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Addicted to Corruption

San Bernardino has been crooked for years. It will take years to clean it up.

One day early this summer, more than 700 people filled a hotel ballroom in downtown San Bernardino, California, 60 miles east of Los Angeles. Few events attract much of a crowd to downtown San Bernardino, a district with so little vitality that city officials are seriously considering replacing blocks of it with a series of reservoirs and canals. But on this seasonably warm day, a sellout crowd had paid $35 to attend the annual "State of the County" luncheon.

The state of the county wasn't very good. It hasn't been good in years, not because San Bernardino lacks natural advantages or economic potential, but because the government is a perennial mess. In the past four years, 13 public officials and private businesspeople have pleaded guilty to bribery charges. Two more are awaiting trial. The county has filed civil suits for corruption against nearly two dozen of its citizens, winning $15 million in cash settlements and another $7 million in judgments still unpaid.

The elected leaders who were present at the annual luncheon didn't dwell on any of this. Supervisor Fred Aguiar referred briefly to the civil suits by promising that "as far as the remaining defendants are concerned, the county is ready to go to trial." Supervisor Bill Postmus tried to make the best of it all in his invocation: "Thank you for taking us out of the difficult times that we've had in the past, Lord."

But it's far from clear that the difficult times are over. They have been going on--or at least have been common knowledge--since August 1998, when County Administrative Officer James Hlawek revealed that he was under investigation by the FBI and resigned. The announcement was stunning. The mild-mannered Hlawek was viewed as a straight arrow, and certainly a contrast to his predecessor, Harry Mays, a flamboyant, personable executive who made no apologies for playing fast and loose with conflict-of-interest regulations. As it turned out, however, Hlawek had hidden a prior felony in Arizona--and was being investigated on allegations of taking bribes from none other than Mays himself.

Over time, it became clear that Mays, Hlawek and other top elected and appointed officials in San Bernardino County had been operating a vast "pay-to-play" scheme. Sole-source contracts were available for the right price--contracts worth hundreds of millions of dollars for everything from bond underwriting to landfill operations. The procurement process included trips around the globe, campaign donations, promises of future employment and plain old cash. This wasn't a case of a few rogue officials or even a nest of wrongdoers. It was an entire system--a small-scale modern equivalent of the Tweed Ring that looted New York City in the 19th century. San Bernardino County wasn't just plagued by corruption--it was practically addicted to it.

In the years since then, several county officials, including some newly elected supervisors, have assumed the role of reformers. They have undertaken internal investigations, tightened contracting and conflict-of-interest rules, and plunged ahead with their civil suits. But even as the downtown meeting took place this summer, one of the five sitting supervisors, veteran Gerald Eaves, was continuing in office despite his indictment for taking bribes to approve billboards along Interstate 10.

After all the scandals, residents of the county are entitled to ask themselves a few simple questions. They know they live in the nation's geographically largest county. Is it possible they also live in the most corrupt?

More fundamentally, how does any local government get into trouble of this magnitude? And how does it climb out?


California is not exactly corruption territory, especially on the local front. Thanks to the Progressive movement almost a century ago, the state has no local political machines of the East Coast or Rust Belt variety. Local government is officially nonpartisan--party involvement in local campaigns can lead to fines and sanctions--and county supervisors are usually chosen in springtime primary elections. Local politics is not free of the typical corrupting influence of campaign contributions--but out-and-out graft is rare.

Yet, as the San Bernardino story reveals, the corruption stew can bubble up anywhere the ingredients are present. In this case, the ingredients were a vast county in the midst of rapid growth, an inattentive population of commuters focused on the distant locations where they work, and a good-old-boy network ready to exploit the opportunity.

At 20,160 square miles, San Bernardino County covers more territory than any county in the continental United States. It is larger than Massachusetts, Connecticut and Rhode Island combined. Most of the land is in the Mojave Desert, including Joshua Tree National Park and military bases so large and remote that no one notices when the military conducts large-scale battle simulations with live ammunition. Most of the 1.7 million residents are in the far southwestern corner, at the edge of the Los Angeles basin.

