San Bernardino Wins $6.3-Million Award

Three central figures in a wave of corruption that plagued San Bernardino County, including the former top bureaucrat at the crux of the scandal, have reached a $6.3-million settlement of allegations that they defrauded the public, officials said Friday.

The settlement is the latest step in a campaign to recoup millions of dollars lost over the past decade to fraud, kickbacks and back-room deals--scams that were once considered part of doing business in San Bernardino County. Just as important, perhaps, the county hopes to recapture the public’s trust.

Friday, county officials said that three former officeholders in the county--ex-Investment Officer Sol Levin, ex-Treasurer Tom O’Donnell and ex-Chief Administrative Officer James Hlawek--have settled a lawsuit that alleged a far-reaching kickback scheme.

Attorneys representing the three men, who have previously pleaded guilty to related criminal charges that they accepted improper gifts in exchange for favorable treatment, did not return phone calls seeking comment.

The lawsuit, brought by the county in August 2000, charged that the three men signed off on a scheme that sank millions of tax dollars into risky investments.

The suit contended that the investments brought inflated commissions to brokers working for two financial companies, including the securities and investment giant Salomon Smith Barney.

From 1992 to 1998, Salomon Smith Barney and another financial group, the New England Adjustable Rate Government Fund, were given contracts to invest more than $7.5 billion in public funds. One broker, authorities say, was making $12,000 a month from his San Bernardino County contract alone.

In exchange, investigators charge, businessmen lavished gifts on O’Donnell, Levin and Hlawek. One broker gave Levin, O’Donnell and their wives an all-expenses-paid trip to Costa Rica in 1995, the lawsuit charges. Additionally, the suit asserts that the three men were given free vacations in France and Greece as well as family outings at Sea World and Disneyland.

County officials have estimated that taxpayers lost at least $20 million on the investments. Salomon Smith Barney reached a deal in February that settled its part of the lawsuit for $7.75 million, which covered its broker, Peter Morrison. The investment firm that now owns the New England fund settled the case for $750,000.

The deals, said San Bernardino County spokesman David Wert, “were intended more to produce commissions for Mr. Morrison than they were to provide the investment pool with the maximum return.”

“And everyone’s obligation here was to provide the investment pool with the maximum return,” Wert said. “There were commissions paid that the county was not obligated to pay. These gentlemen had them paid nonetheless.”

Even as county officials were touting Friday’s deal as another step in their campaign to recover from corruption--a reform effort that has already recovered more than $15 million--they acknowledged the settlement won’t likely bring cash to the county coffers anytime soon.

Officials said the three men have no assets beyond those that are exempt from legal action--their retirement earnings and their homes. The settlement, officials said, will effectively be a lien on any future earnings.

“The county is just not comfortable counting this as money in the bank,” Wert said. “It’s going to take some work to get it.”

County officials, who have spent two years and $3.5 million in legal fees on their reform effort, decided that it wasn’t worth continuing to pay lawyers to push the case if there wasn’t any money available from the three men. “This is the best possible resolution for the taxpayers of San Bernardino County,” said Board of Supervisors Chairman Fred Aguiar. “The defendants have acknowledged their crimes, the taxpayers won’t have to incur any further legal expenses and the county has a legal right to collect the judgments.”

The lawsuit that led to Friday’s settlements grows out of a series of kickback and bribery scandals in the county. The county also filed a lawsuit in June 2000 against 22 former county officials and businessmen in connection with the corruption probe, resulting in several separate settlements.

Criminal cases also have been brought against several former officials and businessmen. O’Donnell, Levin and Hlawek have all pleaded guilty in criminal cases related to the kickback scandals. Last year, Levin and O’Donnell were sentenced to spend a year and a day in halfway houses. Hlawek, who has admitted receiving cash or in-kind payments worth as much as $70,000 in the mid-1990s, has pleaded guilty to corruption-related charges and is expected to be sentenced later this year.

Last spring, in a loosely related case, federal prosecutors brought a round of charges against San Bernardino County Supervisor Jerry Eaves and an Orange County businessman accused in a bribery scheme that led to the construction of giant billboards at the intersection of Interstates 10 and 215.

Eaves, his relatives and his aides accepted gifts, including trips to the Stardust Hotel in Las Vegas, from the businessman, prosecutors charge. He has attributed the charges to sloppy bookkeeping, not criminal acts.