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SEC investigating $70 million in bonds issued by Bell

October 15, 2010 |  4:30 pm

The Securities and Exchange Commission is the latest agency to investigate Bell, launching a probe into the sale of three city bonds totaling $70 million.

The investigation comes after California state auditors raised questions about how the bond money was being used, including one involving a sports park that has yet to be built.

The SEC has asked for documents involving nine current and former Bell leaders, according to the subpoena, a copy of which was obtained by The Times. The subpoena also requires them to testify before the SEC.

The subpoena asks for documents surrounding the sale of $9.25 million in pension obligation bonds in 2005, $26.3 million in taxable bond anticipation notes in 2006 and $35 million in general obligation bonds in 2007.

Those named in the subpoena are former City Administrator Robert Rizzo, former Assistant City Administrator Angela Spaccia, Mayor Oscar Hernandez, Councilwoman Teresa Jacobo, Councilman George Mirabal and former Councilmen Luis Artiga, Victor Bello and George Cole.

The Los Angeles County district attorney's office has charged all eight with public corruption. Also subpoenaed was former City Atty. Edward Lee.

A report issued last month by state Controller John Chiang found that Bell had "mismanaged" its Measure A bond funds, which included the $35 million sale.

The report said that although the money was supposed to be used for a Bell sports complex, "it is unclear what has been accomplished except for acquiring a site that consists of a dirt lot with a masonry wall around it and a water pumping station in the middle." The report found the $35 million "was far in excess of the amount that was needed and thus unnecessarily increased the city’s costs of borrowing."

It also found the funds were placed in a non-interest-bearing checking account, costing the city $1.7 million as of Aug. 31.

The report also found that proceeds from the bond sale were placed in the city’s general fund instead of in a separate account. Under Rizzo’s contract, his salary depended on the city having "a positive cash position in the general fund. Again, at least in appearance, this practice could be self-serving."

According to the city’s latest annual report, proceeds from the pension bonds were to fund $7.3 million in unfunded liability for pension benefits for public safety employees, and to retire nearly $1.5 million in similar bonds issued in 1998.

Rosalind Tyson, regional director of the SEC’s Los Angeles office, declined comment Friday. A spokesman for the state controller’s office said the SEC had not contacted officials there.

-- Ruben Vives and Jeff Gottlieb