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Just One More Thing 

Missing motives in L.A.’s pay-to-play scandal

Thursday, Oct 21 2004
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PROSECUTORS GATHERED ENOUGH evidence of political money laundering to get no-contest pleas this month from Casden Properties vice president John Archibald and 14 subcontractors. They in effect established that the real estate executive orchestrated a scheme to get plumbers, electricians, drywall companies and others to front for him while he illegally enriched the campaigns of City Attorney Rocky Delgadillo, City Council Members Wendy Greuel and Jack Weiss, and unsuccessful mayoral candidate Kathleen Connell.

What District Attorney Steve Cooley’s prosecutors failed to establish is why. Why would 87-year-old Nevada construction-company owner William Isaac, who will have to pay a fine of $10,900, agree to participate in a scheme that allowed Archibald to funnel money to L.A. political campaigns under Isaac’s name? What did Isaac get for it? What did Archibald get for it? What about the other subcontractors?

The no-contest pleas, together with the agreement to drop felony conspiracy charges and forgo any quest for prison time, leave the motive question unanswered. After a year of pay-to-play investigations in City Hall, prosecutors have yet to prove any links between campaign fund-raising and lucrative city contracts.

A similar prosecution is continuing in the case of Los Angeles attorney Pierce O’Donnell, whom Cooley’s office has accused of laundering campaign donations to Mayor James K. Hahn. Getting someone else to donate to a candidate and then repaying that person is a clever, and illegal, way to get around the $1,000-per-donor limit on campaign contributions that city law puts in place to keep the election playing field even and to block any rich person or company from virtually running the town through secret donations and string-pulling.

Evidence in court files of O’Donnell breaking campaign-donation limits by reimbursing employees, friends and acquaintances for their donations to Hahn’s 2001 mayoral campaign is compelling. But why? For what?

As in the Archibald case, the District Attorney’s Office can proceed against O’Donnell and others on money-laundering charges without ever establishing that contributors got anything in return from Hahn or his campaign.

But sources familiar with the prosecution and with corresponding probes by the city Ethics Commission and the state Fair Political Practices Commission (FPPC) say the investigation is focusing on the city’s role as plaintiff in a 2001 lawsuit against Southern California Gas, El Paso Natural Gas and other energy companies. Plaintiffs said the suppliers schemed to artificially drive up natural-gas prices here by canceling pipeline projects and carving out exclusive competition-free territories.

As city attorney, Hahn asked the City Council to file suit in March 2001, in the midst of his campaign for mayor. The legal work was referred out, and city records show the outside law firm getting the contract was Engstrom, Lipscomb & Lack. But the firm entered into a fee-sharing arrangement with four other firms — Astrella & Rice, of Denver; Baker, Burton & Lundy of Hermosa Beach; Girardi & Keese of L.A. And O’Donnell’s firm, O’Donnell & Shaeffer.

The firms were to take the antitrust case on a contingency-fee basis, and bear the costs by splitting them among them.

The probe, according to sources, is seeking to establish a connection between two meetings — a conference between O’Donnell and Hahn, before the city joined the suit and the O’Donnell firm got its chunk of the city business, and a fund-raising appearance later that year that Hahn made at the firm. Was O’Donnell trying to meet a fund-raising commitment in exchange for a piece of the gas litigation?

So far, sources said, no link has been firmly established. No pay-to-play.

Simple political money laundering is another matter though, and made national news earlier this year when Newsweek reported that John Edwards was returning $44,000 in contributions that O’Donnell employees and associates sent in because of the L.A. prosecution. The donations to Edwards came from some of the very same people that Cooley’s office and the Ethics Commission charged in the laundering plot. Now the Federal Elections Commission has opened a probe as well.

Court records show that the investigation here began in early 2003. In July of that year, the FPPC interviewed a former temp from O’Donnell’s office who said she was asked to give money on the day of a Hahn visit. She said she and others were promised that they would be reimbursed. She refused, but she said most gave.

Hilda Escobar, a secretary at the O’Donnell firm who has been charged by the District Attorney’s Office and the Ethics Commission, said in a May 12, 2004, interview with prosecutors that she was asked to make a contribution, that O’Donnell’s secretary, Dolores Valdez, told her she would be reimbursed, and that in fact she got her $1,000 contribution reimbursed by a check signed by O’Donnell. Her donation check bounced, she said, because she had not yet covered her bank account with the reimbursement check.

“I was told that it wasn’t going to be submitted right away,” Escobar told prosecutors.

Firm administrator Else Latinovic, interviewed the same day, said Valdez asked her for a Hahn contribution.

“Well, she came into my office and asked me if I would contribute,” Latinovic said. “And that I would be reimbursed for the contribution.”

Deputy District Attorney Juliet Schmidt asked if Valdez mentioned a commitment that O’Donnell made to raise a certain amount of money for Hahn. Latinovic said she did. “She just said that, uhm, a pledge was made for the Hahn campaign,” Latinovic said. “And then, ‘You’ll get reimbursed.’”

Latinovic’s 74-year-old mother, who lives with her daughter in Simi Valley and like her daughter cannot vote in Los Angeles city elections, also gave the top $1,000 donation and was reimbursed.

“I said, ‘I get the money back?’” she recalled asking her daughter, who assured her she would.

Escobar, the Latinovics and several others testified under a grant of immunity. But prosecutors are still going after them, saying they had plenty of documentary evidence before the testimony that they participated in an illegal money laundering scheme.

The district attorney has named seven people in its complaint, but together with the Ethics Commission it claims that 23 people donated money to Hahn’s mayoral campaign and were reimbursed by O’Donnell. Many of their names also appear in Federal Elections Commission records as donors to Edwards.

The arraignment date has been put off repeatedly, as Cooley’s office, the Ethics Commission and the FPPC coordinate their cases, and as prosecutors play hardball with O’Donnell office workers.

It is not illegal to donate money to political candidates, as long as the donor stays within the limits. Auditing campaign donations to check for excess contributions is a necessary precursor to probing political money laundering, which is itself a necessary prelude to determine whether politicians are selling off city contracts in exchange for campaign donations.

It also is not illegal for contractors (for now) to give money to city candidates. Part of doing business with the city, after all, is being involved in city affairs, so if you want a contract, you show up at a fund-raiser, or maybe throw one yourself. It’s a chance to schmooze. A chance to be sure you are called when issues come up. After all, who else but someone with a direct stake would bother giving money to a city candidate?

 

PROVING PIERCE O’DONNELL USED his own money to break contribution limits would be a coup, and in fact it could get him sent away for 13 years. But prosecutors usually let administrative laws do their work, in the form of fines. The big prize here is answering the questions: What did O’Donnell hope to get? What did Hahn offer, or imply, as a reward? If anything?

If Cooley’s office can establish a link in the natural-gas case, it would finally, for the first time, show that there is a corrupt pay-to-play culture at City Hall. But the possibility remains that O’Donnell, a flamboyant figure, a poet, an author, a former newspaper publisher, a onetime congressional candidate, and one of the top-ranked trial lawyers in the nation, laundered campaign money only because he wanted to be seen like an even bigger cheese. Cooley’s people have their work cut out for them.

Hahn campaign spokeswoman Julie Wong, meanwhile, denied any link between the gas litigation and O’Donnell fund-raising. “The two have absolutely nothing to do with each other,” she said.

She also noted that the gas suit, whoever the lawyers were, helped the city recover $20 million.

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