CAFR tax surplus trillions: L.A. County Sheriff’s first official response: denial

I spoke on the phone with Los Angeles County Senior Media Advisor Steve Whitmore. Below is the e-mail I sent to Mr. Whitmore that shows the L.A. County Sheriff’s first response:

Mr. Whitmore:

This e-mail:

  1. Documents our phone conversation today,
  2. provides you the evidence I find of criminal acts by officials at L.A. County and the State of California,
  3. and requests answers to questions regarding my criminal complaint. I have been directed to you with a criminal complaint, and expect whatever rights and promptness is customary promise from my having followed the instructions from my local Sheriff station and you. Please acknowledge receipt of this e-mail and when I can expect an official response.

The content of our conversation regarding a criminal complaint are published, with reposts of some of my articles that exceed ten million views (look here, here, here to start, overall CAFR articles here). I’d very much like to report a story of competence and justice under the law, Mr. Whitmore. And that said, I promise to report on exactly whatever I receive.

1. Our phone conversation:

I called my local law enforcement agency, Crescenta Valley Station, as an economics journalist wishing to file a criminal complaint regarding the State of California and Los Angeles County officials’ non-disclosure of hundreds of billions in tax surpluses. I was directed to the L.A. County Sheriff’s Headquarter Bureau and spoke with you.

I explained to you that County and State government claims of budget deficits that “forced no choice” except budget cuts seems to be a crime of fraudulent non-disclosure by officials with fiduciary responsibility to taxpayers for honest communication of our financial status. The financial fraud is similar to honestly reporting a shortage of funds in a checking account, but never mentioning that a savings account exists with 35 times the claimed shortage with the state, and 300 times the claimed shortage for the county.

I told you the evidence of this is the county and state’s Comprehensive Annual Financial Report (CAFR). I asked you if you were familiar with a CAFR. You did not answer the question, but instead asserted the existence of such funds, “Is not true.” After first requesting that I send the documented evidence via the postal service, you reluctantly agreed to accept it via e-mail.

2. The evidence: California’s Comprehensive Annual Financial Report (CAFR) shows a tax surplus of $600 billion dollars in cash and investments. This makes Governor Brown saying the $16 billion budget deficit with “no option” than austerity a lie from an official with legal fiduciary responsibility for full and honest communication regarding taxpayer money.

The even-more astounding amount is $8 trillion in surplus taxes from sampled data of California’s various ~14,000 government entities’ CAFRs.

Two years ago, I reported $88 billion in cash and investments in CAFRs for the County and City of Los Angeles. The 2011 Los Angeles County CAFR claims a budget deficit of $221 million (p. v), and states all county departments must cut 7% from their budgets (Sheriff’s must cut $15 million). The people of the County of Los Angeles have other options. The county has $66 billion in “Cash and Investments” (page 63). This means county officials currently and repeatedly claim public programs must be cut because of a $0.221 billion deficit in one public account while being silent about 300 times that amount in other public accounts.

County pension funds on page 47 show member contributions at $1.4 billion and benefit payments at $2.2 billion. Clearly a $0.8 billion cost has other options that officials are legally obligated to disclose than hoarding $66 billion as a tax surplus. If the county’s 3 million households received the $66 billion, each would receive $20,000.

If the $600 billion were returned to California’s 12 million households, each would receive $50,000. Or, if you prefer the money returned per average household income of $50,000, each household could receive a proportional amount (if your household earns $100,000/year, you would receive $100,000).

If the whole $8 trillion were returned, then each California household has been overtaxed by a present-day value of over half a million dollars ($500,000). Of course, these colossal investments should be considered by multiple and independent cost-benefit analyses to discover our options; we can’t simply all cash them in.

Californians do not know about this data revealed in the CAFR. If they did, would they choose the state’s management of austerity or insist on knowing our full options?

  1. Questions regarding my criminal complaint:
  • First, you told me the evidence I just documented of literal billions and trillion in tax surpluses don’t exist. Please explain what you meant.
  • County and State officials publicly and repeatedly claim budget deficits create no option than severe cuts, and never mention the billions in their own financial statements and collective trillions. In their official positions of fiduciary responsibility, is such silence a crime of non-disclosure and/or financial fraud? Please explain and document the applicable law. If the Sheriff’s find my criminal complaint merits investigation, with whom do I contact next? If the Sheriff’s claim this is not a crime, please provide the name, rank, and contact information of the person providing that conclusion.
  • When officials have been pressed about CAFR investment funds and cash, they provide three justifications I wanted to provide in case you claim they are valid. First, “these funds are designated”: if this is valid, designated by whom at the county and state levels, and isn’t this a matter of those who designate can just as easily redesignate and were always legally obligated to explain these funds to the public? Second, “these funds are for pensions”: if so, please explain how the magnitude of difference between tax surpluses and pension costs excuses officials never mentioning these funds as an option. Third: “these are rainy day funds”: if so, how are officials justified to not disclose these accounts and consider other rainy day options (such as a state-owned bank for at-cost credit for budget deficits)?
  • On page 107 of California’s CAFR we see $6 billion annual interest cost of the $164 billion in state debt. The claimed “necessity” of debt and that nearly $100 billion of California’s “investments” in other government debt securities means a net loss to taxpayers as one group pays another interest minus the cost of creating and managing the debt. Non-disclosure of funding by debt, and that buying debt securities that loses money is an “investment” also seems like a criminal act. Is it?

Again, I was directed to speak with you regarding a criminal complaint that I am also documenting as a journalist.

Please respond to make the Sheriff’s Department proud. Your brothers and sisters in law enforcement are one of the groups harmed by what I see as an “emperor has no clothes” obvious crime.

Law enforcement has been lied to that there is no money to fund your departments.

Law enforcement has suffered layoffs, decreases in job safety, and decreases in pay.

When the “99%” in law enforcement discover these facts, I predict they will be highly motivated for ethical investigation under the law.

Do you agree, Mr. Whitmore?

Thank you,

Carl Herman

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