‘Snake Pit’ of Rivalries, Turmoil Uncovered in Treasury

This was not a good week for the city treasurer’s office. In four days of testimony before the Los Angeles City Council, three top-ranking bureaucrats told tales on one another, resurrecting old rivalries, accusing colleagues of incompetence and worse and detailing instances when policies were ignored by the very people who issued them.

The testimony was presented to a council committee investigating whether Mayor Tom Bradley used influence to obtain deposits for a bank that had paid him consultant fees. While the testimony failed to clear up the Bradley case, it did cast an abundance of unglamorous light on the treasurer’s office.

Top city treasury officials have been feuding with one another for years, the testimony showed. There were accusations of bid-rigging and cover-ups, almost comic descriptions of complicated forms that are woefully out of date and simple procedures basic to any banking operation--such as time-stamping bids and transactions--that are nonexistent. Two of the key officials testifying, it was learned, were nearly fired at one time.

“It’s a snake pit down there,” said Councilman Zev Yaroslavsky, who chaired the committee investigating the treasurer’s office and who, like many of his colleagues, came away from the week wondering if the office responsible for investing $2 billion of city money had fallen off course.

On Friday, Yaroslavsky and Councilman Richard Alatorre requested that temporary investment and accounting personnel be brought in to “carry out the necessary daily . . . functions of the city treasurer.”

There have been three main witnesses at the hearing: Treasurer Leonard Rittenberg, cash management officer Bill Hoss and investment officer George Sehlmeyer.

Rittenberg, 57, who worked his way up from an accounting position with the agency, was appointed to the $83,415-a-year post by Bradley in 1987 upon the death of the former treasurer.

Even before he assumed the top spot in the department, Rittenberg attempted to manage the complex mix of personalities that was detailed in hearings this week.

In 1986, Rittenberg was called in to mediate an ugly confrontation between Hoss and Sehlmeyer.

Hoss, Sehlmeyer’s boss in the five-member cash management section of the treasurer’s office, brought charges of slowness and incompetence that resulted in Sehlmeyer being suspended from his job for four days. Hoss later attempted to suspend Sehlmeyer for an additional 20 days.

During the Civil Service hearings on the charges, Hoss portrayed Sehlmeyer as a poor worker who frequently made mistakes, was nearly always late, took excessively long coffee and lunch breaks, was foul-mouthed around co-workers and was overly emotional.

“Every time that George would make an error, we would attempt to correct George and show him a faster way to do it, or we were constantly instructing George,” Hoss testified at Sehlmeyer’s Civil Service hearing.

Asked by Sehlmeyer’s attorney to describe the mistakes, Hoss replied: “You name them; he made them.”

Some of the charges were dropped and a settlement was reached when Hoss refused to return to the witness stand during the Civil Service hearing.

Received Suspension

As a result of that episode, Hoss himself was slapped with a a five-day suspension for “inappropriate behavior.” He was also charged with abusive conduct for threatening Sehlmeyer and with writing a letter to then-Treasurer Robert Odell in which he made false and defamatory statements about both Rittenberg and Sehlmeyer.

In February of that same year, Hoss was reprimanded for attempting to use his influence to keep his son from being fired at Union Bank. Deputy City Atty. Diane Wentworth said Hoss called a bank officer, identified himself as the head of the city office that deposits money in banks and said “that he felt his son had been treated unfairly” by Union Bank.

“Clearly, the bank official took that as a threat,” Wentworth said.

Hoss was suspended for one day.

Rittenberg eventually attempted to distance the two combatants through a staff reorganization earlier this year, but it is impossible to completely separate them on such a small staff.

And Hoss and Sehlmeyer, along with Rittenberg, would become joined in the attempt to explain how the city this year came to deposit $2 million in Far East National Bank, which had paid Bradley $18,000 in consultant fees.

In testimony before the council, Sehlmeyer said Rittenberg told him to make the deposit in Far East bank after he had a phone conversation with Bradley.

Sehlmeyer then wrote on the deposit document, “Per the mayor . . . per Rittenberg,” in what he described as a career bureaucrat’s reflexive response to protect himself.

“People have a tendency to forget things they told you,” Sehlmeyer told the committee.

Witnesses Agree

All three witnesses agree on who wrote the “per the mayor” inscription, but they disagree on who doctored the document by covering the reference to Bradley with white correction fluid.

Rittenberg said that to protect himself from any further misunderstandings, he now calls at least two employees to every meeting in his office. That practice and a new push to operate by-the-book is having a negative effect on the department and the rate of return on city investments, he told the committee this week.

The conditions under which the deposit was made showed that Rittenberg ignored his own policies of obtaining competitive bids.

In his own testimony, Rittenberg said he demanded that bids be obtained even though he had already awarded the deposit to Far East. He acknowledged that he would have placed the money in the bank regardless if better rates had been found elsewhere.

Sehlmeyer testified that it was Hoss who suggested that the absence of competition could be covered up by obtaining after-the-fact bids.

Despite the large sums of money that go through the treasurer’s office daily--upwards of several hundred million dollars on some days--it was not considered a likely spawning ground of City Hall controversy.

The treasurer is the city’s banker. He collects tax and other revenues and invests the funds. When the city controller needs money to pay the city’s bills, he asks the treasurer to release funds.

Primary Measure

The primary measure used to gauge the treasurer’s effectiveness is the rate of return on the city’s huge investment portfolio. On that score, Rittenberg gets high marks.

Rittenberg typically places in the top half to top one-third of treasurers of large California cities in his return on investment, according to several studies.

Rittenberg’s effectiveness became clear earlier this year when city officials preparing the annual budget found their revenue projections were several million dollars higher than those made by independent economists.

“If they haven’t been performing, then we ought to be removing them immediately,” Deputy Mayor Mike Gage said this week of the treasurer and his aides who testified. “But what’s clear is that they have been performing and seemingly performing well. Consequently, I think we will have to allow the normal course of disciplinary action to take its course.”

As for the interoffice bickering, City Council President John Ferraro said:

“Look at the Dodgers; those players fought with one another but went on to win the pennant.”

Yaroslavsky said he agrees that Rittenberg basically does a good job at managing the city’s money but suggested that it could be even better with better morale.

“Perhaps a better esprit de corps and a better organization in that office would help us make more money than we’re making now,” he said.

“If we had people who were more tolerant of each other, didn’t have to have witnesses to their conversation and have to live in this inane Byzantine environment that exists down there, maybe we’d do better than we’re doing.”

RELATED STORY: Part I, Page 1