By Dale Kasler
dkasler@sacbee.com
Published: Thursday, Dec. 2, 2010 – 12:00 am | Page 6B

CalPERS and CalSTRS have paid nearly $3 million in consulting fees to an accounting firm that’s being investigated for its role in the city of Bell salary scandal.

Mayer Hoffman McCann, an accounting firm based in Leawood, Kan., has worked for several years for California’s two big public pension funds. Now, its involvement with the municipal corruption case in Bell is creating problems for the firm.

While CalSTRS is taking a wait-and-see approach, Cal-PERS has decided not to give Mayer Hoffman any more business – at least until State Controller John Chiang finishes his investigation into the accounting firm’s work. Mayer Hoffman has occasionally consulted on real estate investments for the California Public Employees’ Retirement System since 2005.

“They’re just not giving them any new work,” Cal-PERS spokesman Brad Pacheco said Wednesday. He added that CalPERS might re-evaluate its relationship with Mayer Hoffman once Chiang finishes his probe of the firm.

CalPERS, already under fire because of an alleged bribery scandal, was criticized by Attorney General Jerry Brown and others because it knew for years – but didn’t alert anyone – about the huge salaries that Bell city officials paid themselves. In response, Cal-PERS said its job is to enforce public pension laws, not to meddle in local employee compensation issues.

Last month, CalPERS announced that it would dramatically reduce the pensions paid to several Bell officials.

Eight city officials have been charged in a massive corruption scheme in Bell, a suburb of Los Angeles. Prosecutors said city officials paid themselves exorbitant salaries, doled out contracts to firms owned by city workers and illegally overcharged residents and businesses on their taxes.

As Bell’s outside auditor, Mayer Hoffman routinely gave the city’s books “a clean bill of health,” the Los Angeles Times reported last month.

Chiang’s office is performing a “quality control audit” of Mayer Hoffman’s work for the city. Among other things, Chiang has found “numerous glaring problems … in Bell’s internal controls,” said his spokesman Jacob Roper.

Roper said there’s no timetable for completing the probe of Mayer Hoffman.

Joe Crivelli, a spokesman for Mayer Hoffman, said the firm hadn’t heard about the suspension by CalPERS. He said the firm is cooperating with Chiang’s probe and added, “There’s been a real rush to judgment in the city of Bell matter. … We stand by the work we did in Bell, and we stand by the team that did the work.”

At CalPERS, staffers from Mayer Hoffman’s Irvine office have consulted from time to time on the pension fund’s real estate investments. The firm was paid $1.9 million by CalPERS in the five years ending June 30.

“They don’t vet projects for us, they do auditing,” Pacheco said.

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