Lawyer to Pay $300,000 to Settle Interest Conflict Suit

Graham A. Ritchie, the city attorney in the City of Industry and the former city attorney in Hawaiian Gardens, has agreed to pay $300,000 in fines to settle a civil lawsuit alleging that he had a conflict of interest in the issuance of bonds in both cities.

The agreement between Ritchie and the county district attorney’s office, filed Tuesday in Los Angeles Superior Court, ends a three-year investigation into Ritchie’s relationship with two Century City firms that specialized in municipal bond consulting and underwriting.

The district attorney’s investigation focused on two bond sales and Ritchie’s role as city attorney while he had ties to the private firms contracted to issue the bonds.

Second Investigation

Ritchie, 57, a partner in the Los Angeles law firm of Simmons, Ritchie, Segal & Stark, is the second city attorney of a small but wealthy Los Angeles County community to agree in recent months to civil fines after lengthy conflict-of-interest investigations by the district attorney.

In December, Charles Martin, Irwindale’s city attorney and city manager, paid $400,000 in civil fines to avoid criminal prosecution on charges that he engaged in conflicts of interest in connection with six bond issues in that city.

Dist. Atty. Ira Reiner said the agreement with Ritchie will send a message to small communities trying to emulate Industry and Irwindale, which have become industrial giants through massive redevelopment and millions of dollars in bond financing.

“Basically, I think this will have a chilling effect in a number of small communities,” Reiner said at a Tuesday press conference to announce the agreement. “Because of the lack of close media scrutiny in smaller towns, the possibility of this kind of double dealing is much greater.”

Admits No Wrongdoing

In signing the agreement, Ritchie did not admit any wrongdoing.

Ritchie’s attorney, Brad Brian, said his client agreed to the settlement to avoid future aggravation and expense.

“I believe that Mr. Ritchie’s actions complied fully with the laws that govern conflict of interest,” Brian said in a press release. “ . . . My client has already endured 28 months of scrutiny by the district attorney’s office.”

The first related case of alleged conflict of interest took place in 1983 in Hawaiian Gardens. According to district attorney’s investigators, a Century City bond underwriting firm--Bancroft, O’Connor, Chilton & Lavell Inc.--underwrote a $20-million bond issue for financing construction of low- and medium-income housing in the southeast Los Angeles County community. (The firm is now known as Chilton & O’Connor Inc.)

Ritchie’s law firm represented the underwriting firm when it was incorporated in March, 1983, according to investigators. Ritchie put up a $132,000 note as security for the firm to obtain a national license. By doing so, he became a creditor of the firm. Investigators said Ritchie also owned 175 shares of stock in the underwriting company.

The alleged conflict occurred when Ritchie went before the City Council and recommended that Bancroft & O’Connor be awarded the contract for underwriting and purchasing the $20-million bond issue. Ritchie was paid $87,000 by the city for his services as city attorney and redevelopment agency attorney, according to Reiner.

“Ritchie, in his capacity as city attorney, clearly was involved in the planning and negotiations for that bond issue,” a district attorney’s investigator said. “He did so despite the fact that he was a shareholder and attorney in the underwriting firm.”

In Industry, the issue involved an $87-million tax increment bond in which a firm affiliated with Bancroft & O’Connor--BOCL Securities Corp.--acted as a financial consultant.

Helped Negotiate Contract

The district attorney’s office alleged that Ritchie helped negotiate a contract between the city and BOCL Securities in 1984 while he served as a private attorney for BOCL Securities in a different matter. Ritchie was paid $75,000 by Industry for his services in connection with the bond issue.

“Ritchie was paid his fees by both communities, contingent on the bond issues going through,” Reiner said. “It is our position that because of his financial interests in and professional relationship with the private bond firms, Ritchie was not in a position to give those cities unbiased legal advice as their city attorney.”

As part of the negotiated settlement, Ritchie will pay $100,000 in civil penalties to the county, $100,000 for the cost of investigation and $100,000 for one or more civic projects for the residents of Hawaiian Gardens. The $300,000 must come from Ritchie’s own pocket, and he cannot be reimbursed for the amount from the cities or any individuals.

Agrees to Injunction

He also agreed to a permanent injunction prohibiting him from participating in any contract between any city in which he provides legal services and any private firm in which he has an interest.

The injunction also says that cities cannot pay Ritchie on a commission basis for his legal services. Instead, he must receive a salary, a flat fee or an hourly wage.

Ritchie said through his attorney that he is challenging the payment restriction and has asked the state attorney general for a legal opinion.

Ritchie is also city attorney for San Gabriel and Palmdale and serves as a special redevelopment counsel for the cities of Pico Rivera, Oxnard and Duarte.