The former Beaumont officials indicted Tuesday on embezzlement and other corruption charges had been entrusted with hundreds of millions in public dollars.
Much of this money came from bonds that are still being paid off by thousands of homeowners.
During the twenty-two year tenure of former City Manager Alan Kapanicas, Beaumont issued more than $313 million in bonds.
Most of the money was borrowed to build new roads, waterworks, parks and other amenities needed to keep up with rapid population growth. Beaumont’s population quadrupled to more than 40,000 people since the 1990s.
The funds were borrowed through a citywide community facilities district allowed under Mello-Roos Community Facilities Act of 1982.
This law allowed Beaumont to place debt on future homeowners through special property taxes called Mello-Roos assessments. These assessments are in addition to the normal property taxes.
It’s not clear exactly how much money is still owed by Beaumont homeowners, but a state controller’s report last year said the city still has an “investment” in $220 million in community facility district bonds.
These assessments are “just too much money,” said Angela Briz-Garcia, who owns a house with her husband in the Four Seasons development south of Interstate 10 and east of Highland Springs Avenue.
Briz-Garcia’s recent property tax bills showed her Mello-Ross assessment adding up to $1,772 a year.
On Tuesday, the Riverside County District Attorney’s Office, charged Kapanicas and several other city officials with embezzlement and other corruption charges involving the misuse of nearly $43 million in public funds, including city bond funds.
Also indicted were the owners of Urban Logic Consultants. The company by contract provided Beaumont with several key administrators, including Deepak Moorjani, the public works director, as well as the city planning and economic development directors.
These allegations include funneling work to companies they created and making payments to these companies with bond funds.
County records show that Kapanicas and his wife, Diana, registered a company called General Government Management Services in 1995 – the same year that Kapanicas became a consulting city manager. And by 2002, records show him as the executive director of the Beaumont Financing Authority.
These positions gave him control of the distribution of bonds funds, city records show.
On hundreds of occasions, he attested on forms that bond expenses were “properly incurred” and were “a proper charge” against particular bond account before seeking withdrawals from various bond accounts kept at Union Bank, the bond trustee, which has offices in Los Angeles.
These included withdrawals for payments to his own company for financial services.
Bond distribution requests, called “requisitions,” included payment certificates that were signed by Kapanicas, acting as the city manager, and Moorjani, acting as the public works director. These requisitions allowed hundreds of payments to Urban Logic.
The city’s former finance director, William Aylward, who also was charged, also received bond funds for contract accounting work.
A state controller’s office report made public in November foreshadowed Tuesday’s corruption charges.
“It appears that the former finance director, city manager, and public works director had complete control over the bond proceeds and each of them was personally benefiting financially … ,” the report said.
“In effect, this situation created a conflict of interest that the city failed to address or prevent from occurring. ..
“Basically, the city management and the City Council failed to exercise its fiduciary responsibilities in protecting taxpayer dollars.”
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