Montebello officials on Wednesday night discussed closing the books on two “mystery bank accounts” that have led to investigations by the district attorney’s office and the state controller’s office.
City officials who now believe there was no “double payment” of a forgivable loan to a restaurant developer – as was speculated in recent months – were expected to make a presentation to the city council last night and recommend that the two accounts be closed. The meeting occurred after EGP press time.
The city itself launched an investigation into both of the accounts, in particular an account opened with Union Bank of California, after finding what seemed to be two transfers of nearly a million dollars each made from the city’s bank account to developer Hank Attina’s bank account.
City officials, who have released a report complete with backup documents, now say that based on documentation and conversations with authorized bank officials, there were no irregularities.
Rather, the double listing of the transfer was due to an error made during an initial transfer of $1 million, in which the wrong account number was written on the transfer slip. The money was bounced back to the city, which then re-issued the money to Attina’s development company bank account.
According to the city, Attina received only the $1 million that was agreed upon in a 1999 development agreement, rather than the $2 million that was speculated. Attina was expected to bring a high-end dining establishment, as well as construct an office building in a strip mall adjacent to the Montebello Town Center.
At the time, the agreement mired in controversy by residents who felt the million dollar forgivable loan was excessive. There were also accusations that Attina had received the contract because of his close ties to city officials, including a friendship with City Attorney Arnold Alvarez-Glasman.
However, city officials believe the investment has since paid for itself, resulting in an Applebee’s restaurant and an office building. Officials and council members have said their friendly association with Attina was merely a reflection of relationships built when active members of the community get to know each other better.
According to the city staff report, the second account opened with Banco Popular was used to administer a HUD loan, though “there may have been a better way to have accounted for and processed the required HUD payments, than through the Banco Popular account initially established for the [Redevelopment] Agency funded revolving loan program,” according to the report by top city officials.
Officials say both “specific purpose” bank accounts should have been closed when they were no longer needed, but as long as they were opened, they should have been accounted for in the city’s financial ledgers.
Both accounts had originally been flagged by the current finance director and reported to city council members in internal “pass through” memos.
Staff’s planned recommendation on Wednesday included returning positive amounts that remained in the account back into the city’s general and redevelopment fund accounts.
Meanwhile, the city is hoping to settle the issue in the eyes of potential lenders in the financial market, who they hope will lend Montebello the cash it needs to continue operating past September, when, lacking a reserve fund, the city is expected to run out of money.
Interim City Administrator Larry Kosmont says negative press about this issue and others have the potential of scaring away lenders. He believes lenders may start to come around after learning more about the issues that have fueled “overzealous” news coverage by media emboldened by the Bell salary scandal.
Kosmont says he knew as little as others before signing on to become an interim city administrator, but has come to feel that news coverage about the bank accounts, possible bankruptcy, and FBI investigations of the city have been “overblown.”
Kosmont says there are still real problems in how the city has been run that need to be fixed. “I see neglect and some sloppy practices both in accounting and practices, but no corruption… There was some level of turnover, a lot of political warfare.”
He believes the bank accounts became an issue partly because of bad accounting practices, which he says can be fixed by adopting better financial principals and guidelines, as well as hiring better qualified accounting staff, consultants and advisors.
“Staff shortages, turnovers, some prior skill sets may not have been what we needed… we had some consultants that were less than qualified or under performed. I think all of these things added to the mix of what went wrong,” he said.
He says the city is trying harder to prevent reoccurrences of the widespread public distrust that has been directed at city hall. “I don’t know why items get either clouded or not dealt with under this administration. We are making every attempt to deal with things on a timely and transparent basis. There is nothing to hide. We are out there with all our blemishes,” he says.
He feels the “budget was well explained” and the fact that they have provided “every staff report, whether we have the money or not,” shows that their actions are consistent with their promise of more transparency.
The city’s report on the two bank accounts can be downloaded at the city’s website (http://www.cityofmontebello.com) under the “agendas” link button. The city can also be reached at (323) 887-1363.