City Aide Accuses Treasurer of Bank Deposit Cover-Up

A Los Angeles city investment officer Thursday described in dramatic fashion a desperate and clumsy attempt to cover up the facts surrounding an unusual deposit of tax funds in a bank that paid Mayor Tom Bradley consultant fees.

Both in testimony before a special City Council committee and in comments to reporters, George Sehlmeyer accused City Treasurer Leonard Rittenberg and an associate of altering a document that reported $2 million had been deposited--”per the mayor”--with Far East National Bank without competitive bids.

This occurred, Sehlmeyer insisted, immediately after newspaper inquiries to the treasurer’s office about the mayor’s financial ties to Far East in the heat of Bradley’s reelection campaign for an unprecedented fifth term.

‘Cover Tracks’

Councilman Zev Yaroslavsky, chairman of the Finance and Revenue Committee, put the question to Sehlmeyer slowly and deliberately, indicating the gravity of the issue. Was the document altered, the councilman asked, “to cover tracks because the media had called?”

“That was definitely my impression,” Sehlmeyer responded. “Yes.”

Sehlmeyer’s account sharply contradicted earlier testimony before the committee by Rittenberg and cash management officer William T. Hoss, both of whom have said that the document--a “bid sheet”--was not altered with an intent to conceal anything.

Moreover, the two men testified that changes were made in the document before, not after, a Los Angeles Herald Examiner reporter had raised questions about Bradley and the bank, which last year paid the mayor $18,000 in consultant fees. Bradley has since resigned as a consultant and returned the money.

At this point, it appears that the public hearings into the Far East affair, which has challenged Bradley’s reputation of integrity, have degenerated into a duel of conflicting accounts among career bureaucrats in the treasurer’s office, who in the past have waged grudge matches against each other.

While the hearings have not linked Bradley, himself, to the alleged cover-up, they did on Thursday bring an unusual concession from his top aide, Deputy Mayor Michael Gage.

During a packed press conference, Gage conceded that Bradley probably should have inquired in January, 1988, when he became Far East’s only paid adviser, whether the city was doing business with bank.

“In retrospect,” Gage said, “all of us can say, ‘Golly, he should have checked and asked for this information before he went on the advisory board.’ The reality is, he didn’t. He wasn’t as thorough, perhaps, as he should have been.”

The primary focus of the extraordinary City Council hearings this week are alterations made to the bid sheet on March 22. On that day, Bradley called Rittenberg to inquire about the status of Far East’s city account. After the conversation, the treasurer directed that two deposits of $1 million each be placed with the bank, in violation of mandated competitive bidding procedures.

Bradley has confirmed that he inquired about the city’s dealings with Far East in the telephone call but denied that he exerted any pressure on the bank’s behalf.

Rittenberg has said that he acted alone in deciding to deposit the money.

At some point during that day, after the money had been forwarded to Far East, other banks were listed on the document as vying for the deposit. In addition, a phrase indicating that the Far East award had been made “per the mayor” was obscured with white correction fluid.

Sehlmeyer, in his testimony Thursday and during an impromptu news conference afterward, said those key changes were made deliberately to head off any problems for Bradley that might follow a close examination of the document by reporters.

In Sehlmeyer’s words, his boss and co-worker, Hoss, initiated the “cover up” after Rittenberg told them he had just been interviewed by a reporter for 45 minutes and “all he wanted to talk about was Far East.”

The treasurer, according to Sehlmeyer, agreed with a plan by Hoss to list additional bids on the document, making it appear as though there had been competition for the deposit. Sehlmeyer said Hoss also “whited out” the phrase “per the mayor,” which Sehlmeyer had written at the time the money was placed with Far East.

“‘No, we can’t have this,”’ he quoted Hoss as saying.

Sehlmeyer described Hoss as a “big white-out fan.”

The witness said he wrote the notation as a “reflexive” action after Rittenberg earlier in the day “stuck his head in the door and said something to the effect of, ‘I have just finished talking to the mayor. . . and I want to know what’s going on with Far East.’ ”

Sehlmeyer said he told his boss that a matured, $1-million certificate of deposit had been withdrawn the previous day, which prompted the treasurer to respond, “Put that money back in there.”

“I can’t remember any other time that the mayor called and wanted to know what was going on with a particular account,” said Sehlmeyer, who has worked in the treasurer’s office for more than six years.

When Rittenberg examined the doctored bid sheet that had been produced at his request, Sehlmeyer said, the treasurer became upset about the mayoral phrase, which was still visible through the white fluid.

“I don’t want the mayor’s name to appear on anything,” Sehlmeyer quoted Rittenberg as saying. “I don’t want it to appear on anything at all.”

A black felt marker later was used on the document’s reverse side to further obscure the reference. Sehlmeyer said he did not know who had done that or when.

Later that same day, Sehlmeyer said the treasurer told him in “no uncertain terms” never to mention the day’s events, or Bradley’s connection with the Far East deposit.

