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Bell hearings: Rizzo steered city business to his horse-racing partner, D.A. says

March 15, 2011 |  2:12 pm

Bell’s former planning director testified Tuesday that as then-City Administrator Robert Rizzo steered contracts to the planning director's company, he also proposed that the two start a horse-racing venture together to reap tax benefits.

Dennis Tarango, whose contracting firm began doing business with the city in 1995, testified that Rizzo said a horse racing venture would help Tarango shield taxes. The two men went on to form Golden Aggie Ranch Inc.

Prosecutors are trying to establish that there was a connection between the city money Rizzo directed to Tarango and the money that the planning director put back into their shared racehorse business.

Rizzo, one of eight former Bell city leaders charged with public corruption, is accused of conflict of interest by giving millions of dollars in business to Tarango while getting money from the planning director for the horse-racing enterprise.

The city has paid more than $10.4 million to Tarango’s firms since 1995.

Tarango testified Tuesday that he believed his relationship with Rizzo was proper and their business dealings were legal.

“I mentioned to Mr. Rizzo I was paying a lot of taxes the year before and I’d like to find a way to reduce that,” Tarango testified, recounting a conversation he had with Rizzo about seven years ago.

A few days later, he testified, Rizzo approached him and brought up the tax advantages of owning racehorses. After meeting with an accountant, the two formed Golden Aggie Ranch Inc. in 2004 as an S corporation, which does not pay federal income tax. Instead, income or loss is divided among shareholders who report it on their own income tax returns. The corporation and its assets, not shareholders, are liable for the losses of the business.

Tarango testified that Rizzo would give him a breakdown of the expenses each month and Tarango would write a check to Golden Aggie Ranch. In all, Tarango contributed about $200,000 to the racing enterprise.

During their partnership, which lasted about five years, Rizzo continued directing about $3 million in contracts to Tarango’s planning firms, the district attorney’s office said.

Rizzo, who has already been ordered to stand trial for misappropriation of public funds through his lavish contracts and awarding of loans to colleagues and city politicians, is also charged with misappropriation of public funds and conflict of interest for his business relationship with Tarango.

Tarango said, however, that his planning firm and horse racing business were kept entirely separate and he never felt pressured or coerced by Rizzo. Tarango said he approached the district attorney’s office after hearing his name in the news.

“I had nothing to hide so I don’t feel uncomfortable,” he said.

“The witness has testified that there is no connection whatsoever between the business venture he had in horses with Mr. Rizzo and any business at the city of Bell,” said Rizzo’s attorney, James Spertus. “It is just overreaching for a prosecutor to start fantasizing about possible conflicts of interest that don’t exist.”

Golden Aggie Ranch has since been dissolved and Tarango was asked to step down from his role as planning director in October.

RELATED:

Former Bell leaders ordered to stand trial

Judge in Bell case urges D.A. to consider additional charges

Ex-Bell Administrator Robert Rizzo returns to court Tuesday

--Corina Knoll

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