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Riordan Is Investor in Firm With Metro Rail Contract : Ethics: Mayor's related actions may have violated conflict-of-interest law, experts say. He defends his role.


Los Angeles Mayor Richard Riordan, who pledged during his campaign to separate his substantial business holdings from any official actions, helped win approval last year for a rail project that has brought hundreds of thousands of dollars to a company in which he holds a major stake, records show.

Riordan's action, undertaken in his role as a board member of the Metropolitan Transportation Authority, may have violated state conflict-of-interest law, according to legal experts.

Riordan said in an interview that he sought the funding for the commuter rail project to resolve a dispute among MTA board members and had no inkling that the company could benefit. In response to questions posed by The Times, the mayor said that an attorney on his staff has advised him that he did not violate the law.

Last August, Riordan won funding for the rail project between Downtown Los Angeles and Pasadena, activating a $1.05-million contract held by Tetra Tech Inc.

Riordan, a multimillionaire lawyer and investor, owns $9.75 million of stock in the Pasadena-based engineering services company, his largest holding.

During his campaign for mayor a year ago, Riordan said he would place his private holdings in a blind trust "to avoid any potential conflicts of interest."

"Furthermore," he added, "I will remove myself from situations where potential conflicts of interest may arise." Records show that the head of the blind trust, established as of July, 1993, sits on the board of directors of Tetra Tech, along with one of Riordan's other venture capital partners.

Riordan, who accepts only $1 a year of his city salary, referred questions regarding the operation of the blind trust to others. He said that members of his staff have sought to steer him clear of conflicts of interest with his personal holdings, valued at $70 million.

As mayor, Riordan sits on the MTA board and appoints three other people to the 13-member panel. No other official controls as many appointments to the MTA.

The viability of the Pasadena rail line was in jeopardy last year when Riordan moved to save it. Citing an operating budget shortfall of $126 million and a capital budget deficit of $170 million, MTA staff had recommended delaying or killing the proposed 13.6-mile railway.

An Aug. 3, 1993, staff memo to Franklin E. White, the MTA's chief executive officer, warned that undertaking costly new rail construction would be "a highly dangerous course of action," adding:

"There is no money for new rail lines and will not be for at least a decade. This means that we must postpone indefinitely all work on the Pasadena line . . . and all other rail lines that are not currently under way."

White privately recommended delaying or scrapping the Pasadena line, according to people familiar with those conversations. But the chief executive, who had joined the agency a few months earlier, relented when urged by MTA Chairman Richard Alatorre, a city councilman whose district would be partly served by the new line.

White agreed to propose $40 million in funding to mollify Alatorre, sources told The Times. But then Riordan introduced an amendment to the agency's budget committing $97 million of MTA funds toward completion of final design engineering work for the project and authorizing preliminary construction.

"I'm concerned, I think we all should be, as to where the money is coming from," county Supervisor Edmund D. Edelman said in response to Riordan's amendment. ". . . We are facing some terrible fiscal problems."

With Alatorre's active support, Riordan ultimately gained unanimous passage last August for his amendment. White said that day: "The Pasadena line was the single most difficult issue relating to adopting the budget."

At the time of Riordan's amendment, Tetra Tech stood to gain.

The company in June, 1993, a month before Riordan took office, had received its $1.05-million contract to perform various engineering services on the Pasadena line. But records and interviews show that no payments would be made under the five-year contract unless the MTA made annual appropriations for the rail project.

Riordan told The Times that his sponsorship of the budget amendment had nothing to do with Tetra Tech:

"There was a conflict on the (MTA) board. Some board members wanted to spend more money on the (Pasadena) line, others wanted to spend less than was proposed. And I was asked to put together a compromise. It just came down to that. . . . It was just simply a way of trying to bring consensus to the board. No deep-seated meaning to it or anything."

The mayor said he could not recall who asked him to put together the budget amendment.

Passage of Riordan's amendment last August quickly opened the funding spigot for the Pasadena line. Less than two months later, Tetra Tech received its first $267,000 in payments. As of this month, Tetra Tech had received a total of about $320,000, according to the MTA.

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