Beaumont is stepping up its efforts to investigate how bond proceeds were used in the past. Rocked by a raid of City Hall last year by the FBI and the Riverside County District Attorney’s Office, and spurred by a state Controller’s Office audit that reported a “total lack of accounting for, and questionable use of, bond proceeds,” the city is taking critical actions to sort out what happened.
The city is still trying to piece together exactly how hundreds of millions of dollars in bond proceeds have been used since the 1990s. Last November, the state auditor noted the city has completely failed to maintain adequate records detailing such things, finding “only incomplete spreadsheets and copies of requisitions pertaining to the bond transactions.”
In recent weeks, the City Council issued legislative subpoenas to Union Bank to compel the release of bond records and granted the city attorney the power to issue further subpoenas as needed as part of the investigation. The latter action, approved March 15, identified Deepak Moorjani, David Dillon and Ernie Egger, principals of longtime city consultant Urban Logic as potential recipients of such subpoenas.
“The City Council continues with its investigation in the past use of bond proceeds, and in furtherance of this investigation and the reconciliation effort regarding the use of those proceeds and city funds, information is needed related to past use and expenditure of bond proceeds,” City Attorney John Pinkney explained to the council on March 15.
Urban Logic, also subject to raids by federal investigators, has a history with the city going back to the early 1990s. The three men named by the city were working with the company “during the time Urban Logic was paid significant sums of money from bond proceeds,” the city staff report explained, and thus “may have documents and information relevant to the city’s investigation and reconciliation efforts.”
In addition to working through Urban Logic, the three served in various capacities in city government, including roles as directors of planning and public works. This bizarre dynamic also extended to former City Manager Alan Kapanicas, who was a principal with another company, General Government Management Services, while working with the city.
All are known to have benefited from the bond proceeds one way or another. Overall, it appears at the very least that a culture of self-interest took complete precedence over good governance and responsible stewardship of public monies.
“Based on interviews of current city staff members and documents reviewed, 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 state controller reported in November. “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,” the report concluded.
Finally, with all those figures out of city government, Beaumont is trying to live up to its responsibility. This has been incredibly difficult, given how poorly the city had been run for as long as it had. Basic accounting controls and practices only recently have been brought up to the standard one ought to expect from government.
Compiling and reconciling the bond records, meanwhile, has required the council to take the additional steps of issuing subpoenas and compelling cooperation. Taken together with ongoing criminal investigations, there is still a lot to learn.
There are lessons from what Beaumont has gone through, and is going through. Among them, perhaps, is the absolute importance of an engaged, critical citizenry that doesn’t allow government to run on autopilot.
Governments are imperfect, and left to the interests of a few, can easily be steered in the wrong direction.