington warned of a backlash if the retirement plan for Bell’s top officials became public.

Pennington sent Spaccia an email in May 2009, 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,” Pennington wrote.

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.”

The transcripts quote an email in which Spaccia tells Pennington that Rizzo “is not concerned w/ media scrutiny and feels the council will accept it since it only makes him whole.”

Pennington testified that in his 20 years’ experience, he had never crafted a similar plan for a government entity.

Huntsman asked Pennington what went through his mind when he learned of Rizzo’s salary, which reached nearly $800,000 annually.

“People in California make a lot of money,” he replied, then admitted that he had never heard of a government official who made that much.

Members of Bell’s new City Council, which took office earlier this month, reacted with anger to the transcripts.

“It’s certainly something we’ll look into, but it shows you what the previous administration’s focus was and that was to milk the city’s finances and enrich themselves,” Mayor Ali Saleh said.

Officials said they are examining whether some or all of the $4.5 million can be recouped.

James Spertus, Rizzo’s attorney, said his client was not setting up his own retirement plan.

“It could be that Ms. Garcia is misremembering facts,” he said. “What the district attorney is doing is taking items that were approved in open session and criticizing the council for approving them.”

The proposed retirement plan for Rizzo and Spaccia was so secretive that Garcia, who was in charge of the city’s finances, didn’t know about it until Rizzo mentioned it to her in 2008, three years after it was first considered.

Rizzo, she testified, “called me into his office to let me know that the fund wasn’t fully funded, why I haven’t funded the plan as directed, and at that point I didn’t understand what he was talking about.”

Garcia testified under a grant of limited immunity, as she did in the preliminary hearings of the Bell officials.

She said Rizzo looked for ways to find cash for his retirement fund when she told him the city didn’t have the $2 million annually.

She said Rizzo and Spaccia discussed whether employees who quit rather than retired could be eliminated from the plan.

About 40 Bell employees are eligible to receive the supplementary pension. Pedro Carrillo, Bell’s interim chief administrative officer, put a halt to all payments several months ago.

The supplemental plan also covers City Council members, who approved it in 2003, guaranteeing them minimum payments of $2,000 a month if they quit as early as age 52 and had spent five years in office, in addition to their normal payments from the state retirement fund.

The grand jury also heard testimony about attempts to hide the $457,000 annual salary of Police Chief Randy Adams by splitting it into two contracts.

Huntsman said that the council never approved Adams’ contracts, which Bell’s charter required.

jeff.gottlieb@latimes.com

Times staff writers Corina Knoll and Ruben Vives contributed to this report.