Man who got California’s largest public pension sues over benefit cut

A former city manager is crying foul because his yearly take was trimmed to $115,000.

LOS ANGELES TIMESJuly 24, 2013 

LOS ANGELES — Bruce Malkenhorst isn’t giving up without a fight.

The man who took home more than $911,000 a year as city manager of the tiny city of Vernon, near Los Angeles, before legal troubles over the misappropriation of public funds eventually walked away with an annual pension that topped $500,000, tops in the California Public Employees’ Retirement System.

But CalPERS last year decided to cut his pension, concluding he had derived some of his hefty salary improperly.

So now the 78-year-old Malkenhorst is suing Vernon to make up the difference. His lawyers are making a novel if improbable argument: Because it paid him a high salary, the city is responsible for keeping his retirement benefits at the higher level even though CalPERS balked.

Vernon now faces a potentially costly legal battle as attorneys face off with the city’s onetime power broker, who for years was considered the highest-paid public official in the United States.

It could turn into a test case for other city leaders who have seen their hefty pensions cut by CalPERS.

Bell’s former city administrator, Robert Rizzo, was poised to receive a pension of about $650,000. But CalPERS cut it to $50,000 after Rizzo and seven other city officials were accused of corruption. His assistant, Angela Spaccia, had her projected pension cut from $250,000 to $43,000.

Last year CalPERS found that Vernon improperly boosted the retirement benefits of nearly two dozen top employees, resulting in the largest public pension reduction in state history. Malkenhorst’s successor, Eric T. Fresch, who made as much as $1.6 million in 2008, had his pension stripped completely. Fresch died last year.

Malkenhorst’s attorney has already presented hundreds of pages of exhibits as evidence of what he says are the city’s vows to fund his rich pension. In the suit, Malkenhorst describes his pension as a promise from the city based on his “highest earnings at Vernon.” He notes that eight years ago, when CalPERS first raised issues about his pension, the city supported Malkenhorst. That changed last year, he said.

Vernon officials argue that Malkenhorst got paid more than enough and isn’t owed anything from the city.

“The exhibits well document that Mr. Malkenhorst made a pile of money working for Vernon when he ran the show and was lord of the manor,” said City Attorney Nicholas Rodriguez. “We intend to litigate it and believe that he is entitled to nothing further from Vernon.”

CalPERS alleges that Vernon improperly boosted Malkenhorst’s retirement benefits, arguing that his pension was “illegally based on unpublished pay rates, overtime and an inflated longevity allowance.”

Steve Freed, president of the Vernon Property Association, said he has little sympathy for Malkenhorst.

“He set his own salary, he set his own benefits package, then swept it through the City Council,” he said. “He was coming close to $1 million a year, which is just irresponsible for a city to be paying one person.”

Malkenhorst did not return a call seeking comment, and neither did his attorney.

Malkenhorst pleaded guilty to using public money for things such as massages and golf outings. He was sentenced to three years’ probation and ordered to pay $35,000 in fines and penalties, as well as $60,000 in restitution to Vernon.

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