The city of Bell is suing the law firm that formerly provided interim city attorney services, alleging its lawyers failed to notify city officials that bond sales were saddling the municipality with debt.
The suit also alleges the Los Angeles-based Meyers Nave firm did not tell city leaders about an email one of its lawyers wrote to former chief administrative officer Robert Rizzo, stating that the salaries being paid to Bell officials represented “an extraordinary favorable bargain.”
The city filed the complaint Monday in Los Angeles Superior Court, alleging legal malpractice, breach of contract and that the firm put its interests ahead of those of the city.
“The bonds are burdening the taxpayers of Bell with millions of dollars in debt for decades,” according to the lawsuit, which seeks unspecified damages.
David Skinner, managing principal of Meyers Nave, said the firm worked with the city following the financial scandal that rocked the municipality in 2010 and “helped restore the public’s trust in the city’s governance.”
“The city publicly thanked Meyers Nave for its service during that turbulent time,” Skinner said. “We are surprised and disappointed that the city has taken unfounded legal action against our firm. The city is attempting to lay blame on us for the actions of another party. We will defend ourselves vigorously against these meritless claims.”
According to the complaint, Meyers Nave was initially hired as bond counsel for the city in 2009 in the middle of the scandal concerning high salaries for Rizzo and other city officials. Meyers Nave was then hired to provide interim city attorney services in August 2010 after the scandal became public, according to the lawsuit.
The city borrowed $100 million in bonds during the long period of corruption and for much of the time Meyers Nave’s predecessor, Nixon Peabody, and attorney Edsell “Chip” Eady served as bond counsel, the suit says.
Eady later moved to Meyers Nave, according to the suit. In June 2010, Eady wrote an email to Rizzo stating that Bell city officials were being forced by the federal government to take responsibility for the accuracy of the city’s disclosures to bond investors and in complying with tax regulations and rulings, according to the city’s court papers.
“The feds demand that elected city officials perform at the level required of big corporations in the private sector,” Eady wrote, according to the lawsuit. “By that standard alone, the city’s compensation of elected officials is an extraordinary favorable bargain for the city.”
The email was never disclosed to Bell officials and likely was deleted by Rizzo to keep it from becoming known to them, according to the lawsuit.
Questions raised by the state Controller's Office, the Securities and Exchange Commission and the Internal Revenue Service in 2010 made Meyers Nave aware of problems Bell was having with bond transactions dating back to 2004, the suit says.
“Meyers Nave was in a position to reduce Bell's exposure in these matters between 2009 and 2011,” according to the lawsuit.
The suit also alleges Meyers Nave should have taken greater care before recommending attorney William Stoner as malpractice counsel. A dispute later arose concerning Stoner’s compensation and the city was forced to pay him a settlement, according to the lawsuit.
Meyers Nave also wrongly advised the city to take an adverse position against the Attorney General’s Office when it filed a lawsuit against Rizzo and other city officials, causing the city to incur substantial legal fees, according to the lawsuit.
Meyers Nave last represented the city in December 2011, the suit states.
Rizzo, whose exorbitant salary as the head of the small, working-class city made him the central figure in a headline-grabbing corruption probe that resulted in the convictions of a total of seven city leaders, was sentenced last month to 12 years in prison and ordered to pay $8.8 million in restitution.
He was also ordered to serve a 33-month federal prison term for tax fraud, which is to be served concurrently with his state court sentence.
Angela Spaccia, Bell's former assistant city administrator, was convicted of misappropriation of public funds and conflict of interest charges and sentenced to an 11-year, eight-month term.
Five other former Bell
city council members are awaiting sentencing at hearings in June and
July for misappropriating public funds by accepting inflated salaries
for sitting on city boards that rarely met.