Oh My Fraud

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Caleb Newquist: Today our story takes place in Bell, California, population 33,449. As of the 2020 census, Bell, incorporated as a city in 1927, is named after its pioneer founders, James George Bell and his wife, Susan Abia Hollenbeck Bell. Bell is a suburb of Los Angeles, located in southeast Los Angeles County. Situated on the west bank of the Los Angeles River, there's a lot of Los Angeles. [00:00:30] It sits on only 2.5mi², making it the 13th smallest city with a population of at least 25,000. It is a very unassuming place far from Hollywood. Bell is a working class city with a predominantly Latino population and a large number of immigrants. It's one of the poorest cities in Los Angeles County, so it might surprise you to know that in this small, easily overlooked city, some of the key officials running it had some of the highest public [00:01:00] salaries in the country.

Earmark CPE: If you'd like to earn CPE credit for listening to this episode, visit earmark Cpcomm. Download the app. Take a short quiz and get your CPE certificate. Continuing education has never been so easy. And now on to the episode.

Caleb Newquist: This is Omar Fraud, a true crime podcast [00:01:30] where our criminals have less upper body strength than the average felon. I'm Caleb Newquist,

Greg Kyte: And I'm Greg Keats.

Greg Kyte: Caleb. What? Yes, sir. What year did you enter the accounting profession?

Caleb Newquist: Uh, that would have been 2003.

Greg Kyte: Do you do you remember your starting salary in the accounting profession? Yes I.

Caleb Newquist: Do. Yes. What was it? It was $43,000.

Greg Kyte: And you were in New York City, right?

Caleb Newquist: No, this was Denver.

Greg Kyte: This was Denver. Okay. Yes. So, [00:02:00] wait. 2003. You're making 48,000 in Denver.

Caleb Newquist: No, 43. 43,000. Were you?

Greg Kyte: Were you a licensed CPA already? Do you have your license?

Caleb Newquist: I was not yet licensed. No.

Greg Kyte: Well, that makes me feel horrible. I started in 2008 and my salary was like 30. It was. It was like 30 something. Oh, really? I also.

Caleb Newquist: Was. And were you licensed?

Greg Kyte: No. Not yet.

Caleb Newquist: Okay. Yeah.

Greg Kyte: Yeah. Hadn't even started my or. No, I. Yeah, I was just starting my master's when I got hired. Okay. So, um. But [00:02:30] but answer me this. Okay. Like, because I remember, I, I'd come out of teaching public public school. Yep. Um, I and really, it was pretty much a lateral shift. My, my salary as a, as a ten year veteran teacher was about the same as my starting salary in the accounting profession. So it was it was right over. But I also remember in the school district I worked for, they had an accountant who worked at the district office. Yeah. And all of our since it was basically governmental position, all of our salaries were published. [00:03:00] And of course, I remember that the accountant for the district made $75,000 a year, and I was like going, oh my God, God, what would I do if I made $75,000 a year? Holy shit. And then and then you get in and like, do you remember, like again when you were starting off? Well, and even when you were going concern one of the big things was like publishing salaries and starting salaries and different things like that. What were partners making in the accounting profession? Way back when, when I started? [00:03:30] No, no, no. Like in your in your going concern days. Do you remember like it was.

Caleb Newquist: Always hard to pin down. But you could always I would ballpark it around like like two. Like I'll just throw out like 250 K. Oh like for like for newly admitted partners. But the thing was, the thing was especially for those big firms. Yeah. Like they had to you they, you had to buy into the partnership and they usually, unless you just had the money sitting around like you had to, you basically [00:04:00] took a loan from the firm to buy in and you pay it off over time, right? So a decent chunk of your salary was going back. And again, I don't I don't have, you know, the, the, the, you know, the details in the contracts, but, you know, off the record conversations. That's, that's what people told me is like a chunk of that was going to, um, was going to pay back your buy in. Right.

Greg Kyte: So okay. So when you were so, so we're talking like, give me, give me a time frame for when [00:04:30] you were thinking new partner was about a quarter million a year.

Caleb Newquist: Oh, this is a I would say like yeah 2015. Oh no. Even before that, like 2010 2020 okay. 2011 2012.

Greg Kyte: Okay. So while and so still you know, probably back then everybody was it was easy to go ooh, $250,000. That sounds great. But then um, and nowadays it's what, three times that? What do you think?

Caleb Newquist: Oh, gosh. For a new, new partner. Yeah. No, not for a new partner. No. Okay. No no, no. I'd say it's pretty close. I would. [00:05:00] I think I mean, it depends on the firm. And I'm sure somebody who follows this stuff more closely than I. You know, I don't follow this stuff closely anymore. Right. But my hunch is that new partners would be starting around again, depending on the firm. Like, I, if I was going to just throw a number out, I'd say like 300 k.

Greg Kyte: Okay. So that so not a huge increase from from back then. No.

Caleb Newquist: But when you consider where starting salaries are for entry level people, then it's like. Right. It sounds pretty.

Greg Kyte: Good. So everyone in the accounting profession is [00:05:30] underpaid is basically the I.

Caleb Newquist: Mean, we're we're getting to I mean senior partners are doing well.

Greg Kyte: Okay.

Caleb Newquist: Senior equity partners are doing really well.

Greg Kyte: Okay. Gotcha. So become a partner and be that for a while.

Caleb Newquist: Kill yourself. Kill yourself to become a partner and then kill yourself. Continue to kill yourself. Yeah. Continue to kill yourself.

Greg Kyte: And then you're doing great.

Caleb Newquist: Yeah. You'll be doing great. Worth it. Yeah.

Greg Kyte: So, uh. So what if. What if right now, there was a there was a job that you could get. [00:06:00] Uh, that wouldn't be much work than that. You're doing more than you're doing right now, or maybe about the same that you're doing right now, where you would get paid $800,000 a year for it. How does that sound? Wait, wait.

Caleb Newquist: The work that I do for the podcast or my day job?

Greg Kyte: No, not not the podcast. The day, let's say day job plus podcast equals $800,000 a year. How would that how would that change the fortunes of of the Newquist family?

Caleb Newquist: Uh, I mean, it would it would it would change them pretty fantastically. Yeah. So, [00:06:30] yeah, I mean, I don't make anywhere. I don't make anything near $800,000 between my day job and this podcast. So, yeah, that would, um, that would be all right, I suppose.

Greg Kyte: Right. Yeah. But this, this whole thing, I mean, as we already alluded to, the whole reason, uh, that we're talking about. This is today's episode very much so, revolves around salaries that many would consider disproportionate. The [00:07:00] city of Bell, California, was in rough financial shape when it hired one, Robert Rizzo, as the city administrator back in 1993. Uh, many of the industrial employers of Bell, notably, uh, tire, auto and steel plants which had built up the city in the middle of the century. Those all closed during the 1970s and 1980s. Therefore, thousands of jobs slowly [00:07:30] withered away in the city. And concurrently, many of the social service groups things like Kiwanis and Rotary clubs, Masonic and Moose lodges also declined, arguably as a result of those plants closing. And so that also had a big impact on civic engagement. It was speculated that fewer than 700 votes in Bell could win a city council seat, and to make matters only slightly worse, a poker parlor [00:08:00] had recently closed that provided $2 million in revenue for the city. So, uh, this is what Robert Rizzo inherited. Robert Rizzo, before being hired as the administrator of Bell, California, he had been the city manager of Hesperia, California. Have you ever been through Hesperia, California? Caleb.

