Public Censure and Lifetime Bar for Embezzlement

ICMA Executive Board publicly censures former city manager and permanently barred him from membership in ICMA.

ARTICLE | May 7, 2018

The ICMA Executive Board publicly censured Alan Kapanicas, former city manager of Beaumont, California, and permanently barred him from membership in ICMA. 

In December 2017, Kapanicus pled guilty to one felony count of embezzlement of public funds, as well as one felony count of misappropriation of public funds. He was placed on three years of formal probation, ordered to serve one year of custody to be served with electronic monitoring, and ordered to pay $1 million in restitution to Beaumont.

Initially described as a $43 million embezzlement case, Kapanicas was one participant in a complex scheme to divert public funds for personal profit. Kapanicas was initially hired as a contract city manager and provided services to the city via his company. While the contracts were approved by city council, they did not include any “not to exceed” thresholds. Kapanicas authorized payments for his services without obtaining council approval. 

Kapanicus became a city employee in 2011 with an employment agreement that also noted his responsibilities as executive director of the redevelopment agency, utility authority, and finance authority, as well as special districts administrator. 

Since the 1990s, the city contracted with Urban Logic Consultants (ULC), whose principals served as the planning, public works, and economic development directors for the city. These individuals made recommendations to incur debt for public improvements. In his role as executive director of the Beaumont Financing Authority, Kapanicas authorized payment of more than $43 million to ULC for planning and engineering services from bond proceeds. Kapanicas’ firm was paid over $1 million from bond funds for administrative services.

During Kapanicas’ tenure, Beaumont collected a regional transportation fee and failed to transfer the funds to the Western Riverside Council of Governments. A judgment against the city for $44 million plus interest was awarded to the COG. 

Without council approval, Kapanicas approved a no-interest loan program for police officers.

As executive director of the Beaumont Financing Authority, Kapanicas worked with the city finance director to use a resale permit issued to the financing authority to divert sales tax revenues. The transaction was not approved by city council and amounted to a $6 million interest-free loan to a private business.

In addition to Kapanicus, the city’s former economic development director, planning director, finance director, police chief, and public works director all pled guilty to related charges. The former employees were ordered to pay $11 million in restitution to the city.

Members who have questions about their ethical obligations under the ICMA Code of Ethics or who are seeking confidential advice are encouraged to contact Martha Perego, ICMA’s director of membership and ethics, at mperego@icma.org or 202-962-3668.

 

 

 

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