Image: Suspects from Bell, Calif.
AP
Booking photos provided by the Los Angeles County Sheriff's Department show from top left, Luis Artiga, Victor Bello, George Cole, and Oscar Hernandez; from bottom left, Teresa Jacobo, George Mirabal, Robert Rizzo, and Peir'Angela Spaccia. The eight are charged with taking more than $5.5 million from the working-class suburb of Bell, Calif. in a scandal that triggered nationwide outrage and calls for more transparency in government.
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updated 9/22/2010 3:22:16 PM ET 2010-09-22T19:22:16

The scandal-plagued city of Bell mismanaged more than $50 million in bond money, levied illegal taxes and paid exorbitant salaries to its leaders, according to a state audit released Wednesday.

The audit was released a day after eight current and former officials of the blue-collar Los Angeles suburb were arrested for misappropriation of public funds and other charges.

The audit said disgraced former city manager Robert Rizzo had total control of city funds and used some of the money to inflate his salary and pay off personal loans.

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"Our audit found the city had almost no accounting controls, no checks or balances, and the general fund was run like a petty cash drawer," state Controller John Chiang said in a statement. "The city's purse-strings were tied to only one individual, resulting in a perfect breeding ground for fraudulent, wasteful spending."

The audit was requested by interim city manager Pedro Carrillo. A call by The Associated Press to Carrillo seeking comment was not immediately returned.

However, he told the Los Angeles Times the report provided more proof that Rizzo was manipulating the city"

"We look forward to continuing to work with the controller to make sure that there aren't other irregularities," Carrillo said.

Rizzo was making nearly $800,000 a year when he resigned earlier this year. The figure was almost twice as much as President Barack Obama is paid.

Rizzo was arrested along Mayor Oscar Hernandez; former assistant city manager Angela Spaccia; Vice Mayor Teresa Jacobo; council members George Mirabal and Luis Artiga and former council members Victor Bello and George Cole.

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All were scheduled for arraignment Wednesday.

The eight suspects were charged with misappropriating $5.5 million in public funds. However, the audit questioned well over $65 million in city expenses.

Among its findings:

  • The city levied more than $5.6 million in improper sewer, property and business license taxes.
  • Exorbitant salaries were approved for city leaders without required performance reviews. In the past year alone, the city spent more than $5.8 million on compensation for the mayor, City Council members and six top administrators.
  • Rizzo used more than $93,000 to repay two personal loans and approved $1.5 million in loans to other city workers even though no city ordinance permitted it.

"The controller's audit has determined all of these loans to be gifts of public funds, as they provided no public benefit," the audit statement said.

  • The city paid $10.4 million to two development firms owned by a contractor who also was the city's director of planning services.
  • The city made a $4.8-million land purchase from a former mayor without documenting how the land would be used. No work has been done on the property, which contains a vacant store.
  • The city mismanaged $50 million in bond funds approved by voters in 2003. The city issued the funds without any plan to use the money or any apparent need for the money.

Among other things, more than $23.5 million of the bond money went into a non-interest bearing account where it was sitting unused as of last month. Much of the money was designated for the Bell Sports Complex, but the audit found no plans for developing it.

"After six years, the city has a dirt lot with a masonry wall," the controller's office said.

The controller's office plans to release another report next month on the city's handling of state and federal funds. A third audit to be released in November will address financial reports that an outside accounting firm prepared.

Since the scandal broke, public officials, city managers and others have said the situation in Bell showed why people must insist that elected officials communicate honestly and openly.

Interim City Attorney Jamie Casso said he expected Bell could carry on business as usual, adding that Carrillo and Lorenzo Velez — the one council member who wasn't arrested — were meeting regularly. Velez was not taking a high salary.

Copyright 2010 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

Video: Payback time for Bell, Calif. city officials

  1. Transcript of: Payback time for Bell, Calif. city officials

    WILLIAMS: Good evening.

    BRIAN WILLIAMS, anchor: With political anger roaring across this country like a prairie fire, tonight we're going to take you to a small town where the citizens there found out how much their public servants were making and they went wild. It happened in Bell , California , where the former city manager, just for starters, was making $800,000. Well, tonight eight current and former town officials are in jail. The LA County DA is calling this "corruption on steroids," and all public officials like them across the country should probably regard this as a warning shot. We begin tonight with NBC 's George Lewis , who is in the LA suburb tonight. George , good evening.

    GEORGE LEWIS reporting: Good evening, Brian . The eight are accused of misappropriating $5 1/2 million of city funds for their own use. Authorities from the district attorney's office rounded them up first thing this morning.

    Unidentified Man #1: Excuse me, do you have anything to say to the charges against you?

    LEWIS: The big fish in this case is former Bell city manager Robert Rizzo , picked up at his luxury home in Huntington Beach , California . He's accused of stealing $4.3 million in public funds .

    Mr. STEVE COOLEY (Los Angeles County District Attorney): Rizzo , acting as the unelected and unaccountable czar of the city of Bell , secretly set his own salary.

    Unidentified Man #2: There you go.

    LEWIS: Rizzo is one of eight Bell city officials, present and former, arrested today. The others are accused of misappropriating $1.2 million. Officers used a battering ram to break down the door of Bell Mayor Oscar Hernandez when he delayed coming out.

    Mr. COOLEY: The complaint alleges they used the tax dollars collected from the hard-working citizens of Bell as their own piggy bank, which they then looted at will.

    LEWIS: The district attorney making it clear he's going after anyone involved in this.

    Mr. COOLEY: I would charge my mother if I had evidence against my mother.

    Mayor OSCAR HERNANDEZ: Please, I need respect from everybody. Please.

    LEWIS: The people of Bell stormed city council meetings after learning in July about the six-figure salaries officials were receiving.

    Protesters: Another one bites the dust !

    LEWIS: Today, citizens were elated at news of the arrests.

    Unidentified Man #3: I went like this! Yes! We did it!

    LEWIS: The California attorney general , now making a run for governor, has sued Bell city officials, demanding they give back most of their hefty salaries.

    Mr. JERRY BROWN (California Attorney General): This is something when you see it, you can smell it. And this stinks to high heaven.

    LEWIS: Rizzo and the others are scheduled to be arraigned tomorrow morning. The district attorney says he intends to ask the judge to set bail for Rizzo at $3.6 million. Brian :

    WILLIAMS: George Lewis in Bell , California , tonight to start us off.

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