Caleb Newquist: I have not, Greg. Have you?

Greg Kyte: Yes. Oh, many, many, many [00:08:30] times. The drive from Salt Lake City to, uh, to LA or San Diego. You got to go through Hesperia. Not an awesome place. Like. It's okay. Uh, yeah. When it's high desert and it's like you do not want a flat tire in Hesperia. Oh, because the heat stroke will get you before. Before anybody before triple A will will get you. Um, uh, and Hesperia was a town of about 95,000 people. It was in San Bernardino County. Still is. [00:09:00] Uh, he also worked for the city of Rancho Cucamonga prior to that. Have you ever been through Rancho Cucamonga?

Caleb Newquist: No, but I love the name of this town.

Greg Kyte: You know what? You know what locals there call, call call of Rancho Cucamonga.

Caleb Newquist: What do the locals call it? Greg. They call it the kooks.

Greg Kyte: No, no they don't. I wish I really I'm trying to make a catch on. Uh, but no one, no one really, uh, is doing that yet, but. Okay, so he was. He was, uh. So Robert Rizzo was the, uh, he worked for the he worked for the kooks, [00:09:30] uh, prior to working for Hesperia. Uh, he had a degree in political science from UC Berkeley. So clearly, he was a hippie at heart and a master's degree in public administration from Cal State Hayward. According to a Los Angeles Times article that reported Robert Rizzo's hiring, the then mayor of Bell was quoted as saying, we were very forthright with him, and he seemed to appreciate that the city is going through a period of tight financial planning. We feel [00:10:00] it's a fair salary, but all that we could afford at this time. One council member made no bones about why he liked Rizzo. He was coming in cheap. Quote. He was willing to work for the least amount of money. Then Councilman Ralph Johnson told the LA times. That was what attracted me and several other council members.

Caleb Newquist: That's that's some honesty from a politician right there. Greg.

Greg Kyte: It is. It is. Well, I think I think politicians generally [00:10:30] want to be looked at as frugal people who are using governmental funds in a prudent manner in a prudent manner. Yeah, exactly. Yeah. So if you can get a qualified city administrator on the cheap, then yeah, you're probably going to tout that. All right. I would say.

Caleb Newquist: I think you, you may you may have a point I think I think you there's no may about it. I think you have a point. It's a feather.

Greg Kyte: In your political cap for being a cheap son of a bitch. [00:11:00] The well.

Caleb Newquist: Said.

Greg Kyte: The LA times cited bells mayor when it reported that, quote, the lower salary reflects the city's troubled economic state. It was thought that Rizzo was, quote, probably the lowest paid city manager in the area, probably in the county. So, Caleb, that salary back in 1993, okay, was a meager $78,000. [00:11:30] Huh.

Caleb Newquist: In 93.

Greg Kyte: In 93. That was probably all right. It probably. It probably. But but here's the thing. Put it in context. That was $7,000 less than his predecessor made.

Caleb Newquist: Okay.

Greg Kyte: And on top of that, he didn't get a car, which I got to assume his predecessor did, or else it wouldn't have been pointed out. And he didn't get an expense allowance, which also his predecessor probably had, or else nobody would have mentioned that that was something he would get. Exactly right. So [00:12:00] no, I mean, when I told you my starting salary in the accounting profession, I didn't mention that, by the way, I didn't get a car or an expense allowance.

Caleb Newquist: Yeah.

Greg Kyte: So.

Caleb Newquist: Me neither. Right.

Greg Kyte: Weird. Weird? Weird. But listen, Bell was grateful to be able to hire Rizzo. Mayor Johnson called him, quote, creative and resourceful, and that he, quote, impressed council members with his insights into community development, financial planning, and personnel [00:12:30] management.

Caleb Newquist: All right.

Greg Kyte: Yeah. He the dude. The dude was. Everybody was excited about Bobby Rizzo. Come. Is that what they called him? Bobby? I think they called him Bob.

Caleb Newquist: Did they? They called him Bob.

Greg Kyte: Bob. Bob.

Caleb Newquist: Rizzo.

Greg Kyte: Yeah, I like Bobby Rizzo. But Robert Rizzo was tasked with managing a $12 million budget and a staff of 92 employees. He hoped to, quote, boost city revenue through projects such as reopening the city's casino and by [00:13:00] developing property such as the highly visible commercial lots that now stand vacant. Rizzo told The Times there is a lot of potential here.

Caleb Newquist: As you might expect of a new administrator who has inherited a city in dire financial straits, Rizzo quickly gained a reputation as a, quote, micromanager who meant to save the cash strapped city by pinching every penny. [00:13:30] Examples of this thriftiness include laying off workers in favor of contractors. He gave away a bridge to the neighboring city of Vernon, which I have to say, when you actually give away a bridge. Yeah, that's a weird thing.

Greg Kyte: That's that that that whole. I don't know how that works. Right. Uh, my, my, in my mind, it must be a bridge that connects the cities of Bell and Vernon. And it was it was Bell's Bridge. And he's like, hey, you like this bridge? It's [00:14:00] yours. Right?

Caleb Newquist: But it also it also causes me to think about the expression, I've got a bridge to sell you.

Greg Kyte: Exactly.

Caleb Newquist: It's just like, exactly. I'm not even going to sell it to you. I'm just going to give it to you.

Greg Kyte: Just take the fucking bridge. Take the bridge. But. But that. But even that doesn't make sense. Because if it's like it's Bell's bridge and he just gives it to Vernon and it's like, so. Well, I don't know. I guess I was thinking about Utah where it's like, now you got to plow the snow on this bridge. But I guess in, you know, you got to fix the potholes in this bridge, the.

Caleb Newquist: The bridge that goes straight into the salt lake. [00:14:30]

Greg Kyte: Right, right, right. Or that goes into the, in this case into the LA River. Into the LA River. Yeah, something. But anyways, however that bridge worked and it's and it's a, it's gifting. Uh, I guess that's what, uh, that's what Robert Rizzo was good at.

Caleb Newquist: Yeah. One other cost saving measure that I came across was that the city's police cars weren't replaced until they reached 200 000 miles instead of 100,000 [00:15:00] miles.

Greg Kyte: That's a lot of miles on a cruiser.

Caleb Newquist: That's a lot of miles on a Crown Vic, no doubt.

Greg Kyte: Yeah.

Caleb Newquist: Taken altogether, this helped get the city of Belle back on solid financial footing.

Greg Kyte: Which is great. Which? Which seems so again. I mean, that.

