Record Altered on City Deposit : Reference to Mayor in Far East Bank Report Deleted, Auditor Says

Officials in the Los Angeles city treasurer’s office removed from a document a phrase indicating that Mayor Tom Bradley instructed them to deposit $2 million of taxpayer money in a bank that employed him, a city auditor disclosed Monday.

The alteration was made after Treasurer Leonard Rittenberg informed aides that Bradley’s ties to the Far East National Bank were being examined by news reporters, who “would be looking very closely at the documents involved,” auditor Ed Corser testified before a City Council committee.

The revelation constitutes one of the most damaging pieces of evidence yet to surface in a burgeoning investigation of the fifth-term mayor’s personal financial dealings with businesses and stockbrokers. Bradley has maintained that, although he discussed the city’s ties to Far East with the treasurer, he never directed that public funds be deposited in the bank.

Corser said Los Angeles police have determined that a reference to Bradley was obscured with white correction ink--commonly called white-out--on a treasurer’s office document that reported the $2-million deposit in Far East, which last year paid the mayor $18,000 in consultant fees. He has since returned the money.

The white-out concealed the notation “per the mayor,” Corser said, adding that a black felt marker was then used on the document’s reverse side to further obliterate the mayoral reference. In its place was added the handwritten phrase, “per Leonard Rittenberg.”

The “per the mayor” notation appeared underneath an entry reporting the Far East deposit.

The alteration occurred on the same document that auditors last week said had been doctored to show that Far East was awarded the deposits through a mandated competitive bidding procedure, even though it had not been.

The deposit was made on the same day that Bradley discussed Far East with Rittenberg. The mayor, while refusing to divulge specifics, has indicated that he merely asked the treasurer generally about the city’s policy regarding investments in minority-owned banks.

Bradley has said that it was during this conversation that he first learned that the city was doing business with the minority-owned Far East bank--a contention that apparently has been contradicted by public records. Rittenberg has maintained that he acted on his own in deciding to deposit money with Far East after the telephone call.

On Monday, amid growing suspicion at City Hall about Bradley’s role in the Far East deposit, the mayor refused to comment on the newest revelations.

But his deputy mayor, Michael Gage, continued to insist that Bradley exerted no pressure on Far East’s behalf and that he returned the bank’s consulting fees two days after learning of the city’s ties to Far East in his March 22 conversation with the treasurer.

“I think folks are off on a tangent and will get greater clarity tomorrow and the next day,” Gage said, adding: “And those who are most skeptical today will be the most red-faced in the near future when the city attorney has concluded his investigation” into the mayor’s outside business dealings.

City Atty. James K. Hahn has been assigned to investigate the mayor’s dealings with the bank and other allegations. Meanwhile, federal investigators have opened a preliminary inquiry into Bradley’s stock dealings.

The latest disclosures came during testimony by auditor Corser in the City Council’s cavernous chambers, where the atmosphere was anxious. Two flanks of television cameras were set up to record the businesslike delivery by the auditor and the incredulous questioning by Councilman Zev Yaroslavsky, who heads the three-member committee that summoned the treasurer, auditor and others to testify.

Corser’s testimony consumed more than an hour on a day that had been set aside for Rittenberg to answer the stunning allegations in the city administrative office’s report, which Corser had supervised.

But the auditor’s new disclosures overshadowed Rittenberg’s often confusing defense of his actions and gave the drawn and tired treasurer even more to explain.

In his testimony, Corser painted a picture of an office that seemed panicked by the prospect of exposure and set about during a single day in late March to hurriedly cover tracks. It was a day that saw a call from the mayor, questions from a Los Angeles Herald Examiner reporter and a hasty meeting that led to the creation of a document which has jolted the Bradley Administration.

Corser said his testimony Monday was based primarily on the firsthand accounts of city investment officer George Sehlmeyer, who had written the expunged reference to Bradley on the document. Here, according to Corser, is what Sehlmeyer recounted:

On the afternoon of March 22, Rittenberg summoned to his office Sehlmeyer and cash management officer William Hoss. The treasurer indicated that reporters had been questioning him about Bradley and Far East and that the newspapers obviously “would be looking very closely at the documents involved.”

The three men discussed the fact that Far East was awarded $2 million in deposits that very morning without the required competitive bidding process, which is designed to ensure that taxpayers get the highest rate of return on their money.

Additional Bids

Even though the deposit already had been given to Far East, Hoss offered to get additional bids to place on the document, called a bid sheet. One of the bank officers he listed was on medical leave, a discrepancy that would later tip investigators to problems with the document.

