Did hard-nosed ex-city attorney clean up or cause San Bernardino’s problems?

By Joe Mozingo

James Penman says he fought dysfunction at San Bernardino's City Hall. His critics see his tenure as city attorney differently.

James Penman speaks at a forum for the mayoral candidates in 2005. (Gina Ferazzi / Los Angeles Times)

His gray hair was impeccable, as were his suits and ties, cinched into Windsor knots. With his penetrating gaze and stern, pockmarked face, James Penman made a distinctive impression as he roamed San Bernardino in his Chevy sedan.

Whether emerging from a police raid in his flak jacket or speaking out against corruption at City Hall, the city attorney, to many, cut a figure of rectitude in a city of deep decay.

Plenty of others, including outside professionals hired to reverse the city’s decline, saw Penman as the major impediment to fixing San Bernardino’s problems.

Penman did not operate like a traditional city attorney whose job was to advise the mayor and City Council on legal issues. In his 26 years in office, which ended with his ouster two years ago, he became more an old-school political boss, whose clout extended to virtually every part of city government — and was maintained with strong support from San Bernardino’s police and firefighters unions.

Today, Penman argues that the Police and Fire Departments’ widely praised response to the Dec. 2 terrorist attack at the Inland Regional Center validates the city’s investment in those services.

Judith Valles (Gina Ferazzi / Los Angeles Times)

He says he simply fought to ensure law and order and never held power out of proportion to his office. His no-nonsense approach, he says, reflected his responsibilities as city attorney: to root out corruption and ensure that city officials adhered to open-meeting and public-records laws.

“The biggest problem the city attorney had was getting them to follow the Public Records Act and Brown Act,” he says. “The second problem was them taking bribes.”

One of Penman’s supporters, former Mayor Judith Valles, said the corruption that Penman encountered, including a mid-1990s bribery scheme that ended in the conviction of two council members, sealed his approach to the job.

“He didn’t trust anybody,” she said. “Anyone who came as mayor, he didn’t trust. He didn’t trust me. Everyone was suspect.”

That attitude was Penman’s key flaw, says John Husing, an economist and political strategist who writes the Inland Empire Quarterly Economic Report. Penman’s reflexive suspiciousness and penchant for fighting political rivals on almost every front led to paralysis at City Hall, Husing said.

”He was the major disrupting influence who brought the city to its knees. He’s made it impossible to get anything done.... From the day he was elected city attorney, he fought with every mayor to try to run the city from his office.”

Penman grew up in San Bernardino. He says he helped pay his way through Cal State San Bernardino by working as a firefighter in the unincorporated area of Muscoy, on the city’s dusty northwestern edge. He later attended Western State College of Law in Fullerton.

San Bernardino voters first elected him city attorney in 1987 and recalled him in 2013, a year after the city filed for bankruptcy. During his 2 1/2 decades in office, he explored other political paths, running once for district attorney and twice for mayor, both times against Patrick Morris.

Rival mayoral candidates Pat Morris, left, and Jim Penman, right, pictured at a forum in 2005. (Gina Ferazzi / Los Angeles Times)

Although Penman lost to Morris both times, he was reelected city attorney six times, largely by white, middle-class homeowners, a minority in a city that was becoming increasingly diverse.

These supporters applauded when Penman complained that the city’s low-income housing, shelters and food banks were all but inviting homeless people and parolees.

They applauded when he closed cheap motels and trailer parks for code violations.

They applauded his hard-nosed stand on crime.

But within City Hall, his tough-guy approach didn’t play so well.

In 2008, Mayor Morris brought in budget expert Mark Weinberg as interim city manager to help streamline services and cut back on spending at a time when the finance director and outside consultants were warning that the city was close to insolvency.

Having survived 40 years of combative politics as an Inglewood city administrator, Weinberg felt well-prepared to help steer one of the state’s poorest cities away from bankruptcy.

Then he met Penman.

On his first day in the office, Weinberg and Penman had what Weinberg considered a minor difference of opinion at a staff meeting. He suggested they talk it through privately.

After the meeting, Penman followed Weinberg into his office.

“You don’t know who you’re . . . [messing] with!” Penman said, using an expletive.

Penman growled that he was a ”bare-knuckle brawler” who could ”make you, or break you,” Weinberg says.

Penman denies saying that, adding that he never used intimidation as a political tool. But Weinberg and two other former city administrators said the city attorney warned them not to cross him — because he ran the city.

He created his own team of half a dozen former police officers to serve as armed investigators. Penman once sent them to the real estate office of a mayoral candidate, Frank Schnetz, saying the city attorney’s office got a tip that Schnetz had illegally hidden profits from brokering a transaction for the new Police Department building.

“He leaked the investigation to the paper,” says Schnetz, who would later become a council member, “but would not clear my name when the investigators found no problems with the transaction.”

Penman denies that he leaked the investigation and says he was willing to clear Schnetz’s name if someone from the media had called to ask.

Penman used his investigators, two of them retired LAPD detectives, as his own code enforcement team.

When Latino residents complained that he condemned their trailer park just before Christmas in 2001, he offered one of them a free, one-way ticket back to Mexico — a gesture for which the City Council officially censured him.

Shauna Clark, a former city clerk and city administrator, says that one of Penman’s investigators once confronted her in an elevator, saying: “‘You better do what he wants or you’ll regret it.’”

Shauna Clark, pictured at a La Habra Heights City Council meeting, where she was the city manager. (Brian van der Brug / Los Angeles Times)

Newcomers say they were shocked at how Penman’s power stood in the way of fiscal reform.

Charles McNeely, a respected administrator for the city of Reno, replaced Weinberg in San Bernardino in 2009 but resigned in 2012 after repeated clashes with Penman and his council allies.

