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The Legal Cost of Corruption Clean-Up

An article in the Los Angeles Times this week investigated the enormous amount of legal fees that cities in California have racked up over the past several years while dealing with corruption scandals. Long after the officials are dishonorably discharged from their positions (and often indicted), many cities are still facing sky-high legal bills in the wake of municipal corruption – a tab that tax payers are rightfully unhappy about. Perhaps surprisingly, most of the legal fees aren’t paid to cover the representation of the disgraced city official (generally, they have to pay for their own attorneys), but for “defending the city from related lawsuits or complying with requests from investigating agencies.”

For example, in May of 2007 the city of Lynwood received a bill from the city’s law firm along with a letter apologizing for the high tab. It had been two years since the city’s former Mayor was convicted for funneling $500,000 in city contracts into his personal company, but the city was still suffering under huge legal debt. In addition, five council members had just been charged with siphoning off public money to increase their own salaries and expense accounts. The letter from the firm explained that $15,840 of the bill was charged for reviewing public records at the request of the media and investigators, and $23,664 was spent on other items related to the criminal charges such as conferences with prosecutors and researching the legality of the stipends paid to the council members.

Just north of Lynwood in the city of Bell, legal costs soared to 6% of their general budget following a year where the former city administrator and other officials were charged with stealing millions in city tax dollars for their own accounts. The city recounts being “inundated with requests for documents from media outlets”, and paid attorneys more than $400,000 for document production work alone. The city faced its own lawsuits as well when the former city officials involved sued the city for back wages and attempted to get the city to pay their legal bills defending the lawsuit by the State Attorney General (another $300,000 in legal fees).

The article noted that it was difficult to ascertain just how much cities pay for past corruption, since many cities do not keep detailed records of spending related to such cases, or would rather not disclose the amount. In fact, the LA Times admitted that many municipalities did not even respond to their request for amounts spent on legal services for the years 2005 to 2010. Notably, the city of Bell is an exception, where their city law firm includes a line for “corruption” in its invoices. In a few recorded cases, the legal expenses can even exceed the amount of money stolen by an official that formed the basis of the original lawsuit.

However, some cities are still optimistic about their legal expenditures. South Gate is used as an example of where a corruption scandal led to the recoupment of their losses, following the removal of their former City Treasurer. The city filed lawsuits to recover city funds that were stolen following the indictment of the Treasurer, and was able to get back $12 million. Regarding the legal expenses, South Gate City Attorney Raul Salinas stated, “[w]e spent money, but we made more money than we spent. That’s a good thing.” City officials in Bell, noting that corruption scandals had eaten up resources that could have gone to their schools and neighborhood cleanup, did not agree with the sentiment.

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