At the very end of the Kroll report in Appendix Q, the private consultants weigh in on the payroll practices of the City Attorney’s Office under former City Attorney Casey Gwinn – and find that some officials and employees of the office could be criminally liable for their actions.

Recently, the office’s methods for billing the water and wastewater departments for legal services gained attention when the state attorney general launched an investigation into the matter. As the allegations go, the past managers in the office were over-billing enterprise funds, which are supported by water and sewer customers’ bills, in order to prop up the city attorney’s budget. (Critics say it’s essentially a backdoor tax, as the council could easily raise user fees for water and sewer systems without a vote of the public.)

The report reads:

The billing practices of the City Attorney’s Office – in particular, the falsification of time records resulting in improper charges to enterprise funds – implicate a number of statutes and legal prohibitions. Most prominently, the officials and employees of the City Attorney’s Office may be held criminally liable under the California Penal Code pursuant to either Section 72 (“Presenting False Claims”) or Section 424 (“Embezzlement and Falsification of Accounts”).

At the very least, the conduct was “unethical,” the consultants said.

A day before the Kroll report was released, accountancy firm Mayer Hoffman McCann said the billing practices in the City Attorney’s Office were “not in conformity with generally accepted accounting principles,” the report stated. The firm said the practices ended in late 2004, which coincides with the time Mike Aguirre took office.

Kroll was not as reserved in its remarks about the billing practices.

Additionally, the report states, the subordinates who went along with the practice could also be held liable for aiding and abetting their superiors.

The practices could also be found to be a breach of the municipal code and City Charter, the report said. Further, a state law that voters enacted in 1996, known as Proposition 218, prohibits the commingling of fees, such as water bills, and the day-to-day budget for the city.

“Here, in many instances time was billed to the Water and [sewer] funds for work that was not actually performed. Since no services were actually provided, ratepayers bore a cost without receiving any corresponding benefits,” the report said.

Kroll also determined that the practices have stopped under Aguirre.


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