On October 6th, the Lodi City Council voted to begin the process of removing the City Manager Scott Carney. There is still a lack of clarity around the grounds for dismissal, as the resolution has not yet been published. The process began back in April, when it was alleged that Mr Carney had potentially violated the Brown Act during a statement at a City Council Meeting. There has been no confirmation whether this allegation has validity or not. In the subsequent months, there have been serious missteps by the Council in the handling of the investigation and acknowledgement that the internal control issues within various city department raised in independent reports are ongoing and need correction. The Chamber has been the leading voice at City Council meetings calling for increased transparency and for council to set and hold our city to a higher standard for performance.
 
These missteps have produced costly (over $1,000,000 to date) and far-reaching consequences, including:

• $600,000 in legal fees, including a non-approved change order of over $340,000 for outside legal counsel.
• Hundreds of thousands of dollars in salary and employee costs from placing Mr. Carney on paid administrative leave for more than six months, having to hire a contract Acting City Manager, and for the salary share of other department heads that have to fill in when necessary.
• Ongoing instability within City Hall and uncertainty throughout the broader business community.
• Delays in filling key leadership positions that are critical to implementing updated financial policies and procedures.
• Continued exposure to risk as the material weaknesses identified by Moss Adams and LSL remain only partially addressed.

While the discussion around the City Manager’s employment has dominated headlines, the more important story lies in how the City Council has handled the process itself. The $1M spent on legal fees and unproductive staff costs could have been placed toward replacing playground equipment, a new dock at Lodi Lake, new lighting at Salas Field, or many other projects that could improve our community.

If the investigation (taking 6 months and costing $600K) conducted by Meyers Nave did not discover any specific illegal actions that could be considered as grounds for dismissing Mr Carney with cause, the City Council must pursue mutually agreeable separation terms. This is the only way to protect the city against future litigation and to show potential future City Manager candidates that the council is interested in resolving the real issues that are beleaguering our city. 
 
The Council then must re-commit to bringing about the changes desired by the community. Mr Carney was unanimously supported by the members of a community panel that interviewed the three finalists for the position, and he was unanimously selected by Council. He was hired with a mandate from council and the community to evaluate the city’s processes and procedures and to bring about necessary improvements. The next City Manager must be supported by the City Council to execute on that mandate. Organizational change is never easy, but if this situation has taught us anything, it is that our city needs an executive that can challenge the status quo and facilitate the creation of more professional and more efficient city operations.
 
1. Legal Contract Mismanagement: Cost Overrun of $300K
 
What Occurred

• The City’s contract with outside counsel (Meyers Nave) exceeded its approved amount by nearly double (from $265K to an undisclosed amount above $500K) before Council retroactively approved additional funding in September.

Signs of Poorly Managed Process

• The overrun represents another breakdown in financial oversight, ironically, while the City was under audit for poor fiscal controls.
• Council has never publicly clarified who approved these expenditures prior to the vote. Mayor Bregman stated in the September 3rd meeting that Council can provide direction to the legal team to exceed their contract ahead of a public vote. However, comments from multiple other council members in the August 20th meeting indicated that Council was not presented with a clear amendment or letter explaining the increased scope of service to provide such direction, but was only given a rough timeline and some estimates.

 
2. No Forensic Audit: Ignoring the Core Questions

What Was Requested

• Magee’s Mid-Year Budget Reports (April 1st & 2nd) identified poor internal controls, reconciliation delays, and untracked accounts, recommending that a forensic-level review of credit card purchases and certain utility accounts be pursued immediately.
• Carney’s April 1, 2025 public statement reiterated that recommendation, citing the need for a targeted audit of credit card usage, Amazon purchases, and the utility customer deposit account, which was showing an unexplained $1.2 million overbalance.
• Proposed in the reports were recommendation for a Finance Director to be immediately hired to address control deficiencies across departments.
• Report from financial assessor Kevin Harper, who was hired by Council, recommended that the utility deposit account, the purchasing card usage, and Amazon account all needed further investigation.  

Council’s Inaction & Delay

• Despite both managers’ calls for an independent forensic review, Council delayed authorizing an audit until September, when it approved the Hoslett Forensics 'accounting review'.
• According to that Hoslett Forensics scope of work, the audit was to include: “Targeted testing of procurement card transactions, city-issued credit card accounts, Amazon purchase orders, and deposits into the utility customer deposit account dating back to 2016 to determine if deposits were correctly applied to customer accounts.”
• This delay of nearly three months after both Carney and Magee publicly flagged these issues has allowed potential misuse to remain unaddressed.
• The scope of the audit falls well short of what would be considered a true forensic audit, and any suspicious activity will lead to additional auditing with further delay in reporting back accurate information.

