Beleaguered City of Vernon Blasts State Auditor “Rehash”

Friday, July 06, 2012


Officials in the tiny industrial city of Vernon—under fire for pension irregularities, accused of rigged elections, slammed by public corruption charges and the subject of a disincorporation campaign—lashed out at a June report by the highly respected California State Auditor for its “lack of objectivity” and misrepresentation of facts.   

The report, subtitled “Past Poor Decision Making Threatens Its Financial Stability,” focused mainly on the troubled city’s relationship with its Light & Power Department. It found 20 years of structural deficit in the city’s general fund was intertwined with $571 million in outstanding bonds, mostly issued for its power company.

On the day the report was released, the body of former Vernon City Administrator Eric T. Fresch was found floating in the waters off Angel Island, where he had been vacationing. The audit followed up on reports in the Los Angeles Times that Fresch was paid $1.65 million in 2008, one of four years in a row he made at least $1 million.

Fresch, who was a consultant to the city at the time of his death, and other highly-paid Vernon officials came under fire from the California Public Employees’ Retirement System (CalPERS) for erroneously claiming the generous “public safety” retirement packages generally reserved for police and firefighters. CalPERS stripped Fresch of his estimated $300,000-a-year pension entirely in May, although he had not formally retired, and reduced former administrator Bruce Malkenhorst’s pension from a record $545,000 to $115,000.

Vernon, located in Los Angeles County, is the smallest incorporated municipality in California, with just 112 residents. But more than 1,800 businesses employ 55,000 workers within its 5.2 square miles. Its industries include food and agriculture, apparel, steel, plastics, logistics and home furnishings. Vernon has a lot of meatpacking plants and warehouses.

The city has a history of uncontested elections and a record of controversial project developments that have rankled its neighbors. Most of its voters are city employees or connected to city employees who live in homes rented at a nominal fee. Legislation was introduced in 2010 to disincorporate Vernon and city officials responded by paying lobbyists $3.5 million to successfully beat back the effort.

Several former city officials have been convicted of crimes. In 2009, a former mayor was convicted of eight charges, including voter fraud and conspiracy for falsely claiming to have established residency in the city, and fined $500,000. Last year, a former city administrator pleaded guilty to misappropriating $60,000 in public funds and using the money for political contributions and personal expenses. Another former city administrator, who also served as the director of the Light & Power Department, pleaded guilty in July 2011 to conflict-of-interest charges for hiring his wife as a clerical contractor.

It is not unusual for the subject of an audit to have a few tart words of its own in rebuttal. But the city of Vernon and its representative, Latham & Watkins LLP, engaged the auditor in a spirited defense that stretched across the last 50 pages of the 185-page report. “Even a cursory review of the Draft Report reveals that it is riddled with serious mischaracterizations designed to misrepresent the facts,” the law firm’s David J. Schindler wrote.

“The Draft Report is neither objective nor neutral; rather, it appears designed to justify the ten months of work and millions of dollars of taxpayer funds expended to create a report that simply rehashes the same issues that gave rise to the reforms already underway in the City.”

–Ken Broder


To Learn More:

Explosive Hearing on Tap Today After City of Vernon’s Lawyers Bash State Auditor for “Lack of Objectivity” and “Misrepresenting the Facts” (by Steven Maviglio, California Majority Report)

Former Head of Troubled Calif. City Found Dead (Associated Press)

State Pension Agency Slashes Benefits for Former Vernon Officials (by Sam Allen, Los Angeles Times)

City of Vernon: Although Reform Is Ongoing, Past Poor Decision Making Threatens Its Financial Stability (California State Auditor) (pdf)

Hefty Paychecks for Vernon Officials Rival Those in Bell (by Kim Christensen and Sam Allen, Los Angeles Times)

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