Beaumont officials voted this week to ask the California Attorney General to investigate Union Bank’s role as trustee in the sale of $200 million in city bonds after learning some financial records may have been destroyed.
The City Council’s vote follows months of frustration in efforts to get the bank to provide bond-spending records in the wake of an ongoing corruption probe.
The records are needed to account for how bond funds were spent under the tenure of former City Manager Alan Kapanicas, who left the city last year following raids by the FBI and district attorney investigators.
A year ago, authorities searched City Hall, Kapanicas’ Palm Desert home, and the Beaumont offices of Urban Logic Consulting that for years had provided three top administrators. No one has been arrested or charged in connection with the probe.
Contacted by telephone Friday, April 22, Kapanicas declined to make any comments.
The city is asking for the state Attorney General or the state Department of Business Oversight to investigate and determine whether Union Bank has shirked its legal or fiduciary responsibilities as a trustee.
Beyond record keeping, a bond trustee has fiduciary powers to enforce the terms of the bonds, such as ensuring debt payments are made as scheduled. Union Bank also held several city accounts that contained bond proceeds, and processed the withdrawals.
Union Bank spokesman Daniel Weidman said in an email that the bank has “responded to all requests from the city of Beaumont regarding retrieving the documentation they require.”
“We will cooperate with any governmental investigation and we look forward to demonstrating that we have fulfilled all of our obligations in this matter,” his e-mail said.
“Union Bank takes pride in its service to municipal customers, and while we understand Beaumont is going through a difficult process, the city is a long-time client and we are committed to provide our assistance to them in this process.”
Still, problems persist.
The city has hired Albert A Webb Associates, a consulting firm, to evaluate Beaumont bond debts and their payment schedules. Thousands of Beaumont home owners are still paying these debts through special tax assessments.
In a March 30 letter to city, Shane Spicer, the firm’s municipal finance director, said the firm is having difficulties because Union Bank has disclosed that many records have been destroyed and the bank “is not capable of providing necessary support to the city.”
The city had issued bonds starting in 1994 to raise money for roads, waterworks, sewers and other amenities that were needed for the city to keep up with population growth. Between, 1990 and 2014, Beaumont’s population more than quadrupled to more than 42,000 people.
Urban Logic and a company created by Kapanicas, General Government Management Services, had for years been paid with bonds funds for their respective engineering and financial services for the city.
Following the raids, the city began its own investigation of how bonds were spent, but for months the bank was not forthcoming in providing records even though its role as trustee includes recording-keeping obligations, said City Attorney John Pinkney.
Finally, last month, the Los Angeles-based bank released 14,466 pages of documents – but only after the City Council took the unusual legal step of issuing legislative subpoenas to compel the bank to release records.
“The City Council should not have to go through that process,” Pinkney said. “It should not have taken that amount of time to get them.”
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