Reuters: Bankruptcy News: San Bernardino finance official alleges 'crimes' -court filing

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San Bernardino finance official alleges 'crimes' -court filing Jun 4th 2013, 23:09 Tue Jun 4, 2013 7:09pm EDT * Calpers says San Bernardino ineligible for bankruptcy * Ex-finance chief suggests criminal behavior * City, creditors meet in court on Wednesday By Tim Reid LOS ANGELES, June 4 (Reuters) - A former finance chief for the bankrupt city of San Bernardino said that crimes may have been committed with respect to the city's use of funds, according to court papers filed on Tuesday by the city's biggest creditor. San Bernardino and its creditors are preparing for another court hearing on Wednesday in the city's quest to be declared eligible for federal bankruptcy protection. Calpers, the giant state pension fund and the city's biggest creditor, filed a pre-hearing document signaling that it was losing patience with the city's pleas of poverty. "New facts have come to light," raising questions about the city's good faith efforts to achieve bankruptcy protection, Calpers said in the filing citing a May 10, 2013 deposition that is not yet part of the public record. Calpers' court filing does not provide further details about Simpson's allegations. In its papers to the court, Calpers cited the deposition of Michael Busch, the financial consultant hired by the city to run its bankruptcy application. According Calpers' court papers, Busch said in his deposition that Jason Simpson, San Bernardino's most recent finance chief, "expressed his concern that crimes had occurred with respect to the city's use of certain funds." Busch did not return phone calls seeking comment. San Bernardino's city attorney, James Penman, and city manager, Allen Parker, did not respond to requests for comment. No criminal charges have been leveled against city officials and no criminal investigations into the city's finances are known to be underway. Simpson quit as San Bernardino's finance chief in February. There have been no suggestions of any wrongdoing on his part. In an email response to Reuters, Simpson said: "I am happy to talk about the City at a time when I am only legally required to do so." San Bernardino and Stockton, another California city in bankruptcy, are considered test cases in the battle over whether municipal bondholders or current and retired employees will absorb most of the pain when a state or local government goes broke. Unlike Stockton, which was found eligible for bankruptcy protection in April, San Bernardino last summer took the unprecedented step of suspending its pension payments to Calpers, though it has since pledged to resume making payments. In the filing, Calpers also alleges the city "has not chosen" to meet with its officials since February, and has failed to provide a plan on how it intends to deal with creditors. San Bernardino did not negotiate with creditors before filing for bankruptcy. "Consequently, the City cannot meet its burden and demonstrate it is eligible for bankruptcy protection," Calpers states in the court filing. When it declared bankruptcy in August San Bernardino said it did not have the cash to keep current on its payments to Calpers, the largest U.S. public pension system with assets of $256 billion. Calpers says the city is now $13 million in arrears on its payments. Link this Share this Digg this Email Reprints

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