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Film Agency's Chief Finds Himself in D.A. Spotlight

October 29, 2002|Steve Berry, Anita M. Busch and Ted Rohrlich | Times Staff Writers

In just over a decade, Cody Cluff transformed himself from a controller at an Orange County solenoid factory to Los Angeles' film czar.

An accountant by trade, Cluff was assigned by city and county elected officials to woo Hollywood players -- to keep them shooting films and TV shows here, rather than in other states and countries busy rolling out red carpets of their own.

Cluff, head of Los Angeles' Entertainment Industry Development Corp. since its creation in 1995, has helped streamline a vital part of the Hollywood production process by making it easier to obtain filming permits while keeping relative peace in affected neighborhoods.

But the way he spent the agency's money has also led to trouble. With carte blanche access to his agency's multimillion-dollar treasury, the ambitious entrepreneur treated himself and those he courted so well that he and the nonprofit agency are now under investigation by the district attorney's office for possible misuse of agency funds.

The probe has cast an embarrassing spotlight, not only on Cluff, but on the elected officials who created the EIDC as an experiment in privatizing government functions. They appointed themselves as its overseers, then all but ignored it, except as a source of campaign contributions.

Without close scrutiny, Cluff expanded the scope of the $5-million-a-year enterprise while running it out of his hip pocket. For example:

* Hundreds of thousands of dollars a year in corporate expenses were paid for with Cluff's personal credit cards because the EIDC never used a corporate line of credit. Cluff and EIDC employees say they charged everything from office equipment to travel and entertainment expenses, with bills of about $30,000 a month.

* Cluff set his own $200,000-a-year salary package, including an $1,800-per-month housing allowance.

* Under Cluff's stewardship, the EIDC spent $3 million on an online film permit system that never worked.

* Cluff directed one quarter of the EIDC's fiscal 2001 charitable donations to youth and public school programs in Covina, where he grew up and his children have gone to school.

* Cluff negotiated a $340,000 contract to develop a Web site and database for the online system with a firm controlled by a longtime EIDC board member and production company president, Frank Scherma.

* And Cluff directed $185,000 in political contributions to candidates and elected officials, including 19 members of the EIDC's board, the only entity with power to rein in the agency.

The degree of disengagement by public officials in a position to regulate the EIDC's activities has been extreme. All members of the county Board of Supervisors and Los Angeles City Council automatically serve on the EIDC board, but few attended meetings, which were often canceled for lack of interest. Those who did show up were satisfied with a six-line annual budget. The city's chief administrative officer, William Fujioka, was required to audit the EIDC every two years. But he did not, saying his office was too busy.

"Typically, when money and a public policy is involved, you see a little more vigorous oversight on the part of elected officials," said Steve Frates, senior fellow at the Rose Institute of state and local government at Claremont McKenna College. "In 25 years of looking at local government, I can't recall another example of this kind of thing."

In an interview, Cluff contended that using his personal credit cards to pay for the EIDC's day-to-day operations was not unusual. It happens all the time in private business, he said. He conceded, however, that he is "not the best administrator." When asked recently at a public meeting how much his agency had in cash reserves, Cluff said he didn't know.

Cluff said he has been taken aback by the district attorney's investigation because, until it began, he had received good reviews from elected officials. In fact, in 1998, the City Council and the Board of Supervisors each voted unanimously to extend the life of Cluff's agency for 10 years.

The EIDC was set up as a private nonprofit corporation -- an effort to show that private enterprise could do a better job than government. But the district attorney says that because the EIDC performs government functions -- handling film permits -- and collects public funds such as use fees for fire department supervision of film sets, it qualifies as a local government agency under state law.

Confusion over the EIDC's status is unlikely to be resolved soon.

If prosecutors file criminal charges, Dist. Atty. Steve Cooley predicted, appellate courts will probably decide whether the EIDC is a public or private entity. "Both sides are going to fight this one to the death, because it's so important in terms of defining what government is and what government isn't," he said.

Cluff's questionable expenses, according to legal documents, included 100% tips and a $350 bottle of wine.

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