Former Beaumont city officials plead guilty in corruption case

Four former Beaumont city officials pleaded guilty Tuesday to felony charges stemming from a yearlong investigation into corruption involving misuse of tens of millions of dollars in public funds and other acts of fraud, prompting a judge to immediately sentence each man to varying lengths
of home detention and order payment of penalties ranging from $100,000 to $4 million.

William Kevin Aylward, 54, of Cherry Valley, David William Dillon, 64, of Temecula, Ernest Alois Egger, 61, of Mendocino, and Alan Charles Kapanicas, 65, of Palm Desert admitted wrongdoing under a plea agreement with the Riverside County District Attorney’s Office.

Superior Court Judge Mac Fisher certified the terms and imposed the sentences stipulated by the prosecution and defense.

“This is an important step in bringing justice to the people of Beaumont,” District Attorney Mike Hestrin said. “The fact that all these pleas also involve more than $11 million in restitution to the city, to be paid forthwith from the assets previously frozen by the D.A.’s Office, is significant. The success of this prosecution would not have been possible without the cooperation of the city of Beaumont and the Western Riverside Council of Governments.”

With two other disgraced officials — former police Chief Frank Coe, 53, and former public works Director Deepak Moorjani, 71 — pleading guilty in October, only one defendant remains to be prosecuted. A Feb. 22 preliminary hearing is scheduled for ex-City Attorney Joseph Sandy Aklufi, 71, at the Riverside Hall of Justice. He’s free on a $500,000 bond.

Aylward, former finance director for Beaumont, pleaded guilty to embezzlement and misappropriation of public funds. He was sentenced to one year of home confinement with an electronic monitoring device, three years probation and ordered to pay $100,000 in restitution.

Dillon, former economic development director, pleaded guilty to conflict of interest and embezzlement of public funds. He was also ordered to serve a year of home detention and three years probation — with a requirement to pay $4 million back to the city.

Egger, former planning director, pleaded guilty to conflict of interest and embezzlement of public funds. He will serve the same confinement and probation terms as his co-defendants, with an obligation to pay $3 million in restitution.

Kapanicas, former city manager, pleaded guilty to embezzlement of municipal funds and misappropriation of public funds and will also serve a year of home detention and three years probation. Fisher ordered him to pay $1 million in restitution.

On Oct. 20, Moorjani admitted one count of financial conflict of interest and was sentenced to three years probation and ordered to repay the city $3 million. That same week, Coe admitted a misdemeanor charge of conspiracy to commit grand theft and was sentenced to three years probation and 200 hours of community service. He had already repaid $50,000 in interest-free
loans that were arranged for him while he was serving as the chief.

All of the defendants were arrested in May 2016, following a yearlong investigation by the District Attorney’s Office and FBI.

Moorjani was the operator of Urban Logic Consultants, which contracted with Beaumont for more than 20 years to provide a range of governmental services. The prosecution contended that Moorjani and his colleagues at ULC, Dillon and Egger, carried out city business with the specific intent of profiting from it personally.

Prosecutors alleged the defendants engaged in schemes using complex arrangements tied to bond sales and development fees. Coe was awarded interest-free loans straight out of the treasury that were not vetted by the Beaumont City Council.

Hestrin said the ULC executives pulled levers that ultimately resulted in losses totaling $42.96 million.

Moorjani, Dillon and Egger were handling bond sales for the city, plowing revenue from the issuances back into ULC, which is no longer in operation.

The ULC managers, along with Aylward, Aklufi and Kapanicas, were also responsible for overseeing Transportation Uniform Mitigation Fee accounts. TUMFs are collected from developers and are assigned to the Western Riverside Council of Governments, which utilizes the money for region-wide transportation projects.

It’s alleged that from 2003 to 2014, $36.6 million in TUMF revenue was collected in Beaumont but not released to WRCOG. Instead, the funds were retained for local projects that the six men had a stake in, according to prosecutors.

Aylward and Kapanicas were instrumental in arranging equipment purchases for Beaumont Electric. Between 2009 and 2015, $6.2 million in city funds were supplied to the private company, without prior authorization from the council.

The scheme further involved allowing Beaumont Electric to use the city’s reseller’s permit, sparing it from having to pay sales taxes to the state Board of Equalization, as detailed in an audit of the city’s finances ordered in 2015 by state Controller Betty Yee.

The U.S. Securities & Exchange Commission initiated its own probe, and in August announced a settlement with Kapanicas for securities violations arising from his time overseeing the Beaumont Financing Authority.

The SEC said that Kapanicas failed to file disclosures and adhere to other fiduciary duties in arranging bond sales in support of a community facilities district between 2003 and 2013. He agreed to pay a $37,500 penalty without admitting anything to SEC attorneys.