Dick Jones’ Sweet Deal in Westminster

Thy Vo

Richard D. Jones at a city council meeting in Westminster.

A familiar sight at Westminster City Council meetings is an older gentleman with droopy eyelids sitting at the end of the dais dozing into his palm.

His name is Dick Jones and there’s a good reason why he’s so sleepy.

In addition to serving as the city attorney of Westminster, Jones is also the city attorney for the cities of Fullerton, Whittier and La Habra, and is the sole owner of a law firm, Jones & Mayer, which contracts with dozens of public agencies across the county and state. He’s also a paid board member for Cal Domestic, a private water wholesaler, and for Cadway, a real estate agency.

Last year, Jones & Mayer, of which Jones is the sole owner, collected at least $2 million in billings from just the four cities that he personally represents.

Yet for 21 years, Jones also claimed to be a full-time employee of Westminster and took home a salary, which was $210,000 last year. His status allowed him to pay into CalPERS, the state’s public employee retirement system and he could end up collecting a large pension when he retires.

All this despite the fact that, except for bi-weekly council meetings, Jones only occasionally shows up at city hall and doesn’t have an office, or even a desk. In fact, City Manager Eddie Manfro freely acknowledges that Jones “never” works a 40-hour-per-week schedule for Westminster.

“They don’t keep office hours, there’s no desk,” Manfro said, referring to Jones and other lawyers in his firm.

When asked to explain Jones’ situation, Manfro defers to his counterparts from decades ago. “This was a deal he had worked out with previous city leaders. His arrangement was odd, but he had to be paid according to the contract,” Manfro said.

An excerpt from a 1993 memo from Richard Jones to the Westminster City Council.

City of Westminster

An excerpt from a 1993 memo from Richard Jones to the Westminster City Council.

The deal Manfro is referring to is a request Jones made to the City Council in 1993 to make him a full-time employee. He had been Westminster’s contract city attorney since 1989, and had no intention of actually working full-time for the city. But he needed to get ahead of a bill pending in the state legislature aimed at pension-spiking abuses that would also eliminate the ability of certain part-time city attorneys to participate in the state pension system.

Jones’ request was granted, and for more than two decades city officials apparently had no issues with calling Jones “full-time,” despite a roster of outside commitments that made it impossible for him to spend as much time at city hall as his timecards indicated he did.

At least until earlier this year, when former Westminster City Clerk Robin Roberts filed a lawsuit claiming that she was harassed and intimidated for raising questions about the legality of certain city practices, including Jones’ employment arrangement.

“Jones as a full-time employee is paid a full time salary but does not work full-time. This action to hire Jones as a full time-employee was done by the City Council without the advice of separate counsel,” Roberts lawsuit claims.

The same contract that outlines Jones’ employment deal also appoints Jones & Mayer as the city’s contract firm for legal services, an arrangement that Roberts’ claims is a conflict of interest.

“Furthermore, it would appear that Jones has a financial interest in insuring the legal business of the City goes to his firm and that he is actually better off performing as little work as possible for his salary and instead have members of his law firm bill legal work under the contract to maximize profits,” the lawsuit continues.

Robins is still negotiating a settlement with the city. Meanwhile, her attorney, Dennis Wagner, said both Jones and the city were working together to game the pension system.

“You’re working the system. And when caught, they [the city council] gets rid of the issue and reward him with a new contract,” Wagner said.

Roberts’ lawsuit and questions from a Voice of OC reporter led Jones in August to ask the City Council to reclassify him from a full-time employee to independent contractor, a request the Council approved unanimously and without discussion.

“I recognize that this arrangement that was put in place so many years ago has become controversial and become the subject of challenges from a former employee and arguably the press,” Jones wrote in a memo to council members.

He also explained that his full-time employment has been for the “sole purpose of becoming eligible to receive a retirement pension under the PERS system…While I believe that we have all acted in good faith, I think that this potential controversy serves no one well.”

A Special Arrangement or Pension Fraud?

Without the lawsuit and the questions it generated, it is likely that Jones would have been able to continue as he had been for 21 years and retired with a a sizable pension.

Things are far murkier now. The main question is whether Jones’ change of status will nullify the Westminster pension altogether, or, perhaps get him in more trouble.

Jones is adamant that despite the unusual arrangement, he has done nothing wrong and points to the fact that all of the pension payments on his behalf have come from his pocket, not the city’s coffers.

He said as much when he proposed the deal back in 1993.

“I have spoken with Jamie Miller and Brian Mayhew who indicate that this can be arranged without any problem or cost to the City,” Jones wrote in a 1993 memo to the City Council. “…I would pay for those PERS contributions under the terms of the agreement between myself and the City.”

Under the terms of that agreement, Jones received a salary paid to him every two weeks with no vacation or sick time or other benefits. According to Jones, at the end of every month, his two-week salary was deducted from the city’s bill with Jones & Mayer, his law firm that provides the city’s legal services.

At the end of every fiscal year, Jones also receives a bill from the city’s finance department summarizing the total city expenses for his PERS retirement, Medicare tax and workers’ compensation — which totaled $46,174 for the 2014-15 fiscal year — which he typically pays in three installments.

“Mayor [Charles] Smith asked and it has been the practice for the past 25 years that all city costs that result from my being designated as an Employee be paid by me,” Jones wrote in his August memo.

