Bill Would Shield Cities From Pension Lawsuits

Local governments would be shielded from pension lawsuits by former officials who are convicted of corruption under legislation sparked by the scandal in the city of Vernon, where a former administrator sued the city to restore his full pension.

Sen. Kevin de Leon, D-Los Angeles, introduced the legislation Friday as part of an existing bill in response to a lawsuit filed by former Vernon administrator Bruce Malkenhorst, who wants the city restore his $500,000 annual pension.

Malkenhorst, who worked for the tiny Los Angeles-area city for 29 years, left his position in 2005 when he was charged with misappropriating funds. He had been paid as much as $911,000 per year and his pension was the largest in the California retirement system.

A California Public Employees Retirement System audit last year found Vernon officials improperly boosted the pensions of nearly two dozen top employees.

After pleading guilty to corruption charges, state officials slashed Malkenhorst's pension to $115,000. Malkenhorst lost two lawsuits seeking to prevent his pension from being reduced before filing suit against Vernon.

The legislation seeks to prevent public officials who are convicted of corruption from defrauding taxpayers a second time, De Leon said.

``As (Malkenhorst) was forced out of office on corruption charges, he attempted to set himself up with an obscene and what I believe to be an illegal pension plan,'' de Leon said in an interview. ``He gives hard-working folks, who are very deserving of a pension, a black eye.''

Under De Leon's SB39, officials convicted of felonies for actions they took in office still could appeal benefit changes to a public retirement system but they could not take legal action against their former employer. The bill also clarifies that a local public agency only has to pay the benefit amounts awarded by the public retirement system.

The state Assembly added those provisions to the bill Friday on a voice vote. SB39 would apply to Malkenhorst's case if it is signed into law and his lawsuit is still pending on Jan. 1. Assembly Speaker John Perez, D-Los Angeles, said the city of Bell is another example of local officials who were convicted of corruption and later sued to collect substantial pension benefits.

Robert Rizzo, Bell's former city administrator, was poised for a $650,000 pension until state officials slashed it to $50,000 after Rizzo and other city officials were accused of corruption. ``Local governments need to be protected from the greedy public officials who take advantage of the public's trust by unlawfully increasing their own pensions,'' Perez said. SB39 must pass both legislative chambers next week in order to reach the governor's desk this year.

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