Caleb Newquist: Is a talent, right? Like, I feel like we haven't talked about this yet and maybe we'll get into it more, but like to the city manager job like that's a big that's a in this case I think it's technically the city administrator. But whatever it is it's a big time. That's a big [00:15:30] time job.

Greg Kyte: Hell yeah. Yeah. For sure, for sure.

Caleb Newquist: And to do it well, I mean, you've got to know what you're doing, right.

Greg Kyte: Well and to. And I guess, just to clarify, I spoke to a to the what was it? It was like the Utah Association of City Managers. Okay. Yeah. And it was very interesting talking with them because first off, I was like, you people are heroes because I've been to city council meetings and only the weirdest fucking people. Worst people to like like like I go, you, you know, that you're [00:16:00] covering, like, important issues. And the weirdest people are the only ones who have any input on your very important issues. So. So there was that. But also it was very interesting because city city manager, city administrators, not an A, not an elected position. It's a it's a high. It's you are hired.

Caleb Newquist: It's a job.

Greg Kyte: Yeah, it's a job because you've got these elected officials that are making decisions. And then somebody's got to make those make the decisions. Yeah, right. Come in. [00:16:30] Make them work in the real world. And that's what city managers do. And it's a big.

Caleb Newquist: And I guess the way to maybe keep me honest here, Greg, but, um, but the way for the I mean, we have lots of accountant listeners, but, uh, as we've noted, there are plenty of Non-accountant listeners. And the best way to think about it is that I would say, like the city manager is kind of like the CFO of a city is is like they're basically, wouldn't you say, is that fair to say, like, it isn't just the bookkeeping, but it's also like if you were going to do [00:17:00] if you're going to do a if you're going to if your city was going to issue bonds, then the city manager would have a huge role in making that happen.

Greg Kyte: Yeah, I, I would say yeah, I think I think you're I mean that's more or less my same take on it. I think that the city manager would more be like the CEO of the city. Um, and, and yeah, the elected officials are more like the board, the board of directors. Right. So. Gotcha. Yeah. So I think I think, I mean, it's it's a loose, loose analogy but yeah, [00:17:30] I but but yeah, I don't think the city manager necessarily has to be a.

Caleb Newquist: Finance.

Greg Kyte: Expert. Yeah, exactly. Okay. And typically I think they would have people that work with them who would be specifically the financial experts for the municipality.

Caleb Newquist: That sounds right.

Greg Kyte: So yeah, but but also just hearing about how he turned things around. I mean, again, you've got corporate people who come in and their whole, their whole, uh, skill set is, is taking a company that's [00:18:00] failing and making it successful. Yep. And that's a lot of what Rizzo did with Bell. It seems like, although also dramatically I think that he probably, you know, I think he was making a lot of people happy, but he's probably stepping on some toes in the process. Yeah. Yep. Likely because you don't you know, you don't fire a bunch of city employees and those people in favor of independent contractors. You don't and make a lot of friends Yeah.

Caleb Newquist: You don't. That's not how you win a popularity contest.

Greg Kyte: Right, right. But at the same time, that's [00:18:30] how you would turn around a city that's in dire financial straits and. That's right. Make it a stronger governmental entity.

Caleb Newquist: Okay, so despite his talent and results, Russo wasn't flashy and kept a low profile. The LA times described him as diminutive, rotund. Mhm. Not exactly. Uh, I don't know. I don't want anyone calling me rotund.

Greg Kyte: No no no no.

Caleb Newquist: Not at all. In my town's paper of record. Right. [00:19:00]

Greg Kyte: Well, it also said that he was self-conscious.

Caleb Newquist: Self-conscious about his appearance.

Greg Kyte: Maybe because he just called him diminutive and rotund. Dumbass. So that's one way. One way to make someone leave the room. Right. One way to make someone self-conscious about their appearance is to mock their appearance. So well done, LA times. Right.

Caleb Newquist: And then, to make matters worse, it also said that apparently people called him the penguin behind his back.

Greg Kyte: Yeah. And not a not a villain known for his good looks.

Caleb Newquist: No, not [00:19:30] a dashing villain. Yeah. Certainly not.

Greg Kyte: And and also, I guess, goes unsaid a villain.

Caleb Newquist: Right, right. Yes. His office was sparsely decorated. The main thing he had was a small TV that he used to follow the stock market. The then police chief, Michael Travis, who worked with Rizzo, told The times, quote, we were not used to that, but we were broke. We were busted and it took a numbers guy. Still, [00:20:00] the results spoke for themselves. People were saying that Bell hadn't looked this good in years. Citizens remarked on how pretty the parks were, how efficiently trash was removed, how swiftly gang graffiti was painted over. Neighborhood watch participants had T-shirts that said La Perla del Sureste, the Pearl of the southeast. Rizzo was getting the job done, but there was a [00:20:30] dark side, too. Okay. He once pulled the police chief into his office to show him that the department accounted for half of the city budget, but generated only 10% of the revenue. Essentially, Rizzo wanted more tickets written, more cars impounded, whatever the police could do to pull its weight on the revenue front. Chief Travis said that, quote, Rizzo is of the belief that people are either assets or liabilities, and if you're a liability, he will find a way [00:21:00] to jettison you.

Greg Kyte: Yeah, that doesn't sound like how a government is supposed to work.

Caleb Newquist: Yeah, I, you know, police as a.

Greg Kyte: As a revenue.

Caleb Newquist: Revenue generator.

Greg Kyte: Yeah. Yeah. That's. Yeah.

Caleb Newquist: Strange idea. Which, by the way, he. Travis. Chief Travis felt that this revenue oriented policing was unethical and did his best to resist it. And since Rizzo wasn't too keen on anyone questioning his methods, [00:21:30] he found a way to get rid of Travis. Oh. Apparently, Travis had violated his contract by taking outside security work without permission. One police sergeant told the LA times that Travis was, quote, the last chief to say no to Rizzo.

Greg Kyte: In 2002, less than ten years after he'd taken the job at Bell, Rizzo's salary was $250,000, more than [00:22:00] triple that of where he started in 2004. It was 300,000.

Caleb Newquist: Those are good raises.

Greg Kyte: Those are some very healthy raises. Then, in November of 2005, an election was held on a single issue measure A, whether to change Bell from a, quote, general law city to a charter city. Supporters of the measure claim that it would free Bell from some of the state laws governing how cities were run, and it would give officials [00:22:30] more flexibility. Now, one of those state laws that had been passed earlier in 2005. It limited the pay of city council members in general law cities. It had been passed in response to high salaries that had been given to city officials in the nearby city of South Gate, California, that had been revealed earlier in the decade. So clearly, Bell, a city with some salaries that were creeping up there.

Caleb Newquist: Yes.

Greg Kyte: Had [00:23:00] a bit of an incentive, at least on the insiders, to no longer be restricted with their salaries.

Caleb Newquist: Right.