Corser testified that Rittenberg momentarily rejected Hoss’ idea, but quickly relented, authorizing other banks to be placed on the bid sheet.

In altering the document, Hoss noted the phrase “per the mayor” next to the Far East deposit “and said, in effect, we can’t have that there.” He proceeded to “white it out,” Corser said, relating the information from the investment officer.

As Corser laid out this version, the hearing room fell completely quiet. Rittenberg sat impassively, betraying little emotion.

Hoss, in interviews with the city administrative office and in letters to the city attorney, has denied altering any documents or engaging in any improprieties.

Sehlmeyer, reached for comment by The Times, said, “I have not done anything illegal or unethical.” He said that whatever investigators want to know, “I’ll tell them to the best of my ability.”

Rittenberg, for his part, also denied that he acted improperly. During his testimony Monday before the City Council, he attempted to portray himself as a victim of staff members who failed to follow his clearly stated policies.

“Nowhere did I instruct or tell my staff to make those placements ‘per the mayor,’ ” Rittenberg said. “What I did say to my staff when I walked in in the morning was, ‘I just received a telephone call from the mayor regarding Far East National Bank--what is the status?’ ”

Rittenberg, recalling the events of March 22, the day of the alleged cover-up, said:

“I had a brief conversation with the mayor where the mayor related to me that he spoke with the chairman of Far East National Bank, and then made an inquiry to me as to whether we had time deposits with Far East. I told him we did and that I intended to retain such a relationship.”

Rittenberg said that only several days before, he had told his staff to renew all maturing certificates of deposit in minority-owned banks--Far East, by inference, being one of them. He said this policy was designed to help encourage minority entrepreneurs.

He said that after his conversation with the mayor, he asked his staff the status of Far East’s accounts with the city. He said he was “flabbergasted” to learn that a $1-million deposit had matured and was withdrawn--in violation of his directive.

Rittenberg instructed his staff to renew that deposit and throw in another $1 million.

It is at this point where the treasurer’s account becomes confusing. Rittenberg said he instructed his staff to get competitive bids even though the deposits already had been given to Far East at his direction.

Asked to reconcile this apparent contradiction, Rittenberg said he wanted to determine whether the Far East bid was “in the ballpark.”

Rittenberg said that when his subordinate, Hoss, returned with the bid sheet listing the names of the other banks, “I noticed the white-out . . . it was easy to discern what it said. All you had to do was turn the sheet over and you could see it said ‘per the mayor.’ That upset me a great deal. I said why is it whited out, I got no explanation. I was disturbed. . . . Mr. Sehlmeyer, after I asked him why he wrote ‘per the mayor,’ could give me no explanation.”

Around noon that same day, Rittenberg said City Hall reporter John Schwada of the Herald Examiner questioned him for more than two hours on the phone and in person, asking whether the treasurer was aware that a “high-placed official” was connected to Far East.

“I told him I wasn’t,” recalled Rittenberg, who then said he called Gage and another mayoral aide, both of whom were out of the office. “I was disturbed that some person that I was doing business with had a purported tie with a high-placed official.”

Rittenberg said he later learned through the reporter that Bradley was the highly placed official. Although he said Gage and the other mayoral aide returned his call, he did not disclose during his testimony the content of their conversations, nor was he asked to.

Rittenberg referred to the entire day of March 22 as a “fiasco.”

His account differs significantly from information provided to city auditors by his subordinate, Sehlmeyer, in at least one key respect. Sehlmeyer said the bid sheet was altered after the newspaper inquiries. Rittenberg said it occurred before.

The committee members did not ask the treasurer about an allegation leveled Friday in the auditor’s report that he had told the council that the Far East deposit was awarded through competitive bidding. He was not asked Monday to explain this.

The recent disclosures all stem from a city auditor’s report on the matter. Various other investigations, including the lead probe by the city attorney, have yet to deliver any reports on their findings. The district attorney’s office, which would investigate any felony, reiterated Monday that it was not involved in any Bradley investigation.

Chief Deputy Dist. Atty Greg Thompson, after speaking with Dist. Atty. Ira Reiner, said that the district attorney’s office would stick to an agreement made at the start of the investigation that the city attorney’s office, with the assistance of the Los Angeles Police Department, would be responsible for the investigation.

Asked if the increasingly serious nature of the charges should lead the district attorney to step in, Thompson replied: “Somebody is already investigating. Too many cooks and so forth. . . . Right now we have the SEC, the FBI, the LAPD and the C.A. (city attorney), so we don’t need the D.A.,” said Thompson.

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