Beaumont certainly marched to the beat of its own drummer. You can say that without hesitation.
With Alan Kapanicas as city manager and three principals of a consulting company as department heads, the San Gorgonio Pass town of 11,000 quadrupled in population between 2000 and 2015 by using unconventional strategies. According to prosecutors:
• Virtually the entire city was turned into a special-tax district, saddling homebuyers with hundreds of millions of dollars in bond debt.
• Top administrators didn’t work for the city; they worked for their own private companies, enabling them to pay themselves.
• The city collected a regional transportation fee but didn’t turn the money over to the regional transportation agency, as other cities did, instead keeping it for its own use.
• The city used a private company and the city’s sales tax permit to gin up extra tax from sales that really took place outside city limits.
• And city funds were used to give police officers interest-free loans against earned time off without paying taxes on the money.
Those tactics now have the men who are charged with engineering them in hot water.
Kapanicas, former Finance Director William Aylward, former Urban Logic Consultants principals Ernest Egger, David Dillon and Deepak Moorjani, and former City Attorney Joseph Aklufi have been charged with public corruption.
Prosecutors accuse them of lining their own pockets by exploiting their positions of trust as public officials.
Former Police Chief Frank Coe Jr. is accused of conspiring with Kapanicas and Aylward to give himself and nine other city police officers loans of city funds, without the approval or knowledge of the City Council.
Kapanicas and Aylward, if convicted, face up to 26 years in prison. Dillon, Egger and Moorjani, if convicted, face up to 16 years; Aklufi, 15 years; Coe, five years.
I cannot recall another public corruption case in Inland Southern California where the former city attorney and former police chief are among the accused.
How did the city get embroiled in such a mess?
I think former Councilman David Castaldo hit the nail on the head when he told The Press-Enterprise the day of the arrests that council members have to rely on the advice of their city attorneys, and that advice sometimes may be wrong. (He could have added the advice of top staff.)
Just how wrong was Beaumont, under its former regime?
That has already been litigated, in the matter of the Transportation Uniform Mitigation Fee.
A judge ruled that Beaumont had no right to keep the TUMF money it collected; he ordered the city to pay the Western Riverside Council of Governments $42.9 million plus $14.8 million back interest.
Before the April 2015 FBI/DA raid on City Hall, Kapanicas’ home and Urban Logic’s offices, the council decided to appeal the judgment.
In light of the criminal charges against the scheme’s architects, wouldn’t it make sense to drop its appeal and work out a payment plan?
Most of the people responsible for the bad decision have left the building. It’s hard to imagine why the current regime, which is trying to straighten out the mess, should continue paying for an appeal the city will no doubt lose.
The sales tax scheme was another unique approach, one that I’ve never seen tried by any other city government.
Kapanicas and Aylward are accused of using $6 million in city funds to buy electrical and other wholesale products so that a private company, Beaumont Electric, could sell them back to the city so they city could reap sales tax revenue.
The city netted about $62,000 in extra sales tax during that little experiment.
Kapanicas and Aylward are charged with 18 felony counts of misusing public funds and one misdemeanor count of violating the Revenue & Tax Code related to the scheme. (People are always being told to think outside the box, but this one went too far.)
According to prosecutors, the special tax district covering most of the city enabled Urban Logic to pocket a share of the proceeds every time the city issued bonds. Prosecutors said the company principals signed over the money, so the council never knew.
Councilman Lloyd White, who took office in 2014 when many of the old guard were swept out, said he’s frustrated Beaumont has gotten no response from the state Attorney General’s office to its request for help getting documents from Union Bank on the bond work.
I called the Attorney General’s press office and heard back from Press Secretary Rachele Huennekens. She said the office is still reviewing the matter in consultation with “other agencies that may have relevant authority.”
I assume she means federal agencies that oversee banks and bond issuance.
District Attorney Mike Hestrin said this investigation resulted in charges fairly quickly, a little more than a year after the April 2015 raid. But he acknowledged Beaumont residents and officials would like faster closure.
Based on the web of unconventional strategies outlined above, I doubt a fast conclusion is in the cards.
Contact the writer: 951-368-9470 or
cm******@PE.com