LOS ANGELES — The California Public Employees' Retirement System is lowering the half-million dollar annual pension of Vernon's former city manager, convicted felon Bruce Malkenhorst.
The action follows a court ruling in another case that the pension fund said supports its stated belief that it must recover money owed to the system.
CalPERS originally announced in May 2012 that it would lower Malkenhorst's annual pension benefits by almost 80% to $115,000, but did not follow through on the reduction.
It announced Thursday that it will reduce his pension to almost $116,000 annually, effective April 1, citing a February 28 ruling from a state appellate court in a case out of Oakland.
The ruling in City of Oakland v. the Oakland Police and Fire Pension System indicates that retirement systems must correct overpayments sooner than later, CalPERS said in a statement.
"We intend to recover every penny that he owes CalPERS," Anne Stausboll, Chief Executive Officer for CalPERS said in the prepared statement. "Given the extraordinary amounts involved in this case, and the rate at which the potential overpayment has grown and will continue to grow, and recent developments in the law, we have concluded we can no longer continue to pay the higher amount."
Malkenhorst, who worked for the eastern Los Angeles County city for 29 years, has become a poster child for pension abuses.
In 2011, he was convicted of misappropriating public funds to pay for personal expenses such as golf and massages. He was sentenced to three years of probation and fined $95,000.
Serving Vernon, which has about 1,200 businesses and just 112 residents, he earned $911,000 in total annual salary. He has been receiving a $551,688 pension, the largest annual pension in the CalPERS system.
Malkenhorst sued Vernon in 2012, arguing he's entitled to the pension, and that the city has the ultimate responsibility to make good on that promise.
His lawsuit came after CalPERS announced that the pension fund would slash his payments based on an audit that determined his salary was illegal.
In reaction to his lawsuit, the state passed legislation preventing convicted officials from suing cities over pensions.
Last week, Malkenhorst filed a federal lawsuit against the state seeking to overturn the legislation.
State Sen. Kevin De Leon, a Los Angeles Democrat, sent a letter to Stausboll Thursday livid that the pension fund had not reduced Malkenhorst's pension when it originally announced it would, according to the Los Angeles Times.
De Leon introduced legislation in December 2010 to have the city disincorporated after years of complaints from neighboring communities about corruption and pollution from Vernon's power generating station.
Three former senior officials were convicted in 2011 — the mayor for voter fraud and conspiracy, Malkenhorst for misappropriation of funds, and the director of the power utility on a felony conflict-of-interest charge related to the hiring of his wife as a contractor.
De Leon later led efforts that eventually defeated the disincorporation bill he had co-authored in September 2011 after Vernon officials adopted reforms to prevent the kinds of abuses for which the city had become known.
