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State controller orders audit of city of Montebello, saying there's evidence of false financial reports

April 21, 2011 | 12:32 pm

Montebello Councilwoman Christina Cortez, a critic of the city’s past financial dealings, said she welcomed audit.

The state controller took the unusual step Thursday of ordering an outside audit of the struggling city of Montebello, saying there is evidence the city produced false financial reports dating back several years.

The action, which marks the first time officials have launched a full city audit since examining wrongdoing in Bell last year, marks an ominous turn for Montebello, which is in danger of running out of money later this year.

The working-class city east of downtown L.A. has been mired in budget problems and allegations of mismanagement and missing money for months. Last week, the city manager brought in to clean up the mess abruptly resigned. Peter Cosentini warned councilmembers that former city officials for years had used accounting tricks to hide the true nature of the city’s financial picture, making it seem as though the city had more money than it actually did.

Montebello officials discovered more than $1 million in two off-the-book bank accounts. That prompted a probe by Los Angeles County prosecutors that is still ongoing. Last month, Montebello officials said they solved the mystery, claiming the money went to a local developer as part of a complex loan to build a restaurant in the city.

In a letter to Montebello announcing the audit, state Controller John Chiang said the city was out of compliance with state laws because it had not submitted annual audits and financial reports to the state. Chiang also cited comments made by several city officials to The Times and others that financial reports might be inaccurate and included false information.

“I have concluded that there is reason to believe that the Annual Report of Financial Transactions … [is] false, incomplete or incorrect,” Chiang wrote.

Montebello Councilwoman Christina Cortez, a critic of the city’s past financial dealings, said she welcomed the audit.

“It’s unfortunate that nobody in the city understood the severity and seriousness of all the illegal activities that have been going on,” she said. “I’m glad we are finally getting a third party to investigate.”


Montebello seeks 'missing' bank accounts

Montebello city manager abruptly resigns

Cash-strapped Montebello may have trouble paying employees, bills

-- Hector Becerra and Jessica Garrison

Photo: Councilwoman Christina Cortez at her Montebello home on Feb. 18, 2011. Credit: Anne Cusack / Los Angeles Times