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Call for criminal probe after ex-Vernon official avoids subpoena

June 28, 2012 |  4:51 pm

The city of Vernon's seal.

Throughout their 10-month investigation of the city of Vernon, state auditors were unable to speak with one of the people they believed knew the most about the city’s financial woes: former administrator Eric T. Fresch.

Fresch made as much as $1.6 million in 2008 as Vernon’s top administrator and was widely viewed as the most powerful decision-maker in the city’s government.

But he managed to avoid a subpoena issued as part of the state’s investigation, state auditor Elaine Howle said. Attorneys for the auditor’s office contacted him repeatedly, and a process server was hired to try to track him down at his home and offices.

But Fresch could not be found.

“I have been state auditor for 12 years, and I have never experienced something like this before,” Howle said. “From our perspective, it’s very suspicious. It’s frustrating for us.... He was someone we really needed to talk to in order to do our job.”

The report, which was released Thursday, painted a dire picture of Vernon’s finances and sharply criticized several major investments that were made under Fresch’s leadership. In some cases, the city could produce no evidence it had conducted a risk assessment of the investments in question, the auditors said.

State Sen. Kevin de Leon (D-Los Angeles), who has been leading an ongoing government reform effort in Vernon and who requested the audit last year, called for prosecutors to investigate Fresch’s dealings in Vernon in a statement released to the Los Angeles Times on Thursday afternoon.

"In light of Mr. Fresch’s evasive behavior, non-reporting, and the lack of clear record-keeping detailing his activities surrounding these major financial dealings, I am going to request that the Los Angeles district attorney conduct a criminal investigation to determine what truly transpired," De Leon said.

When asked if Fresch had met with state auditors, city spokesman Fred MacFarlane said he was not sure. “My understanding is ... they had an opportunity to meet with whoever they wanted,” MacFarlane said. Vernon has also issued a strongly worded response to a draft of the state audit, saying it contained “serious factual errors and mischaracterizations.”

Fresch, an energy finance lawyer, began advising Vernon as an outside attorney in the 1980s, and in 2003 became city attorney. In 2006, he rose to the position of city administrator after his predecessor, Bruce Malkenhorst, was charged with misappropriation of public funds.

As city administrator, Fresch commuted to Vernon from his home in the Bay Area on the city’s dime, rode in limos and stayed in luxury hotels such as the Ritz Carlton. Two of his brothers were awarded consulting contracts.

The audit specifically called into question a contract between the city and Fresch’s law firm, which was one of many city agreements that had no cap on total expenditures. It also noted that Vernon had paid "legally questionable" retirement benefits to some staff members who were classified as safety employees, a designation typically reserved for police and firefighters. Fresch was one of the staffers with such a classification.

But Howle said her staff was most interested in a natural gas prepay purchase Vernon entered in 2006 and a subsequent sale of its power plant. She said Vernon’s own financial advisors said Fresch was "integrally" involved in both deals. City officials initially told the auditor’s officer that Fresch would be available but later said he was out of the state.

Fresch stepped down as city administrator in 2009, and for the last several years has worked as a $525-an-hour consultant to Vernon’s power utility. In recent months, city officials have said he would no longer work in that role; however, Fresch received a $53,000 consulting payment from Vernon as recently as last week.


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Photo: The city of Vernon's seal. Credit: Robert Gauthier / Los Angeles Times