Those people live in a spectacular natural setting--a sun-drenched valley bordered on three sides by rugged mountains as high as 10,000 feet. However, the location and topography have their drawbacks. The heat can be oppressive, and air pollution generated many miles away, along the coast, blows eastward toward San Bernardino, then hovers, trapped by the mountains. Hence, the San Bernardino-Riverside metropolitan area has the worst air quality in the country, and the snow-capped peaks are often obscured.

Like the rest of metropolitan Southern California, the urbanized corner of San Bernardino County grew rapidly in the years after World War II. But while much of the Los Angeles region grew more affluent, San Bernardino's towns remained rooted in the working class. A huge Kaiser Steel factory, Norton Air Force Base, several large railroad yards and maintenance facilities helped provide a stable job base for decades. With the blue-collar job base and proximity to ever- encroaching Los Angeles, the county grew from just 160,000 people in 1940 to 1.4 million in 1990.

But between 1983 and 1994, Kaiser closed, railroads consolidated and pulled out, and the Air Force decommissioned Norton. As a result, the 1990s were particularly tough for San Bernardino County. During the first half of the decade, unemployment was in the 9 percent to 10 percent range. The city of San Bernardino was among the nation's leaders in the foreclosure of VA mortgages.

There are clusters of new jobs in San Bernardino County, especially in the logistics industry. Ontario International Airport, extensive rail lines and several interstate freeways make the area ideal for shipping and warehouse operations. In general, however, those jobs do not pay as well as the manufacturing and military-related jobs that vanished.

Even so, the county's population grew by 20 percent in the 1990s-- nearly 300,000 people. Most of the new residents were drawn not by local job opportunities but by inexpensive housing. The working-class communities of San Bernardino County offer new houses for about half as much as cities to the west, closer to L.A. Southern California author and urban theorist Mike Davis calls places such as San Bernardino "the new dormitories for Southern California's burgeoning workforces."


Until at least the 1960s, San Bernardino County essentially operated as a collection of small towns. Over time, inevitably, the size and scope of county government--and county contracts--grew dramatically. But local politics remained largely unchanged, says James Mulvihill, chairman of the geography and environmental studies department at California State University, San Bernardino. Long-time family and business connections remained as important as ever. Those who took care of a candidate were taken care of once the candidate got into office. "You can call it an old-boys network," says Mulvihill, "but it means something to voters if you grew up in San Bernardino."

Mulvihill and others suspect that quid pro quos have been standard in San Bernardino county government for decades. Supervisor Dennis Hansberger, who served two terms during the 1970s before returning to office in 1996, thinks that the corruption mess dates to the late 1970s--just as the county's population was approaching 1 million. By that time, Hansberger says, the county had started attracting intensely political supervisors "who tended to want to pursue their own interests without looking more broadly at the interests of the county government. They began to play fast and loose with county policies, and no one stopped them. I think most of their early excursions were minor, but ... in the '80s it began to grow even more."

Backroom deals and sole-source contracts actually became county policy when Mays, who began his county career as a "Boys Ranch" probation counselor in 1966, reached the corner office in 1986. After his return to the Board of Supervisors in 1996, Hansberger recalls, then-deputy Hlawek told him, "It's our practice not to have dissension in the board room. And Harry's rule was, if we don't have agreement, it's not ready to be on the agenda."

In early 1997, there was a scandal involving a proposal to develop a giant garbage dump in the desert. Investigation centered on the dealings of two private companies that were at war over the proposal, but a grand jury indicted the county planning director, who eventually pleaded no contest to stealing a public document. A planning commissioner was later ousted for conflicts of interest.

Shortly thereafter, federal authorities began to take notice. It is widely assumed in San Bernardino (although the U.S. Attorney's Office in Los Angeles will not confirm it) that a low-level county employee tipped off federal authorities because the employee could no longer stand to see county leaders manipulate the system for their own personal benefit. A few county officials seemed to be spending more time in New York City or overseas than in San Bernardino, and these officials made no secret of the fact that they were not paying for the trips. Mays, who retired in 1994 to pursue business interests, still seemed to be calling many of the shots.

