UPDATED: Six Jailed in $43 Million Beaumont Public Corruption Case

BEAUMONT, CA- More than a year after the FBI and Riverside County District Attorney's office raided several locations connected to the city of Beaumont, officials tell Patch that arrests have been made and charges are being filed.

Seven officials connected to the city are now facing embezzlement charges in which nearly $43 million was taken, according to the district attorney's office.

Those charged include: former City Manager Alan Kapanicas, former Police Chief Frank Coe, former Public Works Director Deepak Moorjani, former City Attorney Joseph Aklufi, former Economic Development Director David William Dillon, former Finance Director William Aylward and former City Planner Ernest Egger.

Banning-Beaumont Patch has also learned that six of those men were jailed Tuesday, including:

• Alan Charles Kapanicas was arrested at 9:10 a.m. on Sunrise Mountain View in Palm Desert. He was booked into the Indio jail at 11:47 a.m.
• William Kevin Aylward was booked into the Banning jail Tuesday at 11:24 a.m.
• Joseph Sandy Aklufi was booked into the Riverside jail at 12:28 p.m.
• Deepak Moorjani was booked into the Riverside jail at 12:21 p.m.
• Francis 'Frank' Dennis Coe Jr. was booked into the Riverside jail at 2:10 p.m.
• David William Dillon was booked into the Murrieta jail at 1:23 p.m

Eggers was the only one not jailed Tuesday, as he was out of town. He is expected to surrender on Wednesday, according to the D.A.

RELATED:

• Jail Booking Photos Released of Former Beaumont Leaders Charged in Corruption Case
• Two Arrested in Beaumont Corruption Probe Post Bail

"Our city deserves closure at this point, and this is one step closer," Beaumont City Councilman Mark Orozco told Patch by telephone Tuesday afternoon following the DA's announcement.

The investigation dates back to April 22, 2015, when authorities from both the FBI and District Attorney's office filed into town to search city hall and Urban Logic Consultants. They also searched the house of former city manager Alan Kapanicas in Palm Desert.

Then, three weeks later, the state Controller’s Office announced it was conducting an investigation into the city’s financial and reporting practices. They ultimately released a report stating they'd found "... widespread deficiencies that rendered [the City of Beaumont’s accounting controls] effectively non-existent, with 75 of 79 internal control elements determined to be inadequate."

Since that time, it's been a slow process with officials declining to comment on the investigation. Then, just last month, the U.S. Securities and Exchange Commission served subpoenas on the city.

Prosecutors are now alleging the defendants engaged in schemes that turned taxpayer funds into largesse, 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, according to Hestrin.

Hestrin alleged a professional services firm hired by the municipality in the early 1990s, Urban Logic Consultants -- in which Dillon, Egger and Moorjani were executives -- was pulling levers that ultimately resulted in losses totaling $42.96 million.

The trio were handling bond sales for the city and allegedly plowing revenue from the issuances back into ULC, which is no longer in operation, according to Hestrin.

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

From 2003 to 2014, it is alleged that $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. Investigators pored over reams of documents and uncovered numerous irregularities, as well as indications of outright fraud, the government said.

"Cities have to be very careful and ensure they're in charge of their own business," Hestrin said. "They have an obligation to the taxpayers -- not to the profit."

Coe received his $45,000 loan between 2010 and 2013, Hestrin said, adding that other police officers -- who were not identified -- received smaller loans from the treasury that totaled almost $70,000. Why the other officers weren't charged was not disclosed.

Aylward and Kapanicas were allegedly instrumental in setting up the zero- interest disbursals, in addition to arranging equipment purchases for Beaumont Electric, according to prosecutors.

Between 2009 and 2015, $6.2 million in city funds were supplied to the private company, without prior authorization from the council.

The alleged 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 conducted last year by California State Controller Betty Yee.

Authorities did not amplify on how Aylward and Kapanicas allegedly benefited from these actions.

"I'm very disturbed by the revelations," Hestrin said. "The defendants had an obligation to serve the people and not themselves."

All of the men, except for Egger, were taken to county jails on bail amounts ranging from $100,000 to $5 million.

This is a breaking news story. Refresh for the latest.

SEE ALSO:

• Beaumont Councilman: DA Needs to 'Provide Closure' to Investigation
• Mayor: “Despite the Raids and Lawsuit, Beaumont’s Future is Bright”
• Beaumont Calls for Special Council Meeting After DA, FBI Raid
• Beaumont: City is ‘Fully Cooperating’ With District Attorney, FBI
• UPDATED WITH PHOTOS, VIDEO: FBI, DA’s Office Serve Warrants at Beaumont City Hall, Urban Logic

--

PHOTOS: Riverside County District Attorney Mike Hestrin holds a news conference on May 17, 2016 outlining an elaborate corruption scheme that lasted for decades, according to official documents.

Investigators from the District Attorney’s Office and the FBI raided Beaumont City Hall and Urban Logic Consultants on April 22, 2015. All photos by Renee Schiavone.

--

— City News Service contributed to this report.