Rizzo to plead guilty in tax scheme claiming $600,000 in fake losses

Former Bell City Administrator Robert Rizzo has agreed to plead guilty to filing false tax returns in which he declared phantom losses of more than $600,000 over five years.

He has also agreed to cooperate with federal authorities.

Angela Spaccia, Rizzo’s second in command in Bell who earlier this week was convicted of 11 counts of corruption, has not yet been charged.

FULL COVERAGE: Corruption in Bell

However, she is clearly referred to in Rizzo’s charging document as “A.S.”, along with her company, Sheffield Management Corp.

James Spertus, Rizzo’s attorney, said Spaccia was expected to be indicted and that Rizzo had agreed to testify against her.

When Rizzo pleaded no contest to 69 counts of corruption in October, Superior Court Judge Kathleen Kennedy said she would allow him to serve his sentence in federal prison concurrently with the time he receives on the tax charges. He faces up to 12 years on the corruption charges.

Spertus said he has no deal with federal prosecutors for Rizzo’s sentence.

“Mr. Rizzo’s sentencing in state and federal court reflect his desire to accept responsibility, pay restitution and make things right,” Spertus said.

The U.S. attorney in Los Angeles charged Rizzo on Thursday, and Spertus said his client had already signed a plea agreement. He will make his first appearance in federal court Dec. 23.

The accountant in the scheme, Robert J. Melcher of Calabasas, pleaded guilty in February to aiding and abetting the filing of a false tax return. He faces a maximum sentence of three years in prison.

According to the charges against Rizzo, Melcher’s firm created what are known as “S” corporations for Rizzo and Spaccia. Rizzo and Spaccia would “create bogus losses that they could include on their Form 1040 individual tax returns in order to fraudulently reduce their personal tax liability,” according to the charges.

From 2006 through 2009, Rizzo claimed illegal losses of $409,731 by falsely claiming his horse ranch outside Seattle as rental property, according to the charges. Rizzo also admitted in his plea agreement that he paid for more than $80,000 in personal expenses in 2009 and $120,000 in construction work on his Huntington Beach home in 2010 while claiming they were used for his horse ranch.

Rizzo faces a maximum sentence of eight years in federal prison.

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