The federal indictment of Hollywood private investigator Anthony J. Pellicano for allegedly using wiretaps and police bribes to dig up dirt on celebrities and business executives has cast a spotlight on the often murky but growing practice of commercial sleuthing.
America's appetite for litigation, a rise in corporate snooping on employees, partners and rivals, and the trafficking of vast stores of private information on computer databases have fueled a boom in private investigations.
The burgeoning industry and its darker practitioners have alarmed privacy advocates, federal regulators and legitimate investigators, who say the Pellicano case underscores the need for more public scrutiny of investigators and their employers.
California has nearly 10,000 licensed private investigators, up from about 6,000 in 1990. As their ranks multiply, "we're unable to tell the good players from the bad players," said Robert H. Townsend, a Dana Point private investigator with 40 years' experience.
Pellicano and six others were indicted last week on charges of conspiring to wiretap, blackmail and intimidate dozens of celebrities and other targets, including Sylvester Stallone and Garry Shandling. Prosecutors believe the private eye illegally obtained confidential information to gain advantage for clients in legal disputes.
Pellicano has pleaded not guilty to the charges. He remains in federal custody.
Although the investigator's alleged tactics might put him at the fringe of his trade, the demand for Pellicano's services came straight from the mainstream. For years, private lawyers and government prosecutors paid for his work.
Whether in a criminal case or a messy divorce, personal information such as financial, criminal or even telephone records can help a lawyer build a case or destroy an opponent's. "A lawyer without an investigator is like a gun without bullets," said Zvonko "Bill" Pavelic, a Los Angeles investigator.
But Pavelic and others acknowledge that requests from clients can sink to the lowest depths.
In one instance, Pavelic said, a defense lawyer asked him to find nude pictures of a prosecutor who had once been a Las Vegas showgirl. Pavelic said he refused. "The sleaze is unbelievable" among private investigators, he said, adding that lawyers' requests are often "the most sleazy of them all."
The demand for confidential information coupled with the amount of money one can make obtaining it encourages rogue tactics, Pavelic said. According to the 110-count indictment, Pellicano is accused of paying a former Los Angeles police sergeant nearly $189,000 for scouring law enforcement databases for information and to help bug celebrities and business leaders.
"Are there people in the LAPD, the Sheriff's Department, the courthouses selling information?" Pavelic asked. "There is no question the answer is yes."
As a hired detective who often worked for the rich and famous, Pellicano evokes an image — whether intentionally or not — of investigators deeply rooted in Hollywood lore.
Hard-boiled private eyes navigating the city's seamy underside are well established in the public's imagination, from Raymond Chandler's 1930s gumshoe Philip Marlowe to Jack Nicholson's snooping Jake Gittes in the 1974 film "Chinatown."
Indeed, the popular image endures. When Richard Riordan was mayor of Los Angeles, a private investigator worked out of a backroom of his famous old downtown steak-and-eggs restaurant, the Original Pantry Cafe. Riordan and the investigator, Phillip Burruel, have never publicly commented on their relationship.
Unlike some others in the private eye business, authorities allege that Pellicano had inside help. He is charged with paying former LAPD Sgt. Mark Arneson and veteran Beverly Hills Police Officer Craig Stevens to search for information in the National Crime Information Center, a secured FBI database. The NCIC contains information ranging from criminal histories to records of stolen vehicles.
Putting such police information into the hands of private parties "shows how vulnerable we all are," said Loyola Law School professor Laurie Levenson. A former federal prosecutor, Levenson said the Pellicano case raises "the question of, do we have a bad egg here or another systemic problem at the LAPD? It does indicate that police computer systems can be easily abused."
Pavelic, who retired from the LAPD in 1992, said he often entered law enforcement databases on behalf of private investigators when he was on the force. "That happens day in and day out," he said. "I don't believe there's a cop on the beat who has not accessed a police computer for some type of personal reason."
But not all private eyes operate that way.
"Most of your private investigators are very legitimate operators running small mom-and-pop businesses," serving clients such as insurance firms and plaintiffs' lawyers, said Townsend, who opened his business after serving as an investigator in the Marine Corps. He said his main clients are plaintiffs' lawyers and a nonprofit group seeking to prevent boat injuries.
At the top of the industry's food chain are multinational companies, such as Kroll Associates, serving mainly corporate clients. The firm has grown from a single office in New York in 1985 to a global practice with 63 offices and 3,000 professional staff members, including lawyers, accountants and journalists.
Henry Kupperman, a lawyer, heads Kroll's Los Angeles office. The company's business, he said, includes working for corporations investigating internal fraud and embezzlement or checking the financial condition of a potential acquisition.
"When you have prosecutions and investigations like the one involving Pellicano, it helps our business," he said. "We pride ourselves on being legal and ethical."
At the bottom rung of the sleuthing trade are fly-by-night operations on the Internet that for a fee offer to dig up copies of phone bills and Social Security numbers. Federal officials say such companies routinely engage in deceptive practices to obtain information, such as pretending to be an account-holder when requesting a copy of a phone bill, or paying an employee of a store to pass on customer information.
Chris Hoofnagle, a San Francisco-based lawyer for the Electronic Privacy Information Center, a group focused on privacy issues, said the lack of widespread licensing standards for private investigators was a problem, noting that six states do not require licenses.
One of those states, Colorado, was the site of the first Federal Trade Commission lawsuit against a private detective for "pretexting," using deception to gain information. James J. Rapp and Ragena L. Rapp, whose Denver-area business obtained bank and phone records through various techniques, paid the government a $200,000 settlement in 2000. James Rapp also served a 75-day sentence for racketeering.
Rapp drew the attention of authorities when the LAPD suspected his firm of selling home addresses and phone numbers of organized-crime detectives to a reputed mobster.
California's licensing requirements are among the most stringent, requiring three years of paid work experience for an investigative agency such as a police department or insurance company, passing a written exam and undergoing a criminal background check.
Yet Pellicano's alleged transgressions occurred while he was a licensed investigator. He obtained his license in 1983; it expired in 2004, while he served prison time for possessing hand grenades and plastic explosives.
Times staff writer Henry Weinstein contributed to this report.Copyright © 2014, Los Angeles Times