Amid complaints that it mishandled funds earmarked for upkeep of the landmark Hollywood sign, the Hollywood Chamber of Commerce has agreed to surrender control of the sign and dissolve a trust fund of more than $250,000 set up to maintain it.
Sources close to the chamber's executive board said part of the money will be turned over to the Los Angeles Department of Recreation and Parks, which will assume responsibility for maintaining the sign, and the rest will be given to charities.
The group has also agreed to repay the trust more than $40,000 in interest, in addition to the $45,000 in interest it voluntarily repaid last June after its handling of the fund became public, the sources said.
The decision to dissolve the trust and step aside from managing the sign comes as the attorney general's office is about to conclude an audit of the chamber's finances begun last September. Sources familiar with the investigation said the chamber's decision is part of a settlement with the state expected to be concluded once the audit is finished in a few weeks.
"It's a case of 'Why punish yourself anymore?' " said a source close to the chamber's 45-member executive board. "The feeling was, we've had enough bad press on this already."
Both Deputy Atty. Gen. Patricia Barbosa and Larry Kaplan, the chamber's executive director, declined comment on the matter.
Although the famous sign on the side of Mt. Lee in Griffith Park belongs to the Department of Recreation and Parks, by agreement with the city the chamber has been responsible for its upkeep since 1978, after raising the money to save it from being demolished.
Last May, The Times disclosed that of $122,166 in assets reported by chamber officials last year as belonging to the trust, $53,158 had been on loan to the chamber for nearly 10 years.
Chamber officials repaid the loan's principal at the same time they made the $45,000 interest payment.
The trust was established in 1978 as part of a fund-raising effort to restore the sign. About $214,000 of the almost $300,000 placed in the fund was spent that year to rebuild the sign. The rest was to be used for maintenance.
However, federal and state records showed that in the 11 years since the fund was created, the chamber spent only $600 for the sign's maintenance.
Under terms of the trust's tax-exempt status, chamber officials agreed that the funds were to be used exclusively for the maintenance of the sign, and that the trust was "not to be affiliated with or controlled by the Hollywood Chamber of Commerce."
Chamber officials have defended their control of the trust, saying that while documents submitted to the Internal Revenue Service may suggest otherwise, the terms under which the trust was set up allow the chamber to exercise control over it.
The state, however, took a dim view of that claim.
In a letter to chamber officials last November announcing the preliminary findings of its audit, the attorney general's office chastised the chamber for dipping into the trust fund to help meet its own operating expenses, and indicated that chamber officials had violated the terms of the trust by excluding outsiders from managing it.
Other Hollywood community groups have complained for years that the chamber has refused to provide them with information about the handling of the sign trust.
Ed Cohan, an attorney who has been among the chamber's most vocal critics, expressed pleasure at the prospect of the city's taking control of the sign. "I hope this means there will now be an opportunity for various community groups and others, such as Hollywood Heritage, to have a voice in how the sign is managed," he said.
Besides about $170,000 that chamber officials acknowledge is already in the fund, sources familiar with the audit say the state has insisted, and chamber officials have agreed, that money the chamber has earned from licensing the likeness of the sign on T-shirts, mugs and other items also be included.
Just how much that will amount to, after the chamber's administrative expenses are subtracted, is said to be part of continuing negotiations between the chamber and state officials. Knowledgeable sources, however, say the final accounting is expected to show the trust with between $250,000 and $300,000.