Greg Kyte: So California state law capped the pay for Bell City Council members to $400 a month, along with $150 a month for each committee a member sat on. Measure A would remove those limits. All five members of the Bell City Council signed the ballot statement in support. What? Reso [00:23:30] also supported it. Are you for real? And so the day after Thanksgiving, measure A passed with just 336 votes. That's less than 1% of the population of the city of Bell. And Rizzo's pay that year rose to $442,000.

Caleb Newquist: On July 2nd, 2010, a Los Angeles Times article reported that the City of Maywood, Bell's [00:24:00] neighbor to the north, had lost its insurance coverage and therefore had to disband its police department and let go most of the city workers or transition them from full time to contract work for the services where workers weren't available. That responsibility now fell to the city of Bell. Inadvertent rhyme there, I promise you. The Los Angeles County Sheriff's Department.

Greg Kyte: Like you got bars, man.

Caleb Newquist: Totally. Yeah. The Los Angeles County Sheriff's Department replaced [00:24:30] the Maywood police just over a week prior to that report. The times also reported that Bell City Council members were being investigated by the L.A. County District attorney over their pay. What was the deal with their pay? Each council member was getting nearly $100,000 a year. And by the way, those city council positions were part time, right?

Greg Kyte: Because that's why [00:25:00] under the old law, you could only get $400 a month a month. But these guys were getting $100,000 a year, which is significantly. I mean, I'm no accountant, but I'm pretty sure that's more than $400 a month.

Caleb Newquist: Yeah. I'm not I'm not great with numbers either. And I think that's more.

Greg Kyte: No, it was a you also got 150 bucks for each. Uh, like what committee. We'll get it on. Maybe, maybe they each sat on like, uh, like 50 committees. Maybe.

Caleb Newquist: Let let let. Well, I think [00:25:30] we'll get into that. So. Okay. Bear with me.

Greg Kyte: Yes.

Caleb Newquist: From the period of 2009 through 2013, the median household income in Bell was $35,985. 30% of its residents lived below the poverty line, and its city council members were making $100,000 a year. Public servants. Gregg. Public servants. About two weeks later, on July 15th, 2010, another LA times article ran with the title quote [00:26:00] is a city manager worth $800,000? Who was that city manager? Yep. Robert Rizzo And actually it was $787,637, to be precise.

Greg Kyte: Write the report. Close enough.

Caleb Newquist: Close enough.

Greg Kyte: I mean, it's on that up 13 K.

Caleb Newquist: That's like, you know, that's, uh, that's that's a couple months to a city council member. Yeah, he's.

Greg Kyte: He's getting 13 K in benefits on [00:26:30] top of that salary. So yeah.

Caleb Newquist: The reporters on the story, Jeff Gottlieb and Ruben Vives, obtained documents under the California Public Records Act. But that wasn't the only eye popping salary they found for an official at the city of Bell. In addition to Rizzo's nearly $800,000 salary, Gottlieb and Vives reported that the assistant city manager. Angela. Spooky. Spooky. Spooky.

Greg Kyte: Spooky. Spooky.

Caleb Newquist: Spooky. [00:27:00] Yeah. Yeah. We'll go with the Star Trek. Yeah. Pronunciation.

Greg Kyte: Yeah.

Caleb Newquist: Yeah. She was making $6,288 annually, which is also a decent salary.

Greg Kyte: Right. That's like that's ten times the, uh, median household income of the city. Yeah. Yes.

Caleb Newquist: Yeah. She had been hired in July 2003 at a salary of $102,310. So her salary had tripled in [00:27:30] seven years.

Greg Kyte: Yeah. Wow.

Caleb Newquist: The chief of the Bell Police Department, Randy Adams. He was making $457,000 a year. Okay. Yeah. Both Rizzo and Spaccia. Sorry if we're butchering that. Uh, they got 12% annual raises. Great kite. Have you ever in your career gotten 12% annual raises every year?

Greg Kyte: No, no. I've had some big I've had I've had [00:28:00] big promotions with big salary bumps, but never where it's like, listen, you you are. This is part of your employment contract? Yes. You get 12% a year. That would be bonkers. That and. Yeah. And and you got to go. I mean, that's where I'm sure that's you got to say that's where a lot of these eye popping numbers come from. Because if you know the compounding interest at 12%, right, you're going to you're going to your salary is going to go up quick, ridiculously fast.

Caleb Newquist: Now, [00:28:30] if you are not familiar with, uh, public sector compensation, let us give you a few points of reference. Okay. Please. The president of the United States in 2010, Barack Obama. He made $400,000 that year. The. So Robert Rizzo made twice as much as the.

Greg Kyte: The president of.

Caleb Newquist: The United States. Uh, the mayor of Los Angeles in 2010. [00:29:00] Antonio I always get this name wrong. Villaraigosa. Sir. Not bad. Right? Yeah. Pretty close. Yeah. He earned $232,425. So an assistant city manager was making more than the mayor of Los Angeles.

Greg Kyte: Significantly more.

Caleb Newquist: Significantly more.

Greg Kyte: Yeah.

Caleb Newquist: The chief of the Los Angeles Police Department, Charlie Beck, in 2010, earned $307,000 that year. And in case you were wondering again, [00:29:30] if you're unfamiliar with these things, the Los Angeles Police Department is much, much larger than the Bell Police Department. What bell? In 2010, Bell had 33 sworn officers on its staff. Greg, any guesses as to how many sworn officers are on the LAPD in 2010?

Greg Kyte: 33. In Bell. So I'm going to say, uh, 66.

Caleb Newquist: Close. Okay. [00:30:00] Was 59 sworn officers.

Greg Kyte: On the way. I was way off.

Caleb Newquist: Just by a measure, just by a magnitude of. I don't know of lots. A lot.

Greg Kyte: Yeah. Yeah, that's that's ridiculous. So, wait, so the LAPD chief of police was making $150,000 less than the Bell police chief? Yes, and was in charge of 10,000 more officers. Yeah, basically. [00:30:30]

Caleb Newquist: Basically, yes.

Greg Kyte: Awesome. Yeah.

Caleb Newquist: Yeah. Rizzo, Spaccia and Bell, Mayor Oscar Hernandez all defended their salaries and statements to the times. Quote, if that's a number people choke on, maybe I'm in the wrong business. Rizzo said I could go into private business and make that money. This council has compensated me for the job I've done. Spaccia agreed, adding, quote, I would have to argue you get what you pay for. Bell Mayor Oscar Hernandez defended the salaries. [00:31:00] Quote our city is one of the best in the area. That is the result of the city manager. It's not because I say it. It's because my community says it. A few days after the story broke, the community was saying some very different things. Hundreds of Bell residents protested at a city council meeting calling for the resignation of the mayor, Oscar Hernandez, and other city officials. And when that didn't happen, they started chanting recall as Rizzo, Spaccia, and Adams. On July 23rd, [00:31:30] 2010, one week and one day after the LA times broke the story of their salaries, they all resigned.

