City of Industry

City of Industry City Council closes their council meeting after a closed session on Thursday, January 28, 2016. The state controller’s audit concludes “the potential for fraud, waste, and abuse of public resources was extremely high” over the past decade in the City of Industry. (Sarah Reingewirtz/Pasadena Star-News)

By Jason Henry, San Gabriel Valley Tribune
and Rebecca Kimitch, LA Daily News
Posted: 01/28/16 – 10:19 AM PST |

The state’s top fiscal officer has audited the city of Industry and concluded “the potential for fraud, waste, and abuse of public resources was extremely high” in the city over the past decade.

Specifically, the audit by State Controller Betty T. Yee found the city overpaid employees, possibly doubling some salaries, paid city contractors millions of dollars without clear explanation of work being done, and allowed city staff and elected officials to use city credit cards to purchase iPads, a television, wine tasting and even $661 in “massage services.”

The report also found the City Council largely failed to conduct oversight of city staff and spending. In the eight years from 2006 to 2014, the council adopted more than 800 ordinances and resolutions, and all but one were adopted unanimously “with little or no deliberation” even though many “contained significant fiscal and control implications that were not addressed.”

Document: Read the state controller’s audit of the City of Industry

It notes City Council meetings last, on average, just over 18 minutes.

That lack of oversight had potentially serious implications for the city, which has only about 400 residents but 2,500 businesses and $140 million in annual revenue.

“We identified numerous contracts and transactions that, at least in appearance, raised questions about City Council’s lack of due diligence, including potential conflicts of interest and favoritism,” the report reads.

In addition, former City Manager Kevin Radecki was given “broad authority” to approve work and authorize payments without detailed documentation, the audit found.

“As a result, the potential for fraud, waste and abuse of public resources was extremely high,” it reads.

• City staff and elected officials charged $284,000 to city-issued credit cards from 2009 to 2014; 83 percent of those charges were questionable. The charges included a $560 meal, a $421 hotel room for one night, $446 for wine tasting, $4,142 for flowers and $253 for alcoholic drinks.

• The city’s accounting controls showed “pervasive and serious deficiencies.” Only 15 percent of controls were considered adequate.

• The city paid $14.7 million to the Industry Manufacturers Council since 2003 for advertising and promotion, but it is not clear what, exactly, those payments were for. Controller auditing staff “could not determine what services, or if any services, were provided.”

• The city paid $12.26 million to Zerep Management Corporation, owned by former Mayor Dave Perez, for maintenance and miscellaneous services from July 1, 2012, through June 30, 2014. Those payments were also questionable as many were made without adequate invoices and without proper authorization. An earlier internal audit of the city’s relationship with Zerep and other Perez-owned companies is what sparked the controller’s investigation.

To read expanded article, click here.