Jones said the deal is “cost neutral” for taxpayers because he reimburses the city for the full cost.

He said that he has personally invested “several hundreds of thousands of dollars” into the state pension system, an annual cost that is now “economically impossible” for him to keep paying.

“Your story might have some legs if the city was paying for any of this, but they’re not,” Jones said to a reporter. “The real story here is that I may have made a very bad investment.”

However, the requirements for membership in the pension system go beyond who makes the payments. How much and where Jones works does matter in how the state and IRS distinguish between independent contractors and full-time employees.

Although some California cities still retain their own attorney as a full-time city employee, the majority of cities contract with firms that specialize in providing legal services to government agencies.

At heart of pension issues for many government attorneys is whether they are considered to be working as an independent contractor providing a discrete service, or as an employee of the agency, answering to and receiving direction from agency officials.

Although there’s no cut-and-dried definition, one of the principal tests for whether a worker is an independent contractor is whether they have the right to control and direct the manner in which they do work.

A number of other factors also come into play, according to Michael Roush, the contract city attorney for the city of Brisbane who authored a paper for the League of California Cities on pension issues for municipal attorneys.

Those factors include the level of supervision over the individual, the level of skill required for the job, where the work takes place and the length of time spent on the work, method of payment, and the relationship between the individual and employer.

“If were trying to prove I was an employee, I’d try to show the employer had the right of control over my hours – when I showed up, where I left,” said Roush. “I’d have a time card of some sort, I’d come to work at least every other day, stay until five o’clock, have my own office.”

It’s unclear how Jones split his time between his work for Westminster and his other obligations, which included 17 years as an elected board member for the Lowell Joint School District between 1983 and 2000.

Before becoming a CalPERS member through the city of Westminster, Jones was a member through the school district in 1991, according to public records. After his position in Westminster became the primary agency, Jones continued to collect retirement credits through the school district as overtime.

When Jones is unable to attend city council meetings, another attorney from his firm, Christian Bettenhausen, serves as Assistant City Attorney.

According to timecards submitted by Jones between March 2011 and May 2013, he logged an identical schedule every week for nearly three years, working nine hour days Monday through Thursday and four hours on Fridays, for a total 40 hours a week.

Other records show that pattern of billing continues for the rest of 2013 through 2015.

When asked how he is able to maintain such hours with three other jobs, Jones said, “I’m a professional…there’s no requirement for how many hours I work.”

“I am my firm — my firm is me. I own 100 percent of it,” Jones responded, when asked if he is personally able to work full-time.

According to Jones’ August memo to the City Council, “there was never any expectation that [he] physically perform in city hall any defined amount of time.”

His 1989 contract did, however, require Jones to attend all City Council meetings, maintain a minimum of 4 office hours a week at City Hall, and attend any other meetings as requested by the city manager.

The 1993 amendment to his contract required that he be available “on a full-time basis to provide legal services to the City during all regular business hours.”

However, Manfro, the city manager, is clear in saying Jones and associates of his firm did not work on-site. He said the time card system was only used for a few years so that the finance department would know to pay Jones bi-weekly, although that practice was eventually discontinued.

Although the arrangement is unusual, Manfro does not think it is unprecedented.

“It has, in my opinion, occurred in other places. He said he checked it out with CalPERS and they said it was okay,” Manfro said.

Manfro is right on that point. Given the increasing use of contract firms for legal services among government agencies, a number of municipal attorneys have faced questions about whether they qualify for a state pension.

Jennifer Lyon, the attorney for Calexico in San Diego County, had her PERS benefits revoked earlier this year after the city manager raised questions about whether Lyon worked enough hours to qualify for a public pension.

Oakdale City Attorney Thomas Hallinan faced similar questions about his status as a full-time employee in 2012, according to the Oakdale Leader.

A 2012 audit of the City of Vernon by CaLPERS, which found a number of issues with how the city was enrolling its employees, found that the city’s assistant city attorney Jeffrey Harrison was enrolled in the pension system for five years despite not qualifying for the benefit.

Vernon officials also erroneously classified attorneys as public safety employees, enabling them to receive the higher pension formula available to police officers and firefighters.

Both the IRS and state law have penalties for employers who “willfully misclassify” their employees as independent contractors, which is typically done to avoid paying health and other benefits required for full-time employees.

But there doesn’t appear to be a penalty for employers who do the opposite — intentionally misclassify employees so they can receive a pension.

“I guess from PERS’ point of view, if the contributions are being made by both the city and the individual, I’m not sure they are going to look real closely at that,” Roush said.

Although CalPERS declined to comment on Jones’ employment arrangement, weeks after Voice of OC’s initial inquiry, spokeswoman Amy Morgan said the agency has begun investigating Jones’ employment with the city and his CalPERS membership.

That process, in which began in late October, takes up to 120 days, Morgan said.

After the meeting, Jones maintained that there was nothing unethical about his previous contract.

“There is no ethical question in my mind. I’ve been doing this [job] for forty years,” Jones said. “Anything I do is based on my reputation, and my name is my reputation. I wouldn’t do anything to harm that.”

Contact Thy Vo at tvo@voiceofoc.org or follow her on Twitter @thyanhvo