Greg Kyte: On Tuesday, September 21st, 2010, eight former and current Bell City officials were arrested on charges related to the misappropriation of $5.5 million. Los Angeles County District Attorney Steve Cooley called it Corruption [00:32:00] on steroids. And if anybody knows anything about steroids, it's probably people who live in Los Angeles. By this time, a lawsuit had been filed by the California state Attorney general, and the state comptroller estimated that Bell had wrongly collected $5.6 million in local taxes. Robert Rizzo was charged with 53 criminal counts that included misappropriating public funds, conflicts of interest, and falsifying [00:32:30] public records to keep his salary secret. Among some of the actions wrapped into these charges included Rizzo illegally writing his own employment contracts and steering nearly $1.9 million in unauthorized city loans to himself and to others. What? What do you think that means? Caleb?

Caleb Newquist: Just unauthorized loans. Yeah.

Greg Kyte: Does that mean the city took unauthorized loans and he just pocketed that money. Or does that mean [00:33:00] that there was an unauthorized loan from the city to Rizzo?

Caleb Newquist: Well, to the best of my understanding is like, I don't think I think loans to city officials were not even allowed. Yeah. That would. So the fact that they were doing it was part of the misappropriation. Okay.

Greg Kyte: Gotcha.

Caleb Newquist: Yeah. So because like when I remember so if you I don't remember which article it was because there's everything's in the show notes. There's like there's a lot of articles in the show notes, like I think I dug up like 30 or 30 different pieces of research, [00:33:30] but, um. Yeah, yeah. Uh, if I recall that 1.9 million, the loan portion of it rolled up into that 5.5. Okay. So that was part of the misappropriation.

Greg Kyte: So basically he took a loan from the city. They wasn't allowed. Officials weren't weren't aren't. Yeah. They weren't allowed to do from the city, which makes sense. Why in the hell would you ever.

Caleb Newquist: Well no. And I mean to do that, you know, a municipality. Maybe. Maybe I'm wrong. Maybe I completely don't have a good understanding of this, but I don't really think a municipality. I don't really think of a municipality as a bank, [00:34:00] Greg.

Greg Kyte: No. Well, but but you could think of it as a as privately placed municipal bonds where it was placed with one specific person, that person being the city manager. Right. Who now has. But also. Um. Yeah. Yes. Yes. We're going.

Caleb Newquist: To do this bond issuance and and I.

Greg Kyte: Take it.

Caleb Newquist: I will take.

Greg Kyte: That.

Caleb Newquist: I'll take it. Gladly. Take.

Greg Kyte: Yeah. Oh. And I and and. Yeah. Yeah.

Caleb Newquist: Oh. And don't expect the interest. Right.

Greg Kyte: Interest.

Caleb Newquist: Don't know if I mentioned that.

Greg Kyte: Forget it. Forget it. Forget about the interest. [00:34:30] Uh, in addition to Rizzo, the mayor, the assistant city manager and five city council members were arrested and charged. Now, remember how just a little while ago, we told you that because Bell had become a charter city, it could bypass the California law that limited the compensation for city council members. The good news, as the LA times reported, is that Bell's charter said that its City Council members, quote, are to receive [00:35:00] the same salaries as their counterparts in general law cities of the same size. And in fact, The Times reported that Bell's city council members received $150 for serving on the council. But the bad news is that the charter allowed the city council members to be paid quite a bit more than the $150 state limit for committee or commission assignments, The Times reported. Bell Council members [00:35:30] received the bulk of their salaries as payments for sitting on the Planning Commission, the Surplus Property Authority, the Public Finance Authority and the Solid Waste and Recycling Authority. At least $7,873.25 monthly, so that looks bad. Over $7,800 for each city council member to sit on those special commission boards. But it looks even worse when you consider what's sitting on those boards [00:36:00] involved. Back to the times. They say city minutes indicate that those boards do little work. Board meetings and Bell are supposed to take place during council meetings, although their names seldom appear on council minutes. When the boards held separate meetings, they sometimes lasted a minute. Caleb.

Caleb Newquist: That's my kind of meeting.

Greg Kyte: Greg.

Caleb Newquist: That is my kind of meeting right there.

Greg Kyte: Okay, so many of us have been to meetings that should only last one minute. Yeah, but [00:36:30] don't these people's meetings probably should last longer than a minute? Yeah, but still only take one minute. And that's over $7,800 a month to attend a one minute meeting, that is. I want that job.

Caleb Newquist: I want that job.

Greg Kyte: I think I think I'm gonna put in my application. Well, I guess I can't now, but I would have I would have vied for a position on the city council for those kind of dollars.

Caleb Newquist: Oh yeah.

Greg Kyte: I would move to Bel just to get on the city council. You only need.

Caleb Newquist: Like 700 votes.

Greg Kyte: It [00:37:00] sounds like it. Maybe 336. And I'm good.

Caleb Newquist: Maybe. Yeah.

Greg Kyte: As for Rizzo, among the more notable lifestyle choices afforded to him by his massive salary was, quote, owning a stable of thoroughbreds that included a gelding named Caleb. How do you pronounce this?

Caleb Newquist: Defensa de la Gene.

Greg Kyte: Which is French for spend money that he named his horse. Spend money. Had he only said spend ill gotten gain, [00:37:30] that would have been the only way to improve on the name of his gelding.

Caleb Newquist: And it would probably still sound good in French.

Greg Kyte: It probably would sound amazing in French.

Caleb Newquist: The LA times investigation broke this story wide open, and many astonishing and sordid details began to emerge as law enforcement and more media outlets looked into what was going on at the city of Bell. For example, an activist who had been advocating for changes to the state pension system figured [00:38:00] that Robert Rizzo could pull in over $30 million in pension payments. Geez.

Greg Kyte: And even after he retires and still gets $30 million? Yeah.

Caleb Newquist: It oversimplifies. It oversimplifies we. I'm oversimplifying it pretty significantly here, but essentially like that. Assumed he was retiring at 62. He was living to be 88 or something. And like and like and it showed the, you know, the incremental growth in his in his, his, his pension distributions over those years.

Greg Kyte: If he if [00:38:30] he retires and dies the next week, he's not going to get he's not going to get 30 million. Not going to get 30 million.

Caleb Newquist: Yeah. Right. After a state audit couldn't verify a series of pay raises, Rizzo and other officials had their pensions cut considerably. Something else. More than half of the ballots cast in the special election to change bill to a charter city where absentee ballots. There were even reports of people who were collecting absentee ballots and helping people fill them out. And if the citizen couldn't [00:39:00] complete it, then the people collecting the ballots would fill them out. Now, I don't know if you're aware of this, but that would actually be voter fraud. That would be yeah, that's like real deal voter fraud. That's pretty.

Greg Kyte: Well. And also I'm trying to think back to what year did they change that. Do you remember? 2011.

Caleb Newquist: It was an off cycle year.

Greg Kyte: 2011.

Caleb Newquist: Okay. It's an off cycle. No no, no, not 2011. I'm sorry. It was, um. No, sorry 2005.

Greg Kyte: 2005 by [00:39:30] 2005. Yeah. Voting. Yeah. Oh. Vote by.

