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Criminal probe adds twist in San Bernardino bankruptcy drama

July 13, 2012 |  7:25 am

Photos: California cities in bankruptcy

Revelations of a criminal investigation into possible misconduct at San Bernardino City Hall has added a new twist in the city's plan to file for bankruptcy.

The San Bernardino County Sheriff's Department released a statement confirming the probe but released few other details.

"Several months ago at the request of San Bernardino city officials, the San Bernardino County Sheriff’s Department, along with the San Bernardino Police Department and the district attorney’s office began an investigation related to allegations of possible criminal activity within departments of the San Bernardino city government," the statement said. "The investigation is continuing, and details will not be released at this time. Updates will be provided as new information becomes available."

PHOTOS: California cities in bankruptcy

There have been allegations that some financial documents were falsified to hide the seriousness of San Bernardino's financial woes.

San Bernardino's interim city manager, Andrea Travis-Miller, blamed years of sloppy record keeping for fueling the city's long-coming slide into financial turmoil.

In an interview Thursday with the Los Angeles Times, Miller said the city's financial problems built up over many years, with no single factor driving the city to decide on Tuesday to seek protection in bankruptcy court. A combination of rising pension and labor costs, falling tax revenues, projects that were undertaken with no analysis of long-term costs, and the loss of redevelopment money from the state all fed the decline, she said.

DOCUMENT: San Bernardino bankruptcy report

The city's redevelopment agency had picked up about $6 million a year in expenses that otherwise would have been borne by the general fund, including administrative costs and some services, such as street repairs and code enforcement in redevelopment project areas.

The next step for the troubled Inland Empire city will come Monday, when the council will decide whether to declare a state of emergency or enter into mediation with creditors. It remains to be seen what the move toward bankruptcy will mean for labor contracts or for payments on the city's bond debt.

Miller said the city's financial problems had been evident for many years, but the full scope was not evident until more recently, when she and the new finance director took a hard look at the books.

She said there had been inaccurate financial reporting in the city for many years, which delayed the process of understanding the full financial picture, but she said she had not seen evidence of deliberate wrongdoing.

"I have not found that there's anything more than negligence, maybe sloppiness," she said, adding that staffers at the time were stretched thin because of cuts.

Even without the financial reporting issues, the city still would have faced a budget crisis, Miller said.

Rather than pointing fingers, the city should come together to fix the problems, she added.

"Really, it's no one's fault, and yet it's everyone's fault," she said.


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Photo: A man walks across E Street in San Bernardino; the city is headed to bankruptcy court. Credit: Grant Hindsley / Associated Press

A man walks across E Street in San Bernardino on Thursday, July 12, 2012. San Bernardino is facing a budget shortfall of $45 million and annual deficits over the next five years. (AP Photo/Grant Hindsley)