The Newsome file

Bill Newsome has waited a long time for someone to take him seriously.

In December of 2004, Newsome, at the time a deputy city attorney with 22 years of service to the city, sent a letter to law-enforcement officials and the county grand jury alleging that the city attorney's office had billed the city's Water Department for work it never performed.

Two days later, Newsome was fired. He later sued the city for wrongful termination and won.

Now the city's audit committee, also known as the Kroll company, which is investigating the city's financial mess, is refusing to release its report until another auditing firm completes its probe of Newsome's allegations.

In the meantime, the influential editorial board of the Union-Tribune has seized the news of Kroll's delay to criticize City Attorney Mike Aguirre for failing to investigate Newsome's allegations.

Suddenly at the center of the city's maelstrom, Newsome is ready to talk. His story-full of twists and turns-begins on July 22, 2004, at the Carmel Mountain Circuit City. That's where he ran into Lonnie Eldridge, a young colleague from the city attorney's office.

Tasked with prosecuting utility fraud at the time, Newsome says Eldridge expressed concern about a local television news report detailing potentially illegal interdepartmental contracts-called service-level agreements-that effectively siphoned funds from the city's Water and Metropolitan Wastewater Departments, which are financially self-supporting, to fund other cash-strapped city departments.

Newsome says Eldridge confided that he'd been instructed by superiors to bill the Water Department each week for work he didn't necessarily perform. Concerned that he might unwittingly be part of the siphoning scheme, Eldridge had approached a supervisor, who told him to lay low and stop billing the Water Department until the news story blew over.

Eldridge, who now works for the Los Angeles City Attorney's office, didn't respond to several phone messages left at his workplace last week.

A few days later, on July 27, Newsome consulted an ethicist with the California District Attorneys Association and wrote to Eldridge, informing him that “decisions need to be made and actions taken, since I am now ‘in the know.'”

Newsome recommended that Eldridge consult a private attorney and report the matter to the county district attorney or state attorney general, adding that if Eldridge didn't follow up, he'd have to file a report of his own. Newsome also typed up an affidavit of what Eldridge had told him at Circuit City and passed it along for Eldridge to sign. Later that day, after a conversation with Eldridge, Newsome wrote a memo to his boss, Steve Hansen, providing him with copies of the affidavit and letter.

The letter said, “Lonnie told me this evening that he had shared... all his concerns” with Sue Heath, head of the city's criminal division, and Dave James, a deputy city attorney, who had explained that, “in so many words, it was like a four-hour-per-week/per-time-card/per-whatever retainer agreement with Water Department, but no longer worth the hassle (?) to resume/continue.

“In any event,” Newsome wrote, “I got the impression Lonnie's dropped it.”

Newsome says he, too, dropped the matter, although his discomfort simmered until November when Mike Aguirre was elected as the new city attorney. Realizing that he'd have to re-interview for his job with the new administration, Newsome hired an attorney and asked for a copy of his personnel file. He says he wanted to make sure ancient history wouldn't impact his future. Back in 1998, Newsome was in charge of the city attorney's Consumer and Environmental Protection Unit, which he headed for 14 years, when he was suspended with pay for 90 days. Newsome says he was accused of making threatening statements to coworkers, and his mental health was called into question. Casey Gwinn, then the city attorney, hired an outside law firm specializing in employment law to investigate.

In its related report, which Newsome provided to CityBeat, the firm makes no mention of threats or mental-health concerns but does say that Newsome's management style had changed suddenly and that he became “extremely intense regarding prosecution and work issues.” The firm also notes that Newsome “has exercised poor judgment in some matters but has not engaged in misconduct that would constitute ‘good cause' termination.”

After hiring a lawyer of his own and negotiating with Gwinn, Newsome returned to work in January 1998 but was transferred to a new position.

Newsome asked for his personnel records in November 2004 because, he says, he was trying to see how the events that transpired six years earlier were characterized.

“I didn't want the new boss thinking I was crazy,” he says.

While Newsome hired an attorney to help him get those records, he says the matter took an unexpected turn on Dec. 6, the day of Aguirre's inauguration. That afternoon, Newsome says, he was called to a meeting with Richel Thaler, the head of human resources in the city attorney's office; Rupert Linley, the new head of the criminal division; and Hansen, his boss, during which he was accused of sending threatening e-mails to an Aguirre aide. He denied the charge.

