Vernon audit is ordered by Legislature

The state Legislature approved an audit of the city of Vernon on Thursday, a week after lawmakers rejected a controversial plan to disband the city.

The audit, requested by state Sen. Kevin De León (D-Los Angeles), will examine the city’s finances and conduct over the last five years as well as its ongoing reforms, De León’s office said. It is expected to be completed in April.

De León’s request came in response to a Times’ story on recent investment losses in Vernon’s power business. Since 2005, the city has suffered a $130-million decline in net assets and amassed close to $500 million in debt.

During the same period, Vernon’s expenditures on salaries and legal fees rose steadily. Five city officials made more than $500,000 a year, and City Council members were among the highest paid in the state.

The industrial city, just south of downtown L.A., is home to roughly 1,800 businesses but only 112 residents. Most of the residents live in homes owned by City Hall.

Critics have said the city has been run for decades as a fiefdom by a small group of people. Los Angeles County prosecutors indicted two Vernon leaders on public corruption charges in 2006 and charged another administrator last year. All three were ultimately convicted.

Assembly Speaker John Perez (D-Los Angeles) argued that the only way to end corruption in Vernon was to dissolve its city government and make it an unincorporated area of Los Angeles County. His legislation passed in the Assembly but was defeated last week when De León and other Senate Democrats opposed it, saying it could cause a loss of jobs.

As an alternative, De León proposed a series of governmental reforms. The plan was unanimously approved by the Vernon City Council.

“The city of Vernon is compelled to clean itself up, and I am hopeful with this audit that it will continue to take the steps necessary to build toward a better future,” De León said in a statement.

In addition to the state audit, Vernon is being investigated by the Internal Revenue Service. The agency informed the city last month that one of its tax-exempt bond issues may have violated provisions of the Internal Revenue Code.

The IRS declined to comment on the probe, but experts said the investigation probably would focus on whether Vernon’s use of the bond proceeds violated restrictions on tax-exempt debt.

In a statement, Vernon City Administrator Mark Whitworth endorsed the state audit and said the city was fully cooperating with the IRS examination.

“We are on the path to becoming a model of good governance,” he said.

sam.allen@latimes.com