“I guess I would have to say that they (Hoss and Rittenberg) certainly didn’t want me to do anything that would have an impact on the cover-up,” the harried investment officer told a knot of reporters who had converged on him after his testimony Thursday morning.

Sehlmeyer said he took the order of silence so seriously that he lied to city attorney’s investigators, who asked him if he knew what had been concealed under the white-out. He said he told them he did not know.

The city attorney’s office is one of several entities that has begun investigations of Bradley’s business dealings during the past several months. Among other inquiries, federal investigators have announced a preliminary investigation of the mayor’s stock transactions.

Asked Thursday to comment on Sehlmeyer’s admission of untruthfulness, a city attorney’s spokesman refused comment pending the probe’s anticipated completion in September.

Sehlmeyer said he decided to expose the cover-up in which he had allegedly been enlisted when auditors from the city administrative office began questioning him sometime in June.

“These guys are serious,” he said he quickly determined.

The audit was initiated at the request of the council’s Finance and Revenue Committee. The hearings that began Monday were prompted by an explosive auditor’s report that first alleged document tampering in the treasurer’s office.

Among other things, Sehlmeyer said he informed the city auditors that there were no competitive bids on the Far East deposit and that other banks had been contacted after the fact. After the auditors confronted Rittenberg with the revelation, Sehlmeyer testified that this is what followed:

“Next thing I know, Leonard (Rittenberg) called me into his office and he, in essence, said, ‘They didn’t know anything. They were just fishing, George. You’re a terrible poker player.’

” . . . He said, ‘They didn’t have anything, you know. Why would you admit to that?’ ”

After Sehlmeyer’s testimony Thursday, Rittenberg was summoned back before the council committee, where he asked to be “sworn in.”

Yaroslavsky and fellow committee member Richard Alatorre took a five-minute recess to discuss the matter. When they returned Rittenberg was administered an oath to tell the truth or risk a criminal charge of perjury. Sehlmeyer disclosed Thursday that he too has provided sworn testimony to the city controller’s office, which is also involved in the Bradley investigation.

The swearing-in of Rittenberg complicated a political sideshow that has been running concurrently with the hearing: an effort by council members to empower themselves with the authority to force witnesses to testify under oath. The action Thursday seemed to raise the question of whether the issue was moot.

Appearing confident and relaxed, Rittenberg on Thursday reiterated earlier testimony that the banks were added to the bid sheet before any news media inquiries were made and denied that he ever instructed Sehlmeyer not to discuss the events of March 22.

He did confirm telling Sehlmeyer he was a bad “poker player” in his dealings with the auditors but suggested that it was said as a joke.

“It was his demeanor; he felt that he’d been caught,” Rittenberg said of Sehlmeyer’s nervous attitude after his disclosures to city administrative office auditors.

Rittenberg also testified that he was the one who first revealed to auditors the mayoral reference under the white-out.

The treasurer stuck closely to his earlier testimony. Once again, he said that he had sought bids after Far East was awarded the deposit to see whether the 10% interest offered by the bank was “in the ballpark.”

“I was relieved . . . I felt I had fulfilled the competitive bid requirement,” Rittenberg said. He denied it was an attempt to conceal that competitive bidding requirements had been breached.

Yaroslavsky, still skeptical of Rittenberg’s testimony, noted sourly that the treasurer has been “consistently unsatisfactory” in his presentations to the committee.

Yaroslavsky had also intended to recall cash management officer Hoss to the council chambers to address contradictions in his and Sehlmeyer’s testimony. But Yaroslavsky was informed that Hoss had left town on a three-week vacation.

“I can’t blame Mr. Hoss for not wanting to be available,” Yaroslavsky said. “It would not have been pleasant.”

Meanwhile, Gage found himself for the first time embroiled in the Far East controversy. Testimony on Thursday and earlier in the week revealed that the deputy mayor had a telephone conversation with Rittenberg on the day of the alleged cover-up and met personally with the treasurer some time later.

Rittenberg said he contacted Gage after he was interviewed by the Herald reporter, who had asked the treasurer whether he was aware of an unnamed, highly placed official’s tie to the bank. Gage said he was aware of that but did not volunteer the fact that the official was Bradley. He has said he merely thanked the treasurer for the call.

On Thursday, Gage said he knew the official was Bradley. He said Bradley had summoned him to his office after the mayor’s March 22 telephone discussion with the treasurer about Far East’s account with the city.

Gage quoted the mayor as saying, “We might have a problem here.”

A few days later, Gage said he meet with Rittenberg for 10 minutes to receive information that he had requested on the city’s history of business with Far East--20 deposits spanning the years 1979 to 1987. He said this proved that the controversial $2-million placement with the bank in 1988 was not an aberration.

Gage insisted that he was never told of the falsification of any documents or of the events that had occurred within the treasurer’s office on the day of the alleged cover-up.

“Obviously some people in the treasurer’s office overreacted” to the mayor’s inquiry, Gage said.

“It is not something we have any knowledge of or understanding of,” he said.