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State controller to investigate Stockton finances

April 2, 2012 |  3:26 pm

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The state controller will investigate the fiscal practices and record-keeping of Stockton, a Central Valley city that has been on the edge of bankruptcy.

"There is reason to believe that the city's ability to provide reliable and accurate financial information relating to the required financial reports is questionable," Controller John Chiang said in a letter sent Monday to Stockton City Manager Bob Dias.

If the investigation of city finances, the fourth by the state in recent memory, including in the scandal-plagued city of Bell, finds criminal wrongdoing, the controller will refer the matter to local authorities.

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The investigation is partly the result of a clamor for outside eyes on what has happened in Stockton, an agricultural port city of 300,000. If the city files for protection from its creditors, it will be the nation's largest municipality to seek shelter under the U.S. bankruptcy code.

"It was a combination of missing financial reports and concerns raised by local residents, taxpayer groups, employee groups, and current and former local government officials," said Garin Casaleggio, a spokesman with the controller's office.

Stockton and its redevelopment agency did not submit reports for 2011, and there were discrepancies in the reports for fiscal year 2009-10, according to the controller's office letter.

Stockton is in negotiations with its creditors, a step mandated by a recent California Law, AB 506, before a municipality can file for bankruptcy protection.

The controller's investigation is expected to begin by May but will not be finished before the 60-to-90-day negotiation period, so it probably would not have a direct bearing on any bankruptcy process.

The point of the fine-tooth-comb investigation, Casaleggio said, will be to "give a complete and accurate picture of their finances, so they can move forward."

Calls to Stockton city officials were not immediately returned.


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Photo: An expensive attempt to revitalize Stockton's waterfront is among the contributing factors to the Central Valley city's fiscal crisis. Credit: Luis Sinco / Los Angeles Times