The federal investigation took time. It was not until October 1999 that federal authorities issued their first indictments. Named were Mays; Hlawek; County Treasurer-Tax Collector Thomas O'Donnell; county investment officer Sol Levin; Kenneth James Walsh, a vice president of Norcal Waste Systems Inc., which operated a county-owned landfill; and two private consultants. All seven eventually pleaded guilty to bribery, and six went to prison. Mays' two-year sentence was the longest. Hlawek cooperated with federal investigators and is due to be sentenced in November.

According to federal authorities, Mays went straight from the county payroll to a consulting job with Norcal, which paid him at least $3.5 million. Mays kicked back about $200,000 to Hlawek, who ensured Norcal received a no-bid landfill contract worth tens of millions of dollars annually. Mays also kicked back about $1 million to Walsh, who kept Mays on the company payroll.

In a second round, federal prosecutors indicted Supervisor Eaves, two businessmen, and four public officials from Colton, the town adjoining the city of San Bernardino, alleging that all but one were involved in bribery schemes for billboards along I-10. Eaves was also indicted under state law on 17 misdemeanor counts of accepting improper gifts and two counts of lying to the grand jury. He pleaded no contest to four counts of using his position to influence government decisions in which he had a financial interest and three counts of failing to report gifts. The court ordered him to pay the county $20,000 and forbid him from running for office again. Eaves' attorney called the plea bargain "an honorable close to a sordid, politically motivated ordeal," but Eaves himself continued to argue that prosecutors had exaggerated the importance of "minor ethical lapses" and paperwork problems.


Why did things go so wrong in San Bernardino County? And why did top county officials believe they could openly flaunt ethical standards and the law?

People inside and outside of local government say public apathy deserves at least some of the blame. "We're talking about gratuities for services rendered," says Mulvihill, who ran unsuccessfully for city council in San Bernardino as a reformer in the 1990s. "It was basically a very simple form of corruption. It has existed for so long that people didn't even think about it."

Will Randolph, who served as county administrative officer in the aftermath of the scandals, from 1999 to 2001, agrees. "There were lots of warning signs early on that, had the public demanded action, some of this could have been headed off," he says. For example, Mays used to purchase houses--once, even an airplane--at county tax auctions. There were newspaper stories and even a civil grand jury report on Mays' practices, which may not have been illegal but which were at least in an ethical gray area. Yet no one stopped Mays.

Randolph brought in Michael Josephson, a Los Angeles-based ethics consultant, who interviewed top administrators and found that the situation had been brewing for years. "While relatively few people were engaged in corruption, a lot of people were willing to look the other way," Josephson said. "You didn't go very far in that organization if you rocked the boat. ... There was absolutely a fear of retaliation."

Equally clueless were the newer residents, those who had moved in from the more sophisticated political environs of Los Angeles and Orange counties. They also looked the other way. In particular, they looked west, spending so much time commuting to distant jobs that they had neither time nor energy to connect to local government.

Compounding the situation was a lack of coverage by the local press. From 1992 to 1996, the San Bernardino County Sun did not assign a reporter to county government full-time. When the San Bernardino paper pulled out, competing, financially strapped papers--such as the Inland Valley Daily Bulletin in Ontario--felt comfortable doing the same. They knew they were not going to get scooped. It was in the absence of any media scrutiny at all that the county handed out its rich, sole- source contracts, including the landfill agreement with Norcal. "Unfortunately," says Supervisor Hansberger, "the media, being in the condition they are in... do not keep the public as informed as they deserve to be."

It was Hansberger who, shortly after taking office in December 1996, first began asking questions about the county's contracting procedures. But his voice remained the sole dissent until Aguiar, a former state assemblyman, took office in December 1998. By that time, the FBI investigation was public knowledge.

In 1999, as the news grew steadily worse, the supervisors hired Randolph, a respected executive who had been chief investigative officer in Fresno County. "I knew it was a distressed situation, but nobody knew the extent of it at the time," he recalls. One of Randolph's first tasks was figuring out whom to trust. He met with the FBI and U.S. Attorney's Office, he says, but "they didn't tell me anything."

