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Tuesday, Aug. 1, 2006 | The state attorney general has jumped into the fracas surrounding two-year-old allegations that former City Attorney Casey Gwinn’s administration fraudulently billed the city’s water department and falsified government documents.
Gary Schons, a senior assistant attorney general, confirmed Monday that his office has launched an investigation into the billing practices of the City Attorney’s Office but declined to say whether Gwinn, now a special assistant to the district attorney, is a target.
Schons said the investigation was still in its infancy, but that a three-person team was looking into whether officials in the City Attorney’s Office made fraudulent claims, misused government funds or falsified government records. All charges are potentially felonies.
The decision to investigate was made after Schons said he met July 24 with District Attorney Bonnie Dumanis. Her office would typically field such an investigation, but Dumanis ceded the investigation because Gwinn works for her office, Schons said.
“We both agreed yes, this ought to be investigated because, in a sense, there is information, that on its face, suggests that felony violations might have occurred,” he said. “That’s enough to prompt an investigation in any context.”
Schons said he was contacted by Dumanis after The San Diego Union-Tribune, a local newspaper, published a recent editorial criticizing City Attorney Mike Aguirre for not investigating related allegations shortly after taking office in December of 2004.
U.S. Attorney Carol Lam also declined to pursue the matter, Schons said.
Gwinn did not respond to phone messages left at his office Monday. Dumanis was unavailable for comment.
It was unknown how long the investigation would take.
“It really depends on how deep the tunnel is,” Schons said. “At this point we’re at the mouth of the cave and I just can’t say.”
On Friday, Aguirre released a 30-page report claiming that his predecessors inappropriately billed the city’s water and wastewater budgets. The report alleges that departments were billed by the City Attorney’s Office for work that was never performed, and employees were instructed to fill out time cards in pencil, which were later altered by their superiors.
Critics say the billing practices allowed certain city departments to siphon funds from water and wastewater departments, which are supported by rates that can be increased by a simple City Council vote. The method, termed a “secret tax by some,” simultaneously eased the burden on the city’s day-to-day operating budget, which is supported by taxes.
The probe by the attorney general draws another investigatory agency to City Hall. The Justice Department and the Securities and Exchange Commission began investigating city finances and politics more than two years ago, and the U.S. Attorney’s Office has charged five former pension officials on allegations of corruption.
Likewise, Dumanis’ office has charged six former pension officials with criminal conflict-of-interest violations.
Schons also met with members of Aguirre’s office Monday afternoon. While Schons declined to comment, Aguirre said they were conducting “independent but cooperative investigations.”
“It may be that they go after more serious matters and we go after things that are still criminal but not as serious,” Aguirre said.
The city attorney has authority to bring misdemeanor charges. Felony charges would be the purview of the office of Attorney General Bill Lockyer.
Aguirre’s investigation could reach beyond his own office. Yesterday, the city attorney said his office has requested documents from other city departments that have billed the water or wastewater departments for work performed.
“We are certainly going to look at other departments and examine whether these practices were being carried out there as well,” Aguirre said.
Earlier this month, Kroll Inc., the private firm probing city finances, informed city officials that it wanted more information about allegations made by Bill Newsome, a former deputy city attorney, concerning the billing practices in question.
In a December 2004 letter to Aguirre, Dumanis, Lam, Schons and the county grand jury Newsome alleged that members of the City Attorney’s Office had fudged timecards in order to bill the city’s water department for work that hadn’t been performed.
Aguirre says he had his hands full at the time but forwarded Newsome’s allegations to KPMG, the auditing firm vetting the city’s 2003 financial statements, with the hope that they would look into the matter.
“That didn’t happen,” Aguirre said.
Kroll is now withholding its long-awaited report until an auditing firm hired by Mayor Jerry Sanders earlier this year to audit the city’s water and wastewater departments releases its own report into the billing practices.
Fred Sainz, a spokesman for Mayor Sanders, said the report, from auditing firm Meyer Hoffman McCann, is expected later this week.
“It’s an issue that we’ve been pursing because it inevitably impacts ratepayers in both the water and wastewater departments,” Sainz said. “This much I do know from Meyer Hoffman’s investigation: that there was a systemic pattern of deceit. Unfortunately, there was direction provided for attorneys and other support staff … to charge time to these enterprise funds irrespective of actual time spent on work for those funds.”
“The mayor thinks that is absolutely shameful,” he said.
Schons said his office received the same information from Newsome in 2004 but chose not to act, noting that the city attorney, district attorney and U.S. attorney all could have looked into the matter.
“In that constellation of agencies we were the lease called upon to become involved,” Schons said. “You had three front line investigative offices that I believe he advised so we didn’t do anything.”
Paul Levikow, a spokesman for Dumanis’ office, declined to comment on whether the district attorney pursued Newsome’s allegations in 2004, saying “the DA only discusses an investigation if and when criminal charges are filed.”