In November 2010, McNeely hired Nadeem Majaj, who was assistant director of public works for Orange County, to run the city’s public works department. Majaj knew the city had a reputation for “toxic politics,” but he respected McNeely and Morris.

A soft-spoken engineer, he says he viewed the position as a “dream job” because he would have the opportunity to make a difference for a struggling community.

One day in March 2011, a contractor asked Majaj to increase a purchase order on a paving contract by $855,000. Majaj said he questioned why, and the contractor, Matich Corp., dropped the request.

Robert Matich, vice president of engineering, said he didn’t recall those numbers but that they were probably costs estimated by the city to fix a list of streets.

Suspicious, Majaj looked into the contract. It showed that what had started as an $85,000 bid for a quarter-mile of roadwork in 2009 had ballooned into a potential $12.5-million contract over five years.

Majaj studied the competing bids for the original contract and found that Matich had far underbid five competitors for a portion of the job.

Matich said it would charge $350. The other vendors’ bids ranged from $3,150 to $12,500, city records show.

Matich says that the company bid low because, based on experience, some of the work the city was asking for rarely needed to be done — and that if it did turn out to be necessary, he could have covered the cost.

Majaj terminated the contract and took his findings to police, who conducted interviews but eventually dropped the investigation.

He discovered only later that Matich Corp. was a major contributor to Penman’s campaigns over the course of his career — giving him a total of more than $50,000, campaign records show.

On Oct. 5, Penman called Majaj into a meeting. Majaj later wrote an official city memo to Penman and the city manager about the exchange because, he said, he wanted it on record.

The memo says that Penman ordered Majaj to give him the police report about the Matich investigation.

Majaj said he refused, fearing that it would expose several staff members mentioned in the report to retaliation. According to Majaj’s memo, Penman said that if he didn’t hand over the report, his “house would be raided by agents.”

The memo continued:

“[Y]ou openly discussed your friendship with Mr. Matich and the ‘reverence’ you and some other officials have for this firm. In an intimidating tone, you questioned me as to why I terminated their contract and asked when I will restore it .... I believe it is inappropriate for a City Attorney (or staff) or any other elected official to be involved in ‘steering’ a contract with one of your major contributors.”

A grocery cart filled with trash sits on an over grown lot on West 8th Street near G Street in San Bernardino. (Francine Orr / Los Angeles Times)

Penman says that he was just trying to understand why the contract had been canceled, that he did not attempt to steer the contract and that he only uses the term “reverence” in relation to God.

Majaj said he walked out of the meeting.

He left San Bernardino to become director of public works for Chino Hills in April 2012.

If there was one city that couldn’t afford to misspend its money, “it would be San Bernardino,” he says. “I believe I only scratched the surface.”

By then the Great Recession had hammered the city.

When its latest housing bubble began to burst at the end of 2006, property and sales tax revenue plunged. In 2007, the Orange County municipal consulting firm Management Partners projected that police and firefighters’ salaries and pensions would consume 73% of San Bernardino’s general fund expenditures by 2012, up from 53% in 1996.

Penman repeatedly accused the city manager and finance director of underestimating the amount of money the city could bring in, while arguing against proposed cuts to the Fire and Police Departments.

Penman’s council allies — whose campaigns were also heavily funded by the police and firefighters’ unions — pushed through even more generous retirement provisions so that police officers and firefighters could retire at 50 and collect 3% of their final salaries for every year they had worked.

For example, a police captain making $169,000 a year who had worked 30 years could retire at age 50 with 90% of his or her salary, or an annual pension of $152,000.

Penman says he disagreed with that vote and expressed misgivings in closed sessions.

His allies on the council, meanwhile, bumped city employees’ retirement payments, including Penman’s, from 2% to 2.7% of final salary for every year they worked.

They also fought efforts to enact Management Partners’ key recommendations: to make the city attorney an appointed position (with a smaller staff), to study whether contracting out for fire and police protection and refuse collection would be cheaper, and to get rid of a charter amendment (the only one of its kind in the state) that tied police and fire salaries to those of similar-sized but wealthier cities.

In a city where the median family income was about $37,000, more than half the sworn fire personnel made more than $150,000, including overtime. Three battalion chiefs were paid more than $300,000 in 2014, including overtime and benefits, according to Transparent California, which collects salary data statewide.

On July 18, 2012, the San Bernardino City Council signed a resolution declaring a fiscal emergency and filed for bankruptcy protection. (Kirk McKoy / Los Angeles Times)

By early 2012, with San Bernardino running a $45.8-million deficit, even those who’d doubted the severity of the city’s financial problems saw no way to avoid bankruptcy.

When the city filed for Chapter 9 protection in August of that year, Penman laid the blame on staff. He said at a council meeting that administrators had falsified budgets for 13 of the last 16 years to show surpluses — an allegation the city’s auditing firm said had no merit.

By then, Penman’s adversaries had had enough. In 2013, a well-financed committee backed by Morris and other political opponents launched an effort to recall Penman and two council members.

On Nov. 5, residents voted him out, along with his closest ally on the council.

With none of the prolonged acrimony that marked previous debate, the City Council passed its bankruptcy recovery plan in May, including measures to outsource trash collection and firefighting.

The city’s problems are far from over, however.

The latest city manager, Allen Parker, resigned in November citing a “hostile work environment.”

Penman says he fought this type of dysfunction.

“Since I left office, the fighting has continued. Since I left office, the so-called toxic environment has continued. It has gone on in this city forever.”

Additional Credits: Photo Editor: Robert St. John. Digital Producer and Developer: Sean Greene.