That same day, Newsome sent letters to the offices of the U.S. attorney, the attorney general, the district attorney, Aguirre, the county grand jury and the city's Ethics Commission alerting them to the “possible diversion of public funds” related to both his paid suspension as well as the billing practices in the city attorney's office.

Two days after his meeting with Thaler, Hansen and Linley, Newsome was fired. He says he was escorted from the building by police officers and that his picture was posted in lobbies of city buildings with a note instructing security to bar him from the premises.

In a court filing, Newsome wrote that the city “took this course of action to discredit [him] as a reliable witness relative to the timecard fraud... and other matters.”

In another bizarre twist, Newsome wrote a letter to Gwinn in March of last year asking for $1,290 to cover attorney fees related to his 1998 suspension. In April, Gwinn sent Newsome a cashier's check for that amount for “full accord and satisfaction for 1998 claim.”

“Though I don't believe I owe you any money, I have enclosed a check to satisfy your demand,” Gwinn wrote in an accompanying note. “I want to move on with my life and want you to move on with your life.”

As of press time Tuesday, it remained unclear whether Gwinn paid Newsome with public or personal funds. A spokesperson for the district attorney's office, where Gwinn now works, said Gwinn was not available for an interview.

Over the past year, the city's water and sewer funds have become the subject of several inquiries.

In June the Securities and Exchange Commission-investigating the city's faulty financial reporting-issued a subpoena for records related to the city's Wastewater Department, and in early 2006, the county grand jury released audits of the city's Water and the Wastewater departments, detailing the questionable use of department funds and a lack of internal controls for service-level agreements.

In the spring, Mayor Jerry Sanders announced that he was launching an audit of the city's Water and Wastewater departments. He hired Mayer Hoffman McCann, an Irvine-based accounting firm, to investigate.

Meanwhile, in March, Newsome was awarded $5,000 in a small-claims case he brought against the city, in which he alleged that he'd been “wrongfully and unjustifiably fired.”

He also became the plaintiff in an unrelated lawsuit against the city seeking increased contributions to its beleaguered pension fund.

Newsome's allegations and story were ignored by some and disregarded by others until the news broke two weeks ago that Kroll wouldn't release its long-awaited report until Mayer Hoffman McCann runs down Newsome's allegations.

In an editorial Friday, the U-T's editorial board blasted Aguirre for not following up on Newsome's tip or referring the matter to the district attorney or U.S. attorney. They said his failure to investigate was “extraordinarily troubling.”

Yet the U-T failed to get some of its facts right and played fast and loose with others. The editorial's author mentioned an affidavit signed by Eldridge. Although Newsome passed the document along to Eldridge, he never signed it. While the editorial criticizes Aguirre for not forwarding the matter, it makes no mention of the fact that Newsome sent his letter to the district attorney and U.S. attorney, both of whom have yet to announce investigations.

Editorial page editor Bob Kittle didn't respond to CityBeat's phone and e-mail messages last week. He also didn't respond to an e-mail from Newsome in which Newsome points out that, in 2005, he contacted several U-T reporters, who never followed up.

“I reported everything to your staff at the newspaper-and turned over all the evidence as well-well over a year ago, and your paper did nothing,” he wrote. “You should be ashamed of yourself and your paper, and you owe Mr. Aguirre a swift and public apology.”

(Full disclosure: Newsome provided CityBeat with the same information more than one year ago.)

Aguirre says he had his hands full in December 2004 but reported Newsome's allegations to KPMG, the city's outside auditors. He says he's now looking into them. “I didn't think that the Newsome thing was that big a deal, but that may be changing,” he says. “I'm going to get much more intense about the investigation.”

A spokesperson for Sanders said Mayer Hoffman McCann should be finished with its audits of the Water and Wastewater departments' service-level agreements, as well as the use of bond and ratepayer proceeds, by Friday.

Ken Al-Imam, who's leading the effort for Mayer Hoffman McCann, declined to comment on his investigation, but, in an e-mail to Newsome-whom he's interviewed about the alleged time-card fraud-Al-Imam shed some light regarding his progress.

“A number of people that I have talked to have confirmed what you told me,” he wrote.