So Randolph brought in the investigative arm of Arthur Andersen Inc.- -which had a good reputation at the time--and the Los Angeles legal firm of Gumport, Reitman & Montgomery, to conduct an internal investigation and, eventually, pursue two civil lawsuits to try and get some of the stolen money back. "No matter where the trail led us to, and who it led us to, we were going to pursue it," Aguiar says. "We investigated every contract, every deal."

The following year, the county sued three of its former officials-- Hlawek, Treasurer-Tax Collector O'Donnell and investment officer Levin--as well as Peter Morrison, a vice president with Salomon Smith Barney, and Jeff Jackson, an agent for the New England Adjustable Rate Government Fund. The county alleged that from 1992 through 1998, Morrison and Jackson supplied the county officials with trips all over the U.S. and Europe, bought them expensive meals and entertainment tickets, and paid cash bribes. In exchange, the county claimed, the public officials directed hundreds of millions of dollars of investments and bond activities to the financial companies.

The county filed a separate lawsuit over the scheme behind the Norcal garbage contract. And it sought to escape from $33 million worth of contracts to lease real estate owned by Mays.

More than half of the defendants have settled--Salomon Smith Barney for $7.75 million, New England Adjustable Rate Government Fund (now called CDC Nvest) for $750,000, Norcal for $6.5 million, O'Donnell and Levin for $3 million apiece. Hlawek agreed to pay $300,000 to settle some of the claims, but he, Mays and others remain defendants in the civil litigation.


Besides the lawsuits, the county has overhauled its contracting and leasing procedures, revised its investment policies, adopted the ICMA Code of Ethics, established a fraud hotline, hired a county ethics officer, improved background screening for job candidates, updated employee training, and shown the door to about 25 department heads and administrators. Current County Administrator John Michaelson said he feels free to make recommendations with which supervisors might disagree. "There's an honest debate," he insists, "that now happens in the light of day."

Still, questions remain. Randolph figures he got "maybe half way" with the reforms on his agenda when he departed in June 2001. "I left," he laments, "because the whole board got into this them- against-us. So the whole team I built with this board's blessing became the whipping boys."

Josephson, the ethics instructor, has expressed doubts that county officials are ready to make the necessary commitment to put the mess behind them for good. "They started the process," he says, "but they didn't finish it. To make these ethics programs work, they need to be incorporated into the entire organization. There was a big kill-the- messenger situation there."

Of course, the messenger has been delivering bad news for years. With a sitting supervisor recently indicted by the state attorney general, the bad news is unlikely to go away anytime soon. Eaves remains in office, participating in county business and refusing to go down without a fight. He contends the grounds for the case against him-- that a billboard developer bribed Eaves by giving the supervisor, his family and his chief of staff 10 trips to the Stardust Hotel in Las Vegas--are flimsy. "Eaves himself does not even like going to Las Vegas," one defense motion contends.

"It's a continual distraction for us," Aguiar says of the Eaves indictment. "I don't think the county will be able to take the final step until the issue is resolved one way or the other."

Of course, the first step to recovery is admitting there is a problem. San Bernardino County's current leaders have done that. But like any recovering addict, the county will need some outside vigilance to stay clean. Right now, federal prosecutors and the press are providing that vigilance. At some point, though, the legal proceedings will end, and the story will drop from the headlines. When that happens, officials' voluntary adherence to the system will become even more important.

"These problems," says Josephson, "are not intractable. But they require a sustained commitment. ... You've got to try to motivate the public to care."

For years, a public that was more concerned about long-distance commuting than about local politics allowed scoundrels to watch the till. Despite the outrage of the moment, there is no solid evidence that the fundamental problem of an apathetic electorate has been solved. An indicted supervisor--ordered by a court not to run again-- remains in office, a graphic reminder that the fight against local corruption, like the fight to overcome any addiction, is a long, painful and uneven process.

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