The first retiree to sue CalPERS after it decided to reduce pensions among a group of Southern California public employees is a former executive who’s facing criminal charges alleging that he embezzled government funds.
Salvador Velasquez, 79, wants to block the California Public Employees’ Retirement System from wiping out his pension and demanding that he repay more than $1 million to the fund.
CalPERS, in turn, contends that Velasquez illegally collected a six-figure pension between 2003 and 2014 while he continued to work as the executive at the East San Gabriel Human Services Consortium.
The Los Angeles County District Attorney’s Office, meanwhile, filed charges against him and two former deputies last month, alleging they fraudulently billed Los Angeles County for job training services.
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Public records show that Velasquez referred to himself as chief executive of the organization as recently as 2014, when he also earned a $119,000 pension from CalPERS based on his 35 years of government service through his official retirement date in 2002, according to records maintained by Transparent California.
State law forbids retired public employees from working more than half a year at a government job if they want to receive their full pension.
Velasquez’s organization, a job-training program formerly backed by four cities also known as L.A. Works, is notorious among California public employees because it folded in such a way that CalPERS reduced the pensions it pays to almost 200 of its former employees.
They lost up to 63 percent of their retirement income, stoking fears that other public employees could one day face similar cuts if their employers go bankrupt.
The dissolution of Velasquez’s organization is still making waves at CalPERS. On Tuesday, the CalPERS Board of Administration considered endorsing a bill that would let it sue to block employers from walking away from the pension commitments.
“Every member I'm sure … when they heard about the reduction of those pensions was terrified that their pensions were at stake,” said CalPERS board member Theresa Taylor.
Velasquez has been under scrutiny by criminal investigators since 2014, according to court records.
He and two of his former L.A. Works employees were charged with one count of misappropriation of public funds, embezzlement, grand theft and falsifying a public document.
Velasquez faces additional counts of misappropriation of public funds, embezzlement, grand theft and conflict of interest.
L.A. Works was created in 1979 as a joint powers authority backed by the cities of Azusa, Covina, Glendora and West Covina.
An April 2014 report by the Los Angeles County auditor found that L.A. Works routinely overbilled Los Angeles County for job training services at two hospitals. L.A. Works claimed that it helped people who were actually already employed by the hospitals, according to the audit.
“Due to the severity of our audit findings, we question the validity of the entire amount of (job training) billed by L.A. Works for these hospitals,” the audit said.
The report had life-changing consequences for L.A. Works retirees. It led Los Angeles County to suspend its contracts with the agency, which deprived it of income and led it to quit paying bills to CalPERS.
CalPERS then reduced the pensions it pays to L.A. Works retirees because their former employer was delinquent on its bills to the retirement fund.
In January, CalPERS sent Velasquez a letter declaring that a review of his employment led the fund to conclude he was ineligible to receive the pension he earned from 2003 to 2014 because he appeared to keep a job at L.A. Works after his retirement date.
Velasquez filed a lawsuit last month to prevent CalPERS from rescinding his pension. His attorney wrote that CalPERS has not adequately detailed its allegations against Velasquez or given him an opportunity to defend himself.
The lawsuit centers on CalPERS' determination that Velasquez was not eligible for the pension he received after 2003, not the fund's decision to reduce pensions for former L.A. Works employees.
CalPERS has not yet replied to the lawsuit. Velasquez's attorney did not respond to requests for comment.