An investigator outlines how former city officials angled to keep regional funds for the city – and themselves
Six defendants in the Beaumont corruption case used deceit, arrogance and “strong arm” tactics to siphon as much as $43 million away from a regional transportation fund and instead funnel the money to city projects that richly rewarded them, a court document claims.
Former Beaumont Economic Development Director David Dillon took the action to force developers into signing false agreements that helped the defendants cover the diverted money’s tracks, according to a declaration filed by Riverside County District Attorney’s senior investigator Michael Gavin.
Confronted about Beaumont’s practices at a meeting with the agency that oversees the distribution of the regional transportation funds, former City Attorney Joseph Aklufi allegedly said Beaumont “had come up with a new excuse and if (the agency) did not buy into that excuse, they would come up with another one,” Gavin wrote.
Because some of the defendants not only had positions with the city but simultaneously had construction, engineering, and other contracts with Beaumont as owners and principals of Urban Logic Consultants, they benefitted from using the withheld funds for city projects that they were involved with, Gavin said.
“By keeping the (funds) in Beaumont, ULC was able to ensure that they received the money, with no oversight or accountability,” Gavin wrote.
None of the seven defendants in the case have entered pleas. Arraignments have been delayed to May 26 for some and July for others.
Six of the defendants: Dillon, Aklufi, former Public Works Director Deepak Moorjani, former City Manager Alan Kapanicas, former Finance Director William Aylward and former Planning Director Ernest Egger, are named in various embezzlement, misappropriation of funds, conflict of interest, and conspiracy counts.
Former Beaumont Police Chief Francis Dennis “Frank” Coe Jr. is charged with two counts of misappropriation of funds and is not named in the alleged TUMF scheme outlined by Gavin.
ALPHABET SOUP
The story involves some government alphabet soup, with a dash of regional funding thrown in.
The transportation fund money goes under the acronym of TUMF, for Transportation Uniform Mitigation Fee. The agency that administers TUMF for the area that includes Beaumont is the Western Riverside Council of Governments, or WRCOG.
An attorney for the regional agency that sued Beaumont for the withheld funds, which a judge determined to be $42.9 million with retroactive interest of $14.8 million, said Thursday, May 19 that one possible avenue for recovery could be the defendants’ assets of homes, property and bank accounts that prosecutors are seeking to freeze.
The judge’s assessment is higher than prosecutor’s estimate that $37 million in funds were diverted from TUMF. Altogether, the 94-count case alleges $43 million was misappropriated from the city over two decades.
The TUMF funds come from fees paid by developers, and those fees are determined by an annual study to establish the amount for each equivalent dwelling unit and keep it consistent across the cities. About half the money goes to regional projects, some to WRCOG for administrative costs, and 48 percent goes back to the zone where it originated.
A SERIES OF EXCUSES
But, according to Gavin, that’s not how it worked in Beaumont.
He alleged that between 2003 and 2009 the defendants’ schemes kept TUMF money from going where it should have as they used a series of excuses, until they ran out of them. Beaumont was formally removed from the program in 2009.
In the early 1990s, Beaumont brought in Urban Logic Consultants along with owners and principals Egger, Dillon, an Moorjani “to manage the planning, engineering and economic development aspects of the City,” according to the declaration. Kapanicas was hired as city manager about the same time.
Urban Logic “designed and implemented the city’s Community Facilities District,” described as “a revenue generating mechanism that allows money to be raised from selling bonds, to be repaid by a tax on the individual homeowners.”
But the district created by Beaumont was “unlike any other CFD in California,” Gavin wrote. “Instead of the usual CFD that covers a discreet area, Beaumont’s … encompasses nearly the entire City.”
Gavin wrote that the city “took the position that it would not remit TUMF collected inside the CFD to WRCOG,” he continued.
EXCUSES, EXCUSES
“Instead, the City essentially acted as the administrator of its own TUMF program, collecting TUMF from various sources, holding on to it, and using it within the City, however Kapanicas, Dillon, Egger, and Moorjani wanted,” Gavin wrote.
Over the years, WRCOG challenged Beaumont’s various excuses, among which were: Community Facilities District exemption; its claim that credit agreements with developers precluded payments to TUMF; a “parallel” model Urban Logic program called “B-TUMF” which used a complex formula to make credit assignments to developers and allegedly avoid TUMF payments; and Beaumont’s claim that other existing agreements with developers precluded the collection of fees.
‘FALSE AGREEMENT’
The excuse about credit agreements with developers was especially difficult for the defendants, Gavin said, because those agreements didn’t exist.
“This was no easy task because the developers were being asked to sign a false agreement,” Gavin wrote. “In many cases, the facility was already constructed by the City and yet the developer was being asked to sign an agreement promising to build that already-built facility.
“Other times, the developer had no intention of building the facility, but had been promised the City was going to build it instead. Thus, many, if not most, of the developers balked at the notion of signing the false agreements,” he wrote.
Gavin said Dillon’s “response to the developers’ hesitation to sign the false agreements was two-fold.”
Developers were offered a “comfort letter,” the contents of which were not described.
“Dillon’s second approach was to strong-arm the developers into signing the false agreements,” Gavin wrote.
WRCOG eventually sued Beaumont for the TUMF funds. The case was moved to Orange County in 2010 and in 2014 Orange County Superior Court Judge David R. Chaffee ruled against the city.
Beaumont’s appeal of the Orange County ruling remains in place.
“The city is in discussions with WRCOG,” interim City Manager Richard Warne said Thursday. “There are ongoing discussions, we’ll see what develops.”
Warne said the appeal could not be withdrawn without City Council approval.
“Kapanicas, Dillon, Egger, Moorjani, Aylward, and Aklufi were City officials who were entrusted with TUMF funds collected from developers,” Gavin wrote.
“ Instead of providing those funds to WRCOG for distribution regionally as was required … they kept the funds within the City for use however they determined, including projects that resulted in direct payments to themselves and their companies.”
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