LOS ANGELES — Robert Rizzo, former city manager of Bell, Calif., the working class city that achieved national notoriety in 2010 when it came to light that several city leaders had enriched themselves at taxpayer expense, agreed on Thursday to plead guilty to federal charges of tax evasion.
The charges resulted from a scheme to avoid paying hundreds of thousands of dollars in federal income tax, according to a plea agreement filed in U.S. District Court.
The city became infamous following news reports that Rizzo was collecting an $1.18 million salary including benefits, assistant manager Angela Spaccia was receiving $564,000, and all but one of the part-time city council members in the working-class city of 35,000 had rigged the system to receive $100,000 a year.
Spaccia was found guilty on Monday by a Los Angeles County jury on 11 state counts for her part in defrauding the city. Rizzo pleaded no contest on 69 state counts on Oct. 4. Both are expected to be sentenced to 10 to 12 years in prison.
Five former council members were each convicted on one count and are scheduled to be re-tried early next year on additional charges.
Rizzo, 59, agreed Thursday to plead guilty to two felony charges on the federal charges: conspiracy and filing a false federal income tax return with the Internal Revenue Service.
According to the filing, Rizzo and his co-conspirators defrauded the IRS of more than $300,000 in unpaid taxes during a four-year period.
As part of his plea agreement Rizzo agreed to file amended individual and S Corporation tax returns for the years 2006 through 2010; and to pay all additional taxes and penalties, including the 75% fraud penalty.
"It is regrettable that some public officials believe they are above the law," said Richard Weber, Chief, IRS-Criminal Investigation in a prepared statement. "Instead of filing accurate tax returns, Mr. Rizzo claimed bogus corporate losses on his income tax return to illegally reduce his tax liability."
In the plea agreement, Rizzo admitted that he created a corporation to fraudulently claim losses on his income tax return, which served to illegally reduce his tax liability on the significant income he was receiving from Bell, according to the U.S. Attorney's office.
Rizzo created an S Corporation in 2002 that he called R.A. Rizzo Incorporated (RARI) in order to claim bogus losses on a purported rental property in Auburn, Wash., according to the filing.
Robert J. Melcher, Rizzo's tax preparer, has pleaded guilty to aiding and abetting the filing of a false tax return.
Rizzo admitted that he used a RARI account to pay for more than $80,000 in personal expenses in 2009 and $120,000 in construction work on his residence in Huntington Beach in 2010, according to the filing. RARI's tax returns falsely claimed that these expenses were related to rental property.
Rizzo will be arraigned in federal court on the two felony charges that carry a maximum statutory sentence of eight years in federal prison.
Melcher, who as a result of his guilty plea faces a sentence of up to three years in prison, is scheduled to be sentenced next year by U.S. District Judge George H. King.
The cases against Rizzo and Melcher are part of an ongoing investigation being conducted by special agents with IRS-Criminal Investigation and the Federal Bureau of Investigation.
"Pursuing public servants who corruptly endeavor to circumvent the tax laws to fund their lavish lifestyles is a top priority for IRS-Criminal Investigation," Weber said.
