Iconic California city on brink of financial ruin after being crippled by $230 million sex abuse scandal

A once-thriving California city has declared ‘fiscal distress’ after paying $230 million to victims of a former police staffer involved in a sexual abuse scandal – an expense now pushing the city to the brink of financial ruin. 

The seaside town of Santa Monica – particularly its once-lively downtown shopping district – has been hit hard by years of unnecessary spending, new tariffs, and the lingering effects of the pandemic. 

But city officials say the primary factor pushing Santa Monica toward full-blown collapse is the alleged sexual abuse by former police dispatcher Eric Uller. 

Uller preyed on children in predominantly Latino neighborhoods of the city, patrolling in either an unmarked police car or a personally owned SUV equipped with police gear, according to court records obtained by The Los Angeles Times.

For decades, Uller also molested dozens of kids while volunteering at the Police Activities League (PAL) – a nonprofit serving underprivileged youth – during the 1980s and 1990s. 

It wasn’t until 2018 that he was arrested, but he died by suicide later that year while awaiting trial.

The horrific case sparked a mountain of lawsuits accusing Santa Monica of negligence and even covering up the abuse – claims that have resulted in litigation costs that continue to burden the city.

‘The financial situation the city is dealing with is certainly serious,’ city manager Oliver Chi said during Tuesday’s City Council meeting, according to the outlet.

‘We are carrying the weight of more than $229 million in sexual abuse allegations,’ Mayor Pro Tem Caroline Torosis added.

‘We owe it to survivors to properly address this, but we owe it to Santa Monicans to protect our city’s financial stability.’

In April 2023, the City of Santa Monica agreed to a $230 million settlement for over 200 victims sexually abused as children by Uller. 

It was one of the largest payouts of its kind, involving one of the most prolific alleged molesters. 

Since then, the city has undergone four rounds of settlement talks with claimants – and now faces an additional 180. 

Former Santa Monica Mayor Phil Brock said one of the biggest challenges so far has been the scandal attracting ‘some unscrupulous lawyers,’ according to LA Times.

And while the city has insurance, many claims have resulted in settlements ranging from $700,000 to just under $1 million. 

Many costs have come out of the city’s own pocket because of a $1 million deductible on some insurance policies, and the city has now sued some insurers to recover part of those funds.

Santa Monica’s approved budget for 2025-26 projects $473.5 million in revenue, which is still significantly less than the expected costs of $484.3 million. 

Victims have said that Uller groomed them and invited children to play in his police car – which then gradually progressed to molesting and raping them.

Some of his alleged victims were as young as eight years old and reported being abused for years, as reported by the LA Times.

One former staffer at PAL, Michelle Cardiel, told the Daily Mail in 2022 that she reported Uller to the program’s director, Patty Loggins, in 1993 after a boy came to her office and alleged he had made sexually inappropriate comments to him.

Instead of receiving reassurance, she said she was threatened with a reprimand for gossiping. 

Santa Monica City Councilman Oscar de la Torre also tried to blow the whistle on Uller starting in the early 2000s, but said no action was taken – and alleged the council even retaliated by defunding the youth center he helped run. 

In 2019, a year after Uller’s arrest, California Assembly Bill 218 temporarily extended the statute of limitations for historic child sex abuse cases. 

The new law allowed victims of sexual abuse to file a claim until the age of 40, or within five years of discovering the abuse. 

Because most of Uller’s victims were under 40 when the law was passed, it triggered a new wave of litigation against school districts, counties, and cities.

For Santa Monica, the new law meant taxpayers could be left with a significant bill from lawsuits related to Uller’s abuse. 

During Tuesday’s council meeting, City Manager Oliver Chi noted that new bills under consideration could limit claims under the law – potentially offering some relief for the city.

While city officials initially planned to declare a ‘fiscal emergency,’ they instead voted on Tuesday to declare ‘fiscal distress’ – a designation Chi said is intended to help communicate the city’s financial situation to other agencies when seeking grants and funding. 

‘There is no doubt that the financial circumstances facing the city are serious, and the resolution developed for City Council consideration is a tool identified by staff intended to help institute a broader strategy,’ the city said in a statement, as reported by the LA Times.

However, the specifics of that strategy remain unclear. City officials said a plan is expected to be presented to the City Council in late October. 

‘I’ve heard a lot of people saying we need more staff, we need more police officers and all of that is true,’ Chi said. 

‘But the reality is no matter how many resources we have, no matter how many police officers we have, no matter how much we have here in the city, there’s always going to be a need for more,’ he added.

‘What we need to do is try to figure out how do we utilize the resources that we do have in the best way possible.’