THE MAYOR UNDER FIRE : THE FAR EAST AFFAIR : Bradley’s Journey Into Controversy

For four days last week, the Los Angeles City Council’s Finance and Revenue Committee heard riveting but often conflicting testimony about the city’s dealings with Far East National Bank, which paid Mayor Tom Bradley in consultant fees.

At issue was how the city came to deposit $2 million with the Chinatown bank last March, a deposit which has become central to one of several lines of inquiry into Mayor Bradley and his personal finances.

What follows--based on public testimony, city records and news interviews--is a primer on what is known so far about Bradley and Far East National Bank.

THE BANK

Far East National Bank, founded in 1974, is a Chinatown-area financial institution now at the center of the mushrooming inquiry into Mayor Tom Bradley’s business dealings.

Far East saw its total assets grow to $176 million by 1988. It is one of several minority-owned banks that hold city deposits.

Over the years, Far East received at least 20 relatively small city deposits, and bank chairman Henry Hwang, was openly eager to obtain more.

THE ADVISER

Last year, Far East employed Bradley as a paid special adviser. Bradley said he checked with the bank before joining the board and was told that no city money was at that time deposited in Far East.

In monthly payments, the mayor received a total of $18,000 in fees in 1988, as the only paid member on the bank’s 46-member advisory board.

Hwang said Bradley was hired by Far East because he was the kind of person whose influence could be helpful to the bank, particularly in international trade matters.

“Well, basically, we talk to a different kind of people,” Hwang once told The Times. “And if they can be helpful to us, you know, in doing different things, like (Bradley) in foreign trade, whatever, you know, you generally have to pay people for things . . . for, you know, for services rendered in the future, whatever . . . that’s all. So, that’s normal.”

Hwang Sends Letter

At about the time Bradley became a paid adviser to Far East, Hwang sent him a letter dated Jan. 19, 1988--marked “personal and confidential”--stating that the bank was interested in receiving city deposits.

A few days later, Bradley’s chief assistant, Anton Calleia, sent a memo marked “RUSH” to City Treasurer Leonard S. Rittenberg. Included was Hwang’s letter to Bradley. The memo asked Rittenberg to “prepare response for Mayor.”

Rittenberg later wrote to Bradley and Calleia that the city then had no money on deposit with Far East, noting that the bank was not in a competitive position to do business with the city at that time.

On March 16, 1988, Bradley met with Hwang in the mayor’s City Hall office, according to the mayor’s appointments calendar. It was not known what was discussed.

Five days later, the treasurer’s office bought a one-year, $1-million certificate of deposit at Far East