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City Treasurer Will Answer Allegations of Cover-Up

July 22, 1989|FREDERICK M. MUIR and JOEL SAPPELL | Times Staff Writers

City Treasurer Leonard Rittenberg has agreed to appear Monday before a special meeting of the Los Angeles City Council to answer allegations that he and his office covered up the circumstances of a $2-million deposit of public funds in a bank that employed Mayor Tom Bradley.

"What's at stake here is no longer just one man's reputation but the public tax dollar," said Councilman Zev Yaroslavsky, who on Friday demanded Rittenberg's appearance before a hearing of his Finance and Revenue Committee.

Rittenberg informed Yaroslavsky's office that he would voluntarily defend himself before the lawmakers, who have expressed concern over the allegations of bid-rigging and cover-ups that have rocked City Hall during the last two days.

Rittenberg has yet to publicly comment on the allegations, and efforts to reach him Friday were unsuccessful.

The allegations against him came Thursday from the city administrative office in an audit ordered by Yaroslavsky's committee--one of many public bodies investigating Bradley's personal finances and any conflicts of interest they might have created.

According to the audit report, Rittenberg in March placed $2 million of taxpayer money in Far East National Bank--which last year paid Bradley $18,000 as an adviser--and then sought "after the fact" to make it appear that the deposit had been awarded through a city-mandated competitive bidding procedure.

The deposit occurred on the same day that Bradley discussed the city's ties to Far East with Rittenberg--and one day after the treasurer's office had informed the bank that it was withdrawing a $1 million certificate of deposit that had reached maturity.

Rittenberg has denied that the mayor influenced his decision to suddenly double the amount of city funds with Far East. Bradley, for his part, has also denied exerting any pressure.

Council members interviewed Friday said they were shocked by the audit's disclosures, but most of them stopped short of calling for Rittenberg's suspension or firing until they heard from him on the matter. Rittenberg, appointed by Bradley two years ago, serves at the pleasure of the mayor and the City Council.

Although the auditors found nothing to link Bradley to the treasurer's alleged cover-up, their report has nonetheless intensified questions about the mayor's role in the affair.

As Councilwoman Gloria Molina asked, "How much deeper is it?"

Molina, who has been critical of the treasurer's office, said, "There is a perception that someone did influence" the treasurer.

Council member Joan Milke Flores went so far as to say that the audit "puts us back at square one on the investigations" of Bradley's finances and possible conflicts of interest.

"Circumstantially, it looks terrible to have the money placed in that bank without competitive bidding on the same day the mayor called the treasurer," Flores said. "I think we need to revisit that phone call. . . .

"It would be wonderful if (the mayor) came forward to help us out."

To date, Bradley has refused to provide a detailed account of his actions to the council, other than to deny any impropriety.

Meanwhile, the top executive of yet another bank named in the report disputed a suggestion by auditors that his thrift may also have received preferential treatment from the treasurer's office.

According to the audit, city bidding requirements apparently were violated in the award of millions of dollars in deposits to Gibraltar Savings & Loan Assn. The infusion began after Bradley purchased $100,000 worth of bonds in the thrift in March, 1986. He purportedly sold the bonds at a substantial loss last January, just before the ailing thrift was seized by the federal government.

The audit report stated that Gibraltar and several other financial institutions were told how much competitors had bid and were then allowed to negotiate the amount of interest they would pay above that figure. Auditors said this breached the city's policy of secret bids.

An unnamed Gibraltar official was quoted in the report as saying he was "frequently told the high bid" and was promised that, if he could top it by one-tenth of 1%, he would be awarded the deposits.

But Gibraltar Chief Executive Officer John Carr told The Times Friday that the executive quoted by the auditors flatly denies making such a statement. Gibraltar has "never" negotiated a bid with the city or received special favors, insisted Carr, who was hired only recently but said he has "every reason to believe" his subordinate.

City officials on Friday stood by the report, saying that the quote was obtained in person by two veteran Los Angeles police officers assigned to the Bradley investigation.

"That is the specific quote they got and they will both testify to that at Monday's hearing," said City Administrative Officer Keith Comrie.

He added that no other bank quoted in the report has challenged the accuracy of statements they provided to police or city auditors.

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