By Gary Walker

Members of Bell’s City Council and city manager have been charged with misappropriation of public funds and state investigators believe that accounting firm Mayer Hoffman’s failure to monitor internal accounting controls led to that city’s officials charging businesses illegal fees, imposing questionable property taxes on residents, engaging in unlawful towing of automobiles and giving each other loans and lavish salaries. The firm is being investigated by the state controller for not flagging questionable expenditures in the city of Bell’s redevelopment agency and municipal finances.

The News broke the story on Dec. 9 that Mayer Hoffman is also under contract with Culver City.

Culver City Assistant City Manager Martin Cole said city representatives contacted Mayer Hoffman to obtain their input after news reports brought the audit firm’s role in Bell to light. Cole directed the News to a statement released by the company’s top executives last month regarding the Bell investigation.

“We have cooperated fully with the California State Controller's quality control review of our audit work papers,” said Mayer Hoffman President Bill Hancock. “Our understanding is that both the controller's final report and our response will be made available to the public at the appropriate time.”

The accounting firm signed a contract with Culver City in 2008 and will be up for renewal next year.

Asked if Culver City officials would be keeping a close eye on State Controller John Chiang’s investigation into Mayer Hoffman’s actions in Bell, Cole responded, “As with any documents produced by state officials which may have an impact on or involve Culver City, we will continue to monitor the situation and review any documents those officials may issue.”

The controller’s office is currently only looking into Mayer Hoffman’s role in the Bell scandal, not into other cities where the accounting firm is under contract. “(Bell) is the only one in the process at this time,” Jacob Roper, a spokesman at the controller’s office, told the News.

Residents interviewed recently have disparate views on whether City Hall should continue contracting with Mayer Hoffman.

“Without more information, the mere fact that the auditors used by the Culver City Redevelopment Agency happen to be the same auditors used by the city of Bell is nothing more than witch-hunt material,” Edward Wolkowitz, a former city councilman, asserted.

Steven Gourley, who served briefly with Wolkowitz in the mid-1990s on the council, also believes that without any concrete evidence, it would be presumptuous to decide whether to retain Mayer Hoffman next year until the state controller issue its report. “I don’t think that council can make a judgment yet,” Gourley, who is a member of the Culver City Unified School Board, said. “At this point it seems like guilt by association.”

But Vincent Motyl said he would prefer to have another firm take over auditing the redevelopment agency as well as the city’s finances next year. “We have a public perception problem, whether we’re guilty or not,” Motyl said, referring to the fact that Bell and Culver City have the same auditor. “There’s the truth, and unfortunately, there’s perception.”

Robert Zirgulis agrees with Motyl. He also feels another accounting firm should conduct a review of Culver City’s audits, considering that Bell and Culver City employ the same auditors. “Although I generally think that all the councilmen are honorable men, in the interest of transparency and to put to rest various conspiracy theories, I think there should be another independent auditing company,” he said.

Zirgulis was referring to comments from speakers at a Dec. 6 council meeting in which an agenda item called for the destruction of five-year-old city records. While most residents - including Zirgulis - inquired about prior News articles related to a state investigation of redevelopment agency audits and questionable uses of affordable housing funds, others accused the council of seeking to destroy records for ominous reasons.

Cole said city officials see no need to conduct an outside audit of the agency at this time but depending on what happens with Chiang’s investigation, they might reconsider.

“There is insufficient reason at this time for the city to expend taxpayer monies for such a review,” the assistant city manager told the News. “However, should additional credible and substantiated evidence surface in the future, the city would certainly take that new information into consideration and reevaluate if different action were warranted.

“This would include continued retention of Mayer Hoffman McCann now and in the future.”

Mayer Hoffman is also facing the possibility of losing clients in the wake of the audit scandal. The company audits several municipalities and redevelopment agencies throughout California and recently a Riverside city councilman said the fact that Mayer Hoffman gave Bell’s finances a clean bill of health raises questions about its credibility.

“We're getting the same awards like everyone else from the same auditing firm ... that overlooked these very serious issues,” Councilman Paul Davis told the Riverside Press Enterprise last month.

West Covina City Councilman Mike Touhey said last month that he would like to see his city cancel contracts with any firm that did business with Bell and the California Public Employees Retirement System announced that they would no longer retain the embattled audit company.

Other clients include Pasadena, Temple City and Victorville. Pasadena and Temple City are awaiting Chiang’s report before deciding upon a course of action.

News that Mayer Hoffman has been in charge of Culver City’s municipal and redevelopment audits comes a month after it was reported by the News that a state oversight office questioned some of the redevelopment agencies expenditures pertaining to its affordable housing fund.

The Los Angeles Times reported in October that several certified public accounting firms hired to audit redevelopment agencies did not report the failure of some municipalities to file annual redevelopment reports to the controller’s office, which the state Senate of Office of Oversight and Outcomes called “a major violation.”

Culver City was one of 12 cities named in the state report regarding possible illegal uses of affordable housing funds.

Earlier this month, City Manager John Manager John Nachbar posted a statement on the city’s website in response to recent stories regarding the oversight office’s inquires into the redevelopment agency’s expenditures.

“We fully complied with all applicable statutes, regulations and reporting requirements as well as procedures required before spending affordable housing monies,” the statement reads. “Staff has given complete explanation to the Senate Office of Oversight and Outcomes, and we have never received any notice from that office or any other state official that the city/agency is in violation of anything.”

Wolkowitz said what matters most is what has transpired in Culver City, not elsewhere.

“The real question is whether Mayer Hoffman was and is doing a proper job for the Culver City Redevelopment Agency. The fact that the state of California has advised the Culver City Redevelopment Agency of the discovery of ‘auditing irregularities’ definitely merits further inquiry and, quite possibly, engaging an outside firm to ‘audit the auditors,’” Wolkowitz, a bankruptcy attorney said. “My recollection, however, from sitting on the Culver City Redevelopment Agency for eight years is that the state periodically found ‘irregularities’ with the agency accountings and upon further review, these turned out to be nothing.”

Gourley said city officials should be wary of any new developments, due to the fact that Mayer Hoffman is under state scrutiny.

“Governments should always have a sense of skepticism,” he said.

Chiang’s office released the results of its investigation earlier this week and concluded that Mayer Hoffman essentially acted as a rubber stamp for the city of Bell. The city of Culver City will now conduct its own internal investigation.