Embezzlement of Public Funds Detailed at Pasadena City Hall

[Update: Councilmember Terry Tornek reveals more details below].

City officials today are providing additional details on an audit that has led to the arrest of former City employee Danny Wooten in connection with misappropriation of public funds and embezzlement of up to $6.4 million from Pasadena over the past 11 years.

By News Desk

The Los Angeles County District Attorney’s Office announced today the arrest of Mr. Wooten, a Management Analyst IV in the Engineering Division of the Public Works Department and a 12-year employee, after an investigation by the City of Pasadena and the District Attorney’s Office revealed the misappropriation of public funds.

City Manager Michael J. Beck said:

Embezzlement and theft of public funds is an affront to the people of Pasadena and to our hard-working employees. We will not tolerate criminal misconduct by city employees and we will fully cooperate in their prosecution.

We are grateful to District Attorney Jackie Lacey and her team for their cooperation and professionalism in the investigation and pursuit of those responsible. I am immensely disappointed that one of our former City employees allegedly exploited his position and leveraged our internal processes for personal gain by stealing taxpayer money and betraying the public’s trust. We will use this experience to reinforce our commitment to good governance through our policies and procedures.

City audit

A City audit completed in November documented that:

• Mr. Wooten allegedly provided as many as 296 potentially fraudulent invoices to the City of Pasadena.
• invoices were submitted on behalf of four vendors he was affiliated with.
• Check payments were in excess of $6.4 million.
• The money came from the Underground Utilities Fund that covers the cost of moving overhead power and communications lines underground.
• Revenues to the Fund come from the underground surtax paid by electric customers.

The audit is now publicly posted on the City’s website.

Accounting irregularities discovered late May

Accounting irregularities with the Fund were discovered by City employees in late May 2014. An initial internal investigation was completed and the results were provided to City Manager Beck and City Attorney Michele Beal Bagneris. The District Attorney was notified within days of the preliminary internal investigation. The District Attorney’s Office launched an investigation over the next several months with the cooperation of city officials and a forensic auditor retained by the City. Mr. Wooten’s employment with the City was terminated on July 25, 2014 for personnel matters unrelated to the investigation.

At this time, it is not believed that any other City employees had criminal involvement in this theft of public funds. As the lead agency in this matter, the Los Angeles County District Attorney’s

Office is responsible for all additional information regarding the case; the specific charges against Mr. Wooten and information about other possible additional suspects or arrests.

Recommendations

The City audit makes 43 recommendations of which nearly all are expected to be implemented in the coming months. City Manager Beck has already directed several steps be taken, including:

• Establishing an internal audit manager position within the City Manager’s Office to direct, manage and coordinate an internal citywide audit program.
• Recruitment for the auditor position is in the final stages.

In addition, four employees have been placed on paid administrative leave pending review of the personnel investigation and potential disciplinary action.

Pasadena Mayor Bill Bogaard said:

This is an unprecedented fraud against the City and our people. Any misuse of taxpayer money is antithetical to our values and commitment to our government. We must, and will, ensure that we enact measures to protect our City from future crimes to every extent possible.

[Update]:

Councilmember Terry Tornek posted the following statement on his Facebook page:

While it is important to remember that we are dealing with allegations that must be proven in court, I will work with my Council colleagues to assist in prosecuting this case to the fullest extent possible and to recoup any monies that may have been stolen. It is clear that the City’s accounting procedures were inadequate and existing requirements were not obeyed. This must change to eliminate the risk of theft occurring in the future.

On the same Facebook post, Councilmember Tornek revealed that as a member of the Municipal Services Committee (“MSC”), he has been a vocal and persistent critic of the City’s Underground Utility Program.

The discovery of this fraud resulted from inquires that were made at the City Council’s Municipal Services Committee on May 13, 2014.

The meeting was contentious, according to the online post. Tornek repeatedly questioned and criticized the representations being made by City staff describing them as “infuriating”, “irritating” and “disingenuous.”  Tornek also stated the following about the UUP Program’s Miscellaneous Projects account: “I call it a slush fund because that’s what it is and I object to it.”

Tornek then advised staff, with the support of Councilmember Margret McAustin and Mayor Bogaard, that he wanted an explanation what the UUP Miscellaneous projects consisted of.  As the KPMG report indicates, senior City staff discovered the fraud as a result of responding to Tornek’s inquiry.

The city will receive close to to $5 million dollars back in insurance money.

Briefing Jan. 5

The City Council will receive a briefing from the City Manager and staff at a public meeting beginning at 5 p.m., Monday, Jan. 5, 2015 in the Council Chamber of City Hall.

[This article has been updated to include a statement from Councilmember Terry Tornek and audio files – December 30, 2014 9:58 p.m.]