Beaumont Bond Funds and Capital Assets
The State Controller’s 2015 Report bundled the Bonds & the Fixed Assets together is because the Bond Money was to Construct Capital Assets
On November 3, 2015, the California State Controller’s Office released an Investigative Audit regarding the City of Beaumont: https://www.sco.ca.gov/Files-AUD/11_2015beaumont_internal_acct_control.pdf
FINDING 1 from the State Controller’s Report was: Lack of Proper Accounting and Records of Bond Issuances, Fixed Assets, and Inventory.
The reason the State Controller’s Office bundled the Bonds and the Fixed Assets together is because the Bond money was supposed to be used to construct Fixed Assets, also known as Capital Assets.
On November 28, 2017, over two years after the State Controller’s Investigative Report, the Auditing Firm of Van Lant Fankhanel presented a Draft of Beaumont’s 2016 Audit to the Beaumont Audit & Finance Committee: https://beaumont.civicweb.net/…
Page 16 of Beaumont’s 2016 Draft Audit, Statement of Net Position, once again shows that Beaumont has listed no Capital Assets. Once again the story was told about how it would greatly improved the City’s Finances if Beaumont would only declare its Capital Assets.
Beaumont doesn’t declare its Capital Assets because almost all of the $325 Million in Bond Money acquired to build the Capital Assets was misused/embezzled. The Infrastructure was never built, so the City has no Capital Assets to declare.
Beaumont still claims the $60 Million in Sewer Capital Assets Net of Depreciation even though it has been proven to be a Fraudulent entry. Contrary to what Beaumont Finance Director Melana Taylor stated at the July 5, 2016 Meeting when ‘Council Approved’ the Forging of Beaumont’s Sewer Machinery & Equipment; money paid for anything other than machinery and/or equipment can not be classified as ‘Machinery & Equipment’.
The July 5, 2016 Agenda Item 3.C has been altered since the Council Meeting to record amounts paid to individual scam Contractors instead of Aylward’s Spreadsheet that clearly showed the last $60 Million plugged into the Sewer Machinery & Equipment Fund was money directly to Urban Logic from Beaumont’s 2001 Wastewater Bond: http://www.ci.beaumont.ca.us/D…
The State Controller’s Investigative Report included promises from the City to restructure the Bond Fund Accounts and the Mitigation Fees, Amend Fixes Assets in the Sewer Fund, hire a professional Firm to conduct a fixed asset inventory, and notify law enforcement agencies of possible criminal activity.
This is what the Beaumont City Council did in response the State Controller’s Report:
First of all; on September 1, 2015, every Beaumont City Councilmen gave a ‘We’ll never know’ speech. Two months before the State Controller’s Report; Beaumont Staff and Council had already decided to cover up past illegal activity.
Six hours after the State Controllers’ Report was released; at the November 3, 2015, Beaumont City Council Meeting, Agenda 4.C Awarded Urban Futures a $225,000 No-Bid Contract for Independent Accounting/Fund Reconciliation Services for the City’s Community Facilities District (CFD) and Mitigation Fee Funds: http://www.ci.beaumont.ca.us/DocumentCenter/View/26616
Beaumont City Council knew that Urban Futures was Associated with former City Manager Alan Kapanicas and his Company General Government Management Services, who’s Conflict of Interest is referenced in the State Controller’s Report.
On January 5, 2016, the Beaumont City Council awarded a Contract for Financial Advisor to Urban Futures: http://www.ci.beaumont.ca.us/DocumentCenter/View/26849
Urban Futures was recommended by Acting Finance Director Onyx Jones, who was brought into Beaumont by Urban Futures Principal Mike Busch.
At the May 3, 2016, Beaumont City Council Meeting Agenda Item 3.B contained a CFD Fiscal Accountability Policy & Procedures that has since been ignored: http://www.ci.beaumont.ca.us/D…
On June 7, 2016, Beaumont City Council Meeting Agenda 3.b. contained Urban Futures’ CFD Reconciliation: http://www.ci.beaumont.ca.us/DocumentCenter/View/27679
And the Bonds’ money was never spoken of again. The City has not filed any Complaints against anyone involved in the misuse and embezzlement of the bond money. Not one employee has been fired or reprimanded. Urban Logic Employees Rebecca Deming and Kyle Warsinski still work for the City. Alan Kapanicas is still receiving a salary from the City of Beaumont.
At the June 21, 2016 ‘Council Approved’ Agenda Item 3.F. CFD Quarterly Reports that has never been produced: http://www.ci.beaumont.ca.us/DocumentCenter/View/27726
On September 6, 2016 Beaumont City Council first forged the CFD Bond ‘Certificates of Completion’ in order to transfer $5,069,508.69 that was illegally removed from the CFD Bond Fund Accounts in November, 2014 to pay off Beaumont’s 2001 Wastewater Bond into the City’s General Fund: http://www.ci.beaumont.ca.us/DocumentCenter/View/28276
At the October 18, 2016, Beaumont City Council Meeting, Agenda Item 1, the wording on the Certificates of Completion was changed from ‘The facilities described’ and ‘Financed Infrastructure Improvements have been completed’ to ‘All of the real property has been developed’ and ‘Each developed parcel is served by infrastructure and public facilities adequate to serve parcels’: http://www.ci.beaumont.ca.us/D…
The Bonds were acquired to built Capital Assets, not houses.
On November 1, 2016, ‘Council Approved’ the Forged CFD Bond ‘Certificates of Completion’ and transferred $5,069,508.69 from the Sewer Fund to the City’s General Fund: http://www.ci.beaumont.ca.us/DocumentCenter/View/28542
On August 30, 2017 the Securities and Exchange Commission Issued an Order against the Beaumont Financing Authority to ‘Cease and Desist from Committing or Causing any Violations and any future Violations of Sections 17(a)(2) and 17(a)(3) of the Securities Act’: https://www.sec.gov/litigation/admin/2017/33-10406.pdf
Section 17(a)(2) of the Securities Act makes it unlawful “in the offer or sale of any securities directly or indirectly … to obtain money or property by means of any untrue statement of a material fact or any omission to state a material fact necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading.” 15 U.S.C. § 77q(a)(2).
Section 17(a)(3) of the Securities Act makes it unlawful “in the offer or sale of any securities … directly or indirectly … to engage in any transaction, practice, or course of business which operates or would operate as a fraud or deceit upon the purchaser.” 15 U.S.C. §77q(a)(3).
The S.E.C. gave Beaumont until February 22, 2018, to properly account for the Bonds and to resubmit Financial Statements and Certificates of Completion that are not Forged. Beaumont Staff and Council have made no attempt to comply with the S.E.C. Order.