The poster boy for public pension reform now owes the Golden State millions.
Huntington Beach resident Bruce Malkenhorst once was the most handsomely paid retiree in the entire state of California, with pension checks totaling more than $551,000 a year. How? From his service to the small, strange city of Vernon – where he was city administrator, finance director, redevelopment director, city clerk, city treasurer, head of the municipal light and power operation, etc., pretty much all at the same time.
The California Public Employees’ Retirement System paid him that princely sum for seven years, until a closer examination – which followed the public release of CalPERS’ pension rolls, and Malkenhorst’s guilty plea to felony misappropriation of public funds – suggested that sum might be grossly inflated. After a legal song and dance, CalPERS recalculated Malkenhorst’s pension based on the salary for one of his lesser positions, then slashed his pension from more than a cool half-million to $115,000 a year.
CalPERS also insisted that Malkenhorst repay the millions it errantly overpaid him – which Malkenhorst decried as “elder abuse” and battled in court
room after courtroom.
On Wednesday, Malkenhorst lost and CalPERS won.
Even though an administrative law judge concluded that CalPERS’ recalculation of Malkenhorst’s pension was “arbitrary,” “without sufficient legal authority” and “an abuse of discretion” – and asked CalPERS to recalculate based on the (much higher) pay for the city administrator position, rather than acting city clerk – the CalPERS board of directors decided to stick with the program as is. It has final authority.
America’s largest public pension system now moves in to collect $3.4 million from Malkenhorst, spokeswoman Amy Morgan said. His annual pension is now $122,936, subject to annual cost-of-living adjustments.
We tried to reach Malkenhorst and his attorney to see what’s next, but they didn’t return phone calls and emails seeking comment. Malkenhorst could challenge the decision in court, as he has challenged past decisions. Those have not proved successful.
CalPERS is clearly trying to make an example of Malkenhorst and burnish its “we’re-on-your-side” cred.
“As the judge specifically found, Malkenhorst and other Vernon officials intentionally obscured Malkenhorst’s pay increases, making it impossible for the public to figure out how much the city was paying for what services, and subverting the law’s transparency requirements,” said Matthew Jacobs, CalPERS’ general counsel, in a prepared statement.
“CalPERS will not tolerate these kinds of abuse. We remain on the lookout for all forms of pension spiking and encourage the public to help us root it out.”
Important note: Malkenhorst’s ways were widely known long before
A stunning, once-secret investigation into Malkenhorst’s escapades in Vernon was done in 2004, alleging that Malkenhorst stealthily and systematically bled hundreds of thousands of dollars from the peculiar city’s coffers.
Malkenhorst spent money on groceries, including top sirloin steak and fudge cake; golf; country club memberships; Christmas gifts for his family; homeowners association dues; massages; haircuts; property taxes; and a multitude of other personal expenses, according to the probe by a city-paid attorney.
“In just one year, the city administrator caused the city to pay at least $91,000 for his credit card charges,” the probe said. “Such charges included expensive meals, golf-related fees and travel and dining expenses for his family. The city apparently never received or maintained the detailed credit card statements; they were not able to provide them to me when requested. Thus, nobody but the city administrator reviewed the charges in order to analyze the propriety of his expenses. He was reimbursed for several hundred thousand dollars of expenses without providing support or detail.”
In 2011, Malkenhorst pleaded guilty to misappropriating $60,000 in public funds and using it for political contributions, golf games, massages, a personal trainer and a home security system. The
CalPERS review followed.
Back when he was still working, one of Malkenhorst’s lawyers said there was no deception involved – Vernon officials knew all about Malkenhorst’s handsome compensation and generous perks.
“The people who are running the city say, ‘We like Bruce Malkenhorst. We want him to be able to get around in a limousine. We want him to use it for personal or business uses. We want to pay him a lot of money,’” attorney Bart H. Williams told the Los Angeles Times.
Vernon is an odd place. Just a few miles south of downtown Los Angeles, it’s a tiny industrial enclave of odoriferous factories and warehouses, with its own power plant. Its 100 or so residents live in homes mostly owned by the city itself.
“Vernon should have been subsumed long ago into the surrounding city of L.A., but its independence is a strange and stark example of how a democracy can become a dynasty,” Forbes magazine wrote back in 2007. “California’s tiniest city, if you want to call it a city, is one of the nation’s most lasting and efficient political machines, run almost entirely for the benefit of a handful of rarely opposed, extremely well-paid politicians.”
But that was the old Vernon – when political candidates who challenged the status quo said they were evicted from their homes, kicked off the ballot and followed by private investigators packing heat. The state Legislature did, indeed, try to do what Forbes prescribed – and a bill to make Vernon disappear and fold it into Los Angeles County made big headway in 2011.
The city fought back hard, and a deal was brokered allowing it to continue to exist in exchange for major reforms. The “new” Vernon sided with
CalPERS in this fight.
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