What It Could Have Resolved

• A forensic audit could have definitively ruled out fraud, determined whether there was fraud, and clarified whether questionable credit card purchases were for personal items (which is illegal under CA penal code, even if the charges are reimbursed) or administrative errors. Councilmember Nakanishi stated in the August 20th meeting that he had been informed (by whom it is not known) that a forensic audit was "not needed and very expensive". 
• It also would have determined whether the $1.2 million utility deposit surplus reflected accounting negligence or possible redirection of funds.
• The response leaves the continued impression that the desire of Council is to continue to not pursue the full extent of p-card misuse or lack of financial oversight, and to continue to conceal unsatisfactory behavior by staff members.

 
3. Credit Card / P-Card Mismanagement Minimized

The Problem

• The Moss Adams Internal Controls Review (June 2025) found serious deficiencies in the City’s purchasing and credit card oversight. The report categorized the City’s Cal-Card oversight as “high-risk”, listing “bank reconciliations, receivables, and P-Card controls” as areas requiring immediate corrective action. Specifically, it cited: “Inconsistent application of procurement policies and lack of monitoring of City Cal-Card purchases” and “failure to enforce reconciliation timelines and independent supervisory review."
• In a report out from closed session on July 16th, outside council reported out the following observations from their contracted financial accessor Kevin Harper: "With respect to employee use of procurement cards, Harper determined there are poor internal controls over procurement cards, which the City should remedy. Although none of the transactions are clearly fraudulent, there are many questionable transactions that would require future investigation to determine whether they comply with City policy. Harper also recommended further research into Amazon account transactions." 

Council’s Response — Too Little, Too Late

• The Council waited until September 2025 to adopt a new Cal-Card Use Policy and pass a resolution limiting card issuance to certain positions.
• These policy reforms, though important, came only after months of public pressure and multiple audit confirmations of mismanagement.

Cost of Delay

• The delay prevented timely accountability for questionable transactions.
• It also perpetuated operational risk and public suspicion, undermining the City’s credibility with residents and investors alike.

 
4. Utility Deposit Fund: Either Incompetence or Worse

Audit Findings

• The LSL Audit Report (July 2025) cited “material weaknesses in internal controls over reconciliations and deposit application processes” while noting that “certain customer deposits remain unallocated to specific accounts pending reconciliation.”
• In a report out from closed session on July 16th, outside council reported out the following observations from their contracted financial accessor Kevin Harper:         "In short, he identified no evidence on fraud related to the Utility Deposit & Holding Account. However, he found that the account needs to be analyzed and reconciled to identify all amounts to customer accounts". 

What This Implies

• The continuing $1.2M imbalance, which was left unresolved for nearly a decade, suggests either a prolonged failure in basic financial management or the existence of an informal account functioning as a slush fund.
• The City’s delayed commissioning of a forensic audit has ensured that, as of October 2025, there is still no definitive answer.

 
5. Delayed Public Records Act (PRA) Disclosures: What is there to hide?

Background

• In April 2025, several PRA requests were submitted by residents (Chamber was bcc’d) seeking transparency around travel reimbursements and purchasing card usage:
  • April 10, 2025 – PRA: Travel and Expense Reimbursements for city staff and city council members
  • April 11, 2025 – PRA: Card Account Purchasing Information for city staff

City's Failure to Respond

• As of today, these PRA requests remained unfulfilled.

Impact

• These delays have deepen public suspicion about the handling of credit card statements and reimbursements.
• The Council’s tolerance failure to comply with legal requirements directly undermines its stated commitment to transparency.

 
6. Collateral Damage: Costs, Delays, and Chaos

• Maintaining Mr. Carney on administrative leave for more than five months added unnecessary salary cost and has left a void of leadership at the city.
• The delay in resolving these issues has delayed the process for recruiting another City Manager, if Mr Carney was never going to be reinstated.
• Staff morale and public confidence in City Hall have eroded.
• These failures have created new liabilities and prolonged uncertainty.

 
Looking Ahead: What the Chamber Recommends

1. Pursue a mutually agreeable separation with Mr. Carney to limit legal exposure and demonstrate Council’s ability to move forward constructively.
2. Fill PRA requests for credit card statements and travel reimbursement records.
3. Institute mandatory monthly reconciliations and independent review procedures, as recommended by Moss Adams.
4. Clarify who bears responsibility for the outside counsel over expenditure.
5. Complete and publicly release the Hoslett Forensics audit immediately upon conclusion with unredacted findings.