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L.A. city attorney's wife's firm had tax lapse

The state barred operation of her business after it failed to file tax returns. It also lacked a city license.

June 23, 2007|Matt Lait | Times Staff Writer

A consulting business run by the wife of Los Angeles City Atty. Rocky Delgadillo has failed to file state tax returns for several years and until Friday operated without a city business license -- a type of offense her husband's office is responsible for prosecuting.

In 2005, the state Franchise Tax Board barred Michelle Delgadillo's business, C.R.D. Inc., from operating in California because it had neglected to file tax returns every year since it was founded in 2002, records show.

According to economic disclosure forms that Delgadillo is required to file so the public can be aware of his most significant sources of income, his wife's consulting work generated between $10,000 and $100,000 a year from 2002 to 2005. Under city rules, the city attorney is required to report only a range of income earned by the business.

Michelle Delgadillo, listed as president of the corporation, has declined through her husband's office to comment. It was unclear exactly what work her business did or who its clients were, but records show it operated out of the couple's Hancock Park-area home. A onetime aide to former City Councilman Joel Wachs, Michelle Delgadillo has identified herself as a consultant and homemaker in city documents.

According to a Delgadillo spokesman, Michelle Delgadillo paid taxes on the income she earned over the years. However, she reported that income on her personal tax returns, not her business' forms.

Delgadillo's office refused to answer a list of questions submitted by The Times about the business. Instead, officials released a short statement late Friday saying that C.R.D. Inc. never did work on any city attorney contract.

"If there are any issues with C.R.D., Michelle takes full responsibility and intends to resolve them," the statement read.

Until Friday, Michelle Delgadillo's company operated without what is known as a tax registration certificate. Business owners who fail to register with the city are subject to criminal or civil prosecution by the city attorney's office. Those cases are referred by city finance officials. In the case of C.R.D., no such referral was made -- and if one had been, a Delgadillo spokesman said, the city attorney would have recused himself from handling it.

After The Times inquired about C.R.D. Inc. on Friday, the business applied for -- and received -- a tax registration certificate retroactive to June 10, 2002, the date the business was incorporated. A city finance official said city policy prohibited her from disclosing the amount of penalties and fees that were paid.

The issues regarding Michelle Delgadillo's business come in the wake of other disclosures this week in which she seemed to have disregarded a number of other everyday rules or laws. She has acknowledged driving on a suspended license and without automobile insurance for at least a couple of years.

She went to traffic court to resolve a 9-year-old ticket citation that resulted in a bench warrant's being issued for her arrest. And other records showed that she had been delinquent in paying at least five parking tickets in the last several years.

In statements released this week, Michelle Delgadillo said she was "embarrassed" by her actions and was sorry.

Rocky Delgadillo, who is rarely shy about media attention, sought a lower profile in recent days after he had to acknowledge that he had let his wife use his city-owned GMC Yukon for personal reasons. On one outing in 2004, his wife damaged the rear of the SUV, which Delgadillo had repaired at taxpayer expense. After the matter became public this week, he agreed to reimburse the city for the $1,222 repair job. He also said that -- unbeknownst to him -- he had driven without auto insurance for about a year.

Just days after those admissions, Delgadillo acknowledged in response to inquiries from The Times that he had periodically enlisted his office staff to run personal errands and baby-sit his two sons. The tasks were performed on the employees' personal time, he said. But several sources told The Times that the work occurred during normal business hours.

Robert Stern, the president of the Center for Governmental Studies in Los Angeles, said the "cumulative effect of all these problems really hurts" the city attorney's reputation and political future because he and his family are expected to be "cleaner than clean."

"There seems to be a feeling that they don't have to follow the rules," Stern said. "But the public expects them to set the example."

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