Caleb Newquist: Mail. No, no. That. No, there was none of that was going on back in 2005. No, I don't think so.

Greg Kyte: Okay.

Caleb Newquist: I mean, I was living where was I living in 2005? I was in Colorado in 2005, and I, I was not voting by mail then. Okay. Yeah, yeah.

Greg Kyte: Absentee because absentee ballots, a lot of times you had to like make a case to, to get an absentee ballot.

Caleb Newquist: Yeah. I, um, I the.

Greg Kyte: Only way the.

Caleb Newquist: Only time I [00:40:00] voted absentee when I was in college, I think the first election I voted in, which would have been 2000.

Greg Kyte: Uh.

Caleb Newquist: And I voted absentee. Okay.

Greg Kyte: I, I think I voted absentee also when I was in college. Uh, but that was because I was registered, uh, in my home city of Mountlake Terrace. Yep. And I was living, uh, 30 minutes away in Seattle, and [00:40:30] and I was like, let me see if I can get an absentee. And I remember filling out my absentee ballot at my mom's house, uh, so. And kind of feeling a little smug.

Caleb Newquist: What was your reason for voting absentee?

Greg Kyte: I that was laziness. Lazanis. Right. Exactly, exactly. And I was like, it was really easy to get that absentee ballot. Yeah. And kind of going, we should do this all the time. And now look where we are now, look where.

Caleb Newquist: We are now.

Greg Kyte: In the state of Utah. It's it's the weirdo. The weirdos are the ones who show up [00:41:00] to vote.

Caleb Newquist: Yeah, well, and like, let's, I guess, I guess we the point has to be made because maybe we didn't make it explicitly, but, um, whenever there is voting fraud now and granted, I don't know who our listeners are, but I know who some of them are. Voter fraud is not common, but when it does occur, absentee ballots are something that, uh, gets [00:41:30] flagged a lot. Yeah. Yeah, yeah.

Greg Kyte: Yes.

Caleb Newquist: So it was in this case, we had a pretty legitimate, uh, uh, case of voter fraud potentially going on. Yeah. So then in March 2011, a recall election was held on the Bell City Council members. You will not be surprised to learn that all the City Council members were recalled, including the single member who hadn't been charged with any wrongdoing.

Greg Kyte: Oh, but that's not surprising to me at all.

Caleb Newquist: No, not [00:42:00] at all.

Greg Kyte: Everybody's just like going clean.

Caleb Newquist: Clean house. Oh, yeah.

Greg Kyte: Absolutely.

Caleb Newquist: Throw them out. Yeah. Throw the bums out for sure. Yeah.

Greg Kyte: You you didn't do anything wrong. But we still don't like you. Get the hell out of here.

Caleb Newquist: Yeah, yeah. Guilty by association.

Greg Kyte: Very much so. Yeah.

Caleb Newquist: Fun fact that came out of that recall election. A special bill had to be passed to allow the city clerk to swear in the new council members. And the Los Angeles County Board of Supervisors had to validate the election. Quote, prior to that, the new city council had been unable to take office because there [00:42:30] was no quorum of the former city Council to swear them in. Amazing, fabulous, right.

Greg Kyte: Uh, there were a lot of pretrial hearings throughout 2011 where some damning evidence started to come out, including the fact that a former city clerk testified that Rizzo instructed her to show falsified records to a Bell citizen who had inquired about Rizzo's pay. Those records showed that Rizzo earned $15,000 [00:43:00] a month, while city council members only made about $700 a month. The first officials to go on trial in this case were six city council members in January of 2013. The trial lasted four weeks and jury deliberations started on February 28th. But then a juror had to be excused, replaced, and then that jury took 18 days to deliberate. So then on March 20th, the result of those deliberations were that five council [00:43:30] members were found guilty on some charges, but not guilty on other charges. And the jury was deadlocked on yet another charge and the judge on the case declared a mistrial on those. One city council member, his name is Luis Arteaga, was acquitted of all charges.

Caleb Newquist: I have I have nothing to say other than that sounds like a mess.

Greg Kyte: It sounds like a judicial clusterfuck, I think is what they call that.

Caleb Newquist: Oh yes, that does sound like a that sounds a technical term [00:44:00] there.

Greg Kyte: Yeah, exactly. Prosecutors announced in May 2013 that they would retry the remaining five defendants. Meanwhile, prosecutors were getting ready to go to trial against Robert Rizzo and Angela Spaccia. Later that year, in early October of 2013, to everyone's surprise, Robert Rizzo up and decided to plead no contest to all 69 of the charges he was facing. And Caleb, just so [00:44:30] you're aware, no contest. Basically the same as pleading guilty. Correct. So he just said, yeah, there's all these 69 crimes. I did. All of them. Yep. His lawyer said that he wanted to take responsibility and blame Spacca for being the mastermind behind the scam. It was also made known that he would plead guilty to tax evasion charges, which he also blamed on Spacca, because Spacca apparently prepared his fraudulent tax returns. Yeah, you know.

Caleb Newquist: Even [00:45:00] though even though it says right on the tax return that by signing the tax return.

Greg Kyte: You take responsibility. You take.

Caleb Newquist: Responsibility for the.

Greg Kyte: For the preparation of said return. Yeah. And also really I hate it that it's like he was going to take responsibility but also.

Caleb Newquist: Throw someone under the bus.

Greg Kyte: Completely throw his, his his like underling under the bus. That was just a puppet. Yeah. Of this person I hired ten years after I got the job.

Caleb Newquist: They were excellent at managing up, right?

Greg Kyte: Right. [00:45:30] Uh, not everyone was satisfied with this outcome. Uh, one of the new council members, Nestor Valencia, said he's a rat bastard. We won't know what really happened, because once you plead guilty, there's no trial, right? All of the evidence that was discovered doesn't need to be presented, right. Because Robert Rizzo wussed out and just pled no contest.

Caleb Newquist: I mean, that's my favorite quote in the story, but but also. [00:46:00] Oh, if you if you put yourself in Robert Rizzo's shoes, I'm probably I'm probably don't want to go to trial. I don't like my odds at trial.

Greg Kyte: Right, right. Yeah. Maybe his his attorney was also going. Yeah, this isn't gonna this isn't going to go well for you, Bob. Yeah.

Caleb Newquist: So and also Rat Bastard is just one of those things where when people say it, you're just like, I don't know what what it just.

Greg Kyte: It feels good. It feels. It feels. It feels good. Yeah. I [00:46:30] mean, how many rat bastard. Yeah.

Caleb Newquist: Yeah.

Greg Kyte: All right. Uh, at Sparky's trial, the former police chief of Bell, Randy Adams. You remember him? He's the police chief who was making more than the police chief of the LAPD. Right. Uh, he testified as a defense witness for Sparky. And maybe you picked up on this. Maybe you didn't. But he was not one of the people who were criminally charged in this case. Guy [00:47:00] got off basically scot free, but Sparky ended up testifying in her own defense, uh, basically saying Rizzo forced her lucrative salary on her. Oh, no. Please don't make me take this exorbitant salary, boss. This despite the fact that she wrote the contracts for both her and Rizzo, that the City Council never approved, and that she got $350,000 in loans from the city of Bell. A jury found Sparky [00:47:30] A guilty on 11 charges. In December of 2013, Rizzo was sentenced to 12 years for the corruption charges and he got 33 months for tax fraud. Angela Spaccia was sentenced to 11 years in prison. As for the city council members, they ultimately struck a plea deal for the outstanding charges they faced in April of 2014. Aside from one former city council member who was sentenced to two years in prison and another [00:48:00] who was given home confinement. The others all received one year jail terms, including Victor Bello, who had written a letter to the Los Angeles County District Attorney in May of 2009 alleging misconduct in the city of Bell. Is that a snitches get stitches? I don't think so. That's a snitches should have gotten out of their fraudulent Lifestyle and avoided stitches, [00:48:30] maybe. Yeah, something like that. Investigators didn't interview bellow for ten and a half months after he alleged the misconduct of the city of Bell. These investigators later testified that bellow had raised concerns as far back as October of 2006.

Caleb Newquist: You might be wondering how Rizzo and Spaccia were [00:49:00] able to pull this off, aside from basically bribing city council members. That is, how were they able to finance these extravagant salaries and pensions? Well it's complicated. Uh, they did several things, including, as we alluded to earlier, encouraging the police department to write more traffic tickets and impound more cars in 2008 2009. The city of Bell made nearly $1 million in impound fees. They were charging motorists $300 to recover their cars, which was three times [00:49:30] what the city of Los Angeles. Was charging at the time. Wow. Again?

Greg Kyte: Yeah. It's a the comparison never ceases to amaze, right? Between Bell and and the city of Los Angeles.

Caleb Newquist: But one of the main ways the bell. Administrators collected money from its citizens was through property taxes. Homeowners in Bell were paying the second highest tax rate of any city in Los Angeles County. And remember, this is a county that has cities in it such as Hidden Hills, Malibu, Santa Monica, and Beverly Hills. [00:50:00] These are some of the wealthiest places in the country, and Bell had higher property taxes than those places.

Greg Kyte: So.

Greg Kyte: So in this in this city where a third of the of the citizens were living below the poverty line, they were paying higher property tax rates. Yes. Than people in Malibu.

Caleb Newquist: Right.

Greg Kyte: So crazy.

Caleb Newquist: The the LA County auditor controller reported that Bell residents paid 1.55% [00:50:30] of their home's assessed value in taxes. That was 34% higher than the county average of 1.16. California auditors figured that the taxpayers were overcharged $2.9 million.

Greg Kyte: Crazy.

Caleb Newquist: Speaking of auditors, the Irvine, California branch of the audit firm Mayer Hoffman McCann was cited for, quote, repeated acts of negligence in the 2009 audit of the city of Bell. The California Board [00:51:00] of Accountancy suspended its CPA license, uh Mayor Hoffman McCann's CPA license for six months, put the firm on two years probation, and fined it $300,000. Greg Kyte, did we learn anything?

Greg Kyte: Yeah. Uh, yes. Okay. We were. We were reminded. I mean, for me, I was reminded of things, uh, throughout throughout this, this whole, uh, case. All right. Uh, one of the things [00:51:30] is I love it when government employees who commit fraud or corruption say that they could be making so much more money if they did the exact same job in the private sector, because my reaction is, then you should have worked in the private sector. You don't. Whoo hoo! I mean, doesn't everyone know the government jobs are not you? You're not going to make all the money if you're looking for all the money. Don't go into a government job.

Caleb Newquist: Yeah, [00:52:00] I think I think that's pretty much common knowledge.

Greg Kyte: You'll have stability. Yes. You'll usually have generous benefits. Yes. But you're not going to be making the, you know, Goldman Sachs salaries. No. In, in the, in the private sector. So if that's what you were after, go work somewhere else. However, that said, we know that this is a regular rationalization, uh, for, for any fraud where it's like somebody else doing my same job would be making so much more than me. That's. That's why it's okay for me to get my beak wet [00:52:30] in these fraudulent ways. That's right. The rationalization side of the fraud triangle. Yep. Um, but we we see, I feel like that's particularly the case in these governmental frauds and in these municipal frauds. And that might be because I used to be a public school teacher. And I remember a lot of times when I would get worked up or I'd be working crazy hours at my job just going, I don't the number of times as [00:53:00] a government employee, as a teacher, that I would say I don't get paid enough for this was that that happened a lot. Yeah. To me. So, no. Did I commit fraud? No. No, I did not. But at the same time, I understand the sentiment. And if it gets out of control, that's going to fuel a lot of, that can fuel fraud and corruption like we saw here, like we saw in the Roslyn School District case. That's the same thing that the superintendent of that school district said [00:53:30] when he and his business manager stole $11 million from the district.

Greg Kyte: Yep. So this is this is a it's striking a familiar chord, uh, in fraud with that. Uh, the other thing that came to mind is that once again, and I find Caleb, I think this is such an interesting thing, such an interesting pattern that we've seen in these cases is that people who are good at their jobs are also really, really good at stealing from their employers. [00:54:00] Yeah. And, and, and I think, I mean, again, you to, to successfully pull off some major fraud, you've got to be a pretty smart person to do that. But on top of that, you are going to you're going to gain the trust. You're going to gain the ability to pull off those frauds if you're really, really good at your job. So we look at Robert Rizzo. He came in to this failing city of Bell, and he I mean, [00:54:30] it sounds like objectively, he turned that city around. Yeah. By doing and that's how you start getting these justifications of, yeah, we make a lot of money, but you get what you pay for. Yeah. We needed somebody who could come in and could turn the city around. And he did. And now, shouldn't he be compensated for the job that he did for the residents of Bell, California? Again, another rationalization that's just right there that can be used both both by the perpetrator and by the people [00:55:00] who, uh, who, uh, what's the word?

Caleb Newquist: Enablers.

Greg Kyte: Enablers. So it's a it's a great it's a great rationalization for people who commit the fraud. It's also useful for the people who enabled the person who committed the fraud. Yes. You know, the bystanders who were like, this is okay, what's going on? It feels maybe feels a little sketchy. But here's a way for me to make this all make sense as well.

Caleb Newquist: Yeah.

Greg Kyte: In terms of this whole idea of people who are great at their jobs [00:55:30] are also great at stealing from their from their, their employers. We saw Rita Crundwell in Dixon, Illinois. She she was great at her job. And she pulled off the biggest municipal fraud in in United States history. We also saw it with Claudia Wiles. She was the tax collector in little old Anson, Maine. She was great at her job, and she also stole at least a half $1 million from this little tiny municipality. So Rizzo, Robert Rizzo, he did a great job turning around the city of Bell, but he also did [00:56:00] a great job of fleecing the city of Bell.

Caleb Newquist: Yeah, yeah, yeah, they they they they got some, they got, uh, they came up with some clever ways to squeeze their citizens for pretty much every nickel. Yeah. They could. Yeah. We didn't cover them all in this episode, obviously, but, uh. But yeah, check out check out all our sources in the show notes. Yeah, there's there's plenty there to, uh, check out. Yeah.

Greg Kyte: Um, now, the other the other interesting thing here is that the [00:56:30] the exorbitant salaries. Yes. That was not fraud.

Caleb Newquist: It was not.

Greg Kyte: So.

Caleb Newquist: And that was in fact, in fact, we didn't mention it, but that was the. So remember Rizzo pleaded no contest. Sparky, whose name we've been butchering this entire episode, I'm sure. Yeah. She's the only one who went to trial. Well, she, uh, the other council members, she she went to trial, uh, after the council members. But as one of the key perpetrators, her defense was [00:57:00] my mega my my super huge salary is not a crime. And that was a key part of how they tried to explain, uh, the salaries that they were receiving was that it was all within the rules, but it turned out like they were writing their own contracts, and they were doing they were doing all this other stuff that was misappropriation of, uh, of public money. And so they [00:57:30] even though it was technically, uh, within the letter of the law.

Greg Kyte: Yet.

Caleb Newquist: Clearly violated the spirit of the law.

Greg Kyte: Right. So I know that there's often times when people are trying to, you know, split hairs with this stuff. They will say, uh, especially it seems like in governmental issues they talk about fraud and abuse. Yes. And, and I would say the exorbitant salaries would definitely fall under abuse. They were abusing the power that they had. They were abusing [00:58:00] the, you know, the the levers that they had for their own personal gain. But was it fraud to have these huge salaries? No, but it was the LA times breaking the news about these ridiculously exorbitant salaries that caused everybody to, like, flock to the city to go, what the hell else is going on here? And that's when you found the contracts that were written illegally. That's when you found out these loans that were given from the city to these individuals. That's when you found the $5.5 [00:58:30] million of misappropriated funds that happened that were beyond abuse and were black and white fraud.

Caleb Newquist: Yeah. And, um, I'm glad you brought it up, but how was this, uh, how was this fraud discovered?

Greg Kyte: Not by the.

Greg Kyte: Auditors.

Caleb Newquist: And not.

Caleb Newquist: By a whistleblower. It was by. Well, I mean, if you if you consider journalists to be whistleblowers, but, yeah, it was it was it was reporting by a, uh, by by local by local journalists. And what's interesting is that Bell [00:59:00] used to have its own paper. Right. And there were other like, smaller periodicals that kind of covered, uh, you know, smaller towns within Los Angeles County. But, um. But the Bell newspaper closed many years before this started, and so there just wasn't a ton of scrutiny, right. On these officials. Right. So, for example, when there's a there's a good article in the show, notes, um, about how these reporters, uh, [00:59:30] we mentioned them earlier, Jeff Gottlieb and Ruben Vives. Yeah. How they, how they, how they, how they broke the story. And one of the things was that, um, you know, it all started with this story about the city of Maywood that had lost its insurance and like, and had to discontinue services. And Bell picked up some of those services. And so while they were working on that story, they kind of just stumbled across these crazy salaries and they're like, right, well, maybe we should ask some questions about this because this is pretty [01:00:00] weird. Right? And so then and I think that's and then once they found that thread, they just kept pulling it and pulling it and pulling it.

Greg Kyte: Right.

Caleb Newquist: And so like it just goes to show you and I mean, I don't mean to be like I'm being probably too kind of idealistic or whatever, but but like the, the importance and the power of local journalism. And I mean, this is the LA times, which is a big which is a big newspaper, right? It covers the second biggest city in the country. But it just so happened that this little tiny city that's [01:00:30] close to Los Angeles, it was just in a way, it was just kind of lucky because, yeah, nobody was going to those city council meetings, nobody like, you know, reporters go to the LA City Council meetings, right? Because it's a big city. And like, there's a lot going on and has its own problems. But like Bell's just like this small little town. And so there weren't reporters going to all those meetings and it took, I don't know, just these kind of like these things kind of aligned in such a way that these reporters were able to, like, turn over all the right rocks and like, they they [01:01:00] uncovered this huge story. And so that that's pretty cool. And also.

Greg Kyte: Well.

Greg Kyte: Well, before. Before you go, support.

Caleb Newquist: Your local journalist. Go support your local journalist.

Greg Kyte: Right.

Greg Kyte: Well, and and I think of the, the stat that we've cited many times that, uh, that there's like 5% of frauds that are discovered by accident. Yes. And only 3% of frauds that are, uh, discovered by the external auditor. Right. Uh, and and I would say if the LA times was investigating an adjacent [01:01:30] city and just so happened to stumble across the exorbitant salaries in Bell, I would say that probably broadly falls under the, uh, that this fraud was discovered by accident. Yeah, exactly. Probably. So. So that. Yeah. Fraudsters are. Well, I like to say fraudsters are 2% dumber than auditors are good at their job.

Caleb Newquist: And with that.

Greg Kyte: Okay, that's it for this episode. And remember, most city council meetings [01:02:00] should only be one minute long. But you still shouldn't get paid 7800 bucks for attending them.

Caleb Newquist: And also remember, if you must spend your fraud loot on horses, just name it Normal Horse. My name is Normal Horse. Nothing to see here but a normal horse.

Greg Kyte: If you want to, that's awesome.

Greg Kyte: And coming in front of his normal horse. Just a normal horse. Nothing to see here, but a normal horse coming around the turn. Normal horse? Normal horse. Nothing to see here but a normal horse. Uh, if [01:02:30] you want to drop us a line, uh, send us an email at. Oh, my fraud@earmarks.com. Caleb, if people want to find you out there on the internet, where can they do so?

Caleb Newquist: Best place to get me is LinkedIn slash Caleb Newquist. Greg, are you are you anywhere on the internet?

Greg Kyte: Uh, same. Linkedin is the right. You need LinkedIn and patience. Uh, so so yeah, DM me on LinkedIn. I'm Greg Kite, CPA on LinkedIn. And I do look at every interaction I have on LinkedIn, [01:03:00] but it's maybe twice a month that I do, so. So, uh. Yeah. Like I said, LinkedIn and patience.

Caleb Newquist: Oh, My Fraud is written by Greg Kite and myself, our producer Zach Franc. Rate review and subscribe to the show wherever you listen to podcasts. If you listen on earmark, you can earn some free CPE, which if that is a thing for you, do it. Yeah, because it's time running short. Yet time is not quite running short yet.

Greg Kyte: Oh it.

Greg Kyte: Is. People just don't feel that time.

Caleb Newquist: Is running short. [01:03:30] Yeah, yeah.

Caleb Newquist: And then if you know someone who is running short, you should share this show with them.

Greg Kyte: Absolutely.

Caleb Newquist: So they can get some CPE. Yep. Okay. All right. Join us next time for more average swindlers and scams from stories that will make you say, oh my God.