All seven former Beaumont officials plead not guilty in corruption case

The seven defendants were charged in May with 94 felony corruption counts, including embezzlement and misappropriation of public funds

The seven former Beaumont city officials charged in May with 94 felony corruption counts, including embezzlement and misappropriation of public funds, each pleaded not guilty to all charges against them today.

The defendants are former city manager, Alan Kapanicas; former police chief, Francis Dennis “Frank” Coe; former city attorney, Joseph Aklufi; former finance director, William K. Aylward; former public works director, Deepak Moorjani; former planning director, Ernest A. Egger; and former economic development director, David W. Dillon.

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All seven entered pleas to the charges just before noon in a hearing before Riverside County Superior Court Judge Mac Fisher in Riverside. The charges were announced May 17, but all defendants waived their rights to speedy arraignments.

Judge Fisher started out court proceedings today by postponing one preliminary motion that was related to the defendants’ status as contractors.

And he addressed the state attorney general’s request to take away Aylward’s CPA license during the pending criminal case, tentatively ruling against lifting the license.

Instead, Aylward likely will be required to inform present and future clients of the criminal case against him.

And attorneys Friday morning agreed to postpone a hearing on keeping the defendants’ assets frozen. That matter will be taken up later to coincide with the preliminary hearing.

The judge also scheduled a Sept. 16 hearing on the appointment of a receiver to oversee and manage the defendants’ assets.

The Riverside County District Attorney’s Office is alleging conflicts of interest, embezzlement and misappropriation of city bonds and transportation fee funds that added up to more than $43 million.

City records show that Kapanicas and Moorjani, acting as contract employees with the city, signed off on millions of dollars to consulting companies they owned.

Kapanicas, 64, of Palm Desert, and Aylward, 53, of Cherry Valley, both are charged with six counts of embezzlement, 24 counts of misappropriation of funds and two counts of conspiracy.

Dillon, 62, of Temecula; Moorjani, 69, of Yorba Linda; and Egger, 59, of Mendocino, each are charged with one count of conflict of interest and six counts of embezzlement. Aklufi is facing six counts of embezzlement.

Coe, 52, of Redlands, was charged with two counts of misappropriation of funds and one count of conspiracy. Coe’s charges stem from $45,000 in interest-free loans of city funds arranged by Kapanicas and Aylward without City Council approval, according to court papers filed by investigators.

THE PROSECUTION’S CASE

The prosecution’s case describes local government administration run awry.

To save money and increase efficiency, Beaumont’s City Council hired outside consultants to run most of the city’s day-to-day operations and oversee an ambitious plans to rebuild the city’s roads, and sewer and water delivery systems. These consultants also set out to foster growth that resulted in a surge of tract housing that quadrupled the city’s population.

Kapanicas was Beaumont’s consulting city manager, the highest ranking city administration from 1995 to 2011, and he billed the city for his services through a company he and his wife created called General Government Management Services.

Likewise, Dillon, Egger and Moorjani, were Beaumont’s economic development, planning and public works directors. Like Kapanicas, these men were not city employees. They billed the city through a company they owned called Urban Logic Consultants.

Things went wrong in how these companies got paid.

General Government Management Services, for instance billed the city for financial services work associated with repeatedly going to the bond market to take out more $300 million in debt to pay for public works projects.

But the arrangement became a criminal, prosecutors allege, because Kapanicas, acting as city official, repeatedly signed off on payments from the bond fund accounts to his own company. General Government Management Services received at least $1.2 million in bond funds, according to city records.

Much larger sums – at least $43.2 million – went to Urban Logic Consultants between 1994 and 2012. Moorjani, acting as public works director, signed off on payments to Urban Logic from bond construction funds for engineering work, the records show.

Kapanicas and Urban Logic officials, as well as other city officials, are also accused of misappropriating millions of dollar in developer fees that should have been turned over to the Western Riverside Council of Governments for regional transportation projects. Instead they kept the funds under their control as city officials, which allowed them to make more direct payments to their own companies, prosecutors allege.

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