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Film Agency Audit Urged

Report: As part of overhaul, city attorney also calls for removal of elected officials from the board of the troubled nonprofit corporation.


The Los Angeles city attorney's office called Thursday for an overhaul of the beleaguered Entertainment Industry Development Corp., saying city officials failed to "properly monitor and audit" the film permit agency, which is now under investigation by the district attorney's office for possible misuse of public funds.

In a 17-page report to the City Council, City Atty. Rocky Delgadillo proposed a city audit of the nonprofit corporation's finances and the removal of all elected officials from its board of directors.

He also said the EIDC board should consider limiting agency President Cody Cluff's responsibilities and suspending reimbursement of expenses for officers until it can be determined whether public funds were misspent.

"It's clear no one was minding the store," Delgadillo said in an interview. "The failure to have oversight and the actions of the CEO [Cody Cluff] muddied the waters over whether money was spent properly."

For The Record
Los Angeles Times Saturday October 12, 2002 Home Edition Main News Part A Page 2 National Desk 9 inches; 344 words Type of Material: Correction
Audit chairman--A story in the California section Friday on the Entertainment Industry Development Corp. incorrectly reported that Councilwoman Wendy Greuel heads the Los Angeles City Council's audit committee. She is the vice chairwoman. The committee chairman is Councilman Tom LaBonge.

The film agency is under investigation by the district attorney's office to determine whether it improperly spent public funds on lavish expenses and political contributions to elected officials on its board.

EIDC officials have argued that the agency is private and therefore can make political contributions and have entertainment expenses not acceptable in the public sector. The district attorney's office, citing a state Fair Political Practices Commission advisory letter, has said the agency may be a public entity prohibited from making election contributions.

Delgadillo said his review of the agency concluded that it was intended to be a private con- tractor expediting film permits for the city. He said the removal of elected officials from the board will help clarify that the EIDC is a private corporation that will be held accountable by the city through a contract with regular audits.

"We need to take government out of the EIDC and remove the politicians from the board," Delgadillo said.

County Supervisor Zev Yaroslavsky, a member of the EIDC board's executive committee, said Thursday that he had not seen the city attorney's report yet. He said he agreed with the concept of elected officials no longer serving on the board. But he added that it is too early for such a move.

"Eventually, I do believe that has to happen," Yaroslavsky said. "But right now, I think the executive committee has an immediate responsibility to determine what's going on [with EIDC] and right this ship, and I don't think it can wait for weeks or months to renegotiate a contract."

Delgadillo said confusing and ambiguous rules, the management of Cluff, the involvement of elected city and county officials on the agency's board, and the city's "failure to properly monitor and audit EIDC has blurred the line between public and private."

Delgadillo recommended that the mayor and the members of the Los Angeles City Council and the county Board of Supervisors be removed from the EIDC board to help reduce confusion over whether it is a private or public agency.

He said that "only an audit can definitively determine if EIDC inappropriately used any public funds, and thus we recommend this audit begin immediately."

The city attorney also called for the city to renegotiate the terms of its contract with the agency to clarify and limit its role.

Delgadillo's recommendations were endorsed Thursday by several elected officials, including City Councilwoman Wendy Greuel, who heads the council's audit committee.

"I am in complete agreement with the recommendations in his report," said Greuel, who had, before her election, served on the film agency's board as an executive with DreamWorks SKG.

"I want to make sure we reform and clean up those things that are problematic. Major changes are needed," Greuel added, promising to take Delgadillo's recommendations to the EIDC board for adoption.

County Supervisor Michael Antonovich said he wants to see a report now being prepared for the EIDC board by former City Administrative Officer Keith Comrie on reforms before committing to proposals by Delgadillo.

"The city attorney's recommendations and the City Council's recommendations are premature until Keith Comrie's report comes back," Antonovich said.

Antonovich endorsed the concept of developing a protocol for more oversight.

"It is essential to have an EIDC that has the integrity and support of the public and private sector. Having appointed members from the private sector ... makes more sense."

Cluff said Thursday evening that he had not seen the report, but "we're pleased to know that the city attorney agrees with us on the fundamental issue that the EIDC is a private corporation. We look forward to working through the rest of the issues with the city and county on a reasoned basis."

The issue of whether the EIDC is a private or public agency could be crucial to whether its executives face criminal prosecution.

Delgadillo said it is clear that when the city and county set up the agency in 1995 it was intended to be a private, nonprofit corporation that would contract with the two government jurisdictions to expedite film permits.

He said one city document called it a "quasi-public agency," but said the overwhelming majority of city records suggest the city intended for it to be an "independent, nongovernmental" agency.

Delgadillo disputed a state Fair Political Practices Commission opinion that indicated EIDC was a public agency, saying it passes through funds meant for the government and keeps fees from production companies for expediting their permits.

"We disagree with the FPPC's conclusion and find that the facts indicate that the city is not the primary source of funds to EIDC," Delgadillo wrote.

Times staff writers Steve Berry, Anita M. Busch and Ted Rohrlich contributed to this report.

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