Federal investigators looking into Beaumont’s finances sought information on bonds issued between 2008 and 2013, the departure of the former city manager and finance director, and the city’s practice of borrowing from restricted funds to shore up the general fund, according to subpoenas from the Securities and Exchange Commission.
Following the Tuesday arrests of seven former Beaumont officials on corruption charges, the city on Wednesday, May 18 released the subpoenas the SEC served April 22. The commission enforces rules that govern U.S. stock and bond markets.
The documents were released following a request from The Press-Enterprise. City officials have said the city had received the subpoenas, was cooperating with the SEC investigation and was trying to be transparent with the public.
“The council as a whole has wanted to make sure that the city knows what we know and so our goal was to get it out,” Mayor Mike Lara said Wednesday. “The citizens have been kept in the dark for too long and council is in lockstep in trying to change that.”
The commission requested documents from the city, the Beaumont Financing Authority and a community facilities district that includes most of the homes in Beaumont.
The SEC and Riverside County District Attorney are investigating bonds the city issued to pay for roads, sidewalks and other public infrastructure, how the bond funds were spent, and whether former city officials benefited from them.
The SEC subpoenas cover a large volume of information, including documents related to more than $39 million in bonds issued over a six-year period, agendas and minutes from meetings regarding the bonds, and documents that show “how each dollar financed with the Beaumont bonds has been spent and any and all remaining balances of such funds.”
The commission also zeroed in on four paragraphs in Beaumont’s 2015-16 budget document that note the city “is cash insolvent” because the general fund has been running a $10 million annual deficit for several years.
To plug the hole, the city was “borrowing from various restricted funds that are pooled in the city’s general bank account,” and “transferring one-time monies to pay ongoing expenses and using other creative approaches,” the city budget said as quoted in the SEC subpoena.
The investigation could extend beyond city employees and officials to draw in outside financial and legal firms that were hired to help issue bonds.
The subpoenas sought names of everyone who was aware of the city’s insolvency, who helped prepare the budget, and who bought the city’s bonds. They also asked for details of the city’s dealings with bond broker O’Connor and Co. Securities, consultants Willdan Group and Urban Futures, accounting firm Moss Levy & Hartzheim and auditor Macias Gini & O’Connell.
On Tuesday, the District Attorney’s Office arrested seven former city officials, including longtime city manager Alan Kapanicas, finance director William Aylward and city attorney Joseph A. Aklufi, on 94 felony charges involving alleged misappropriation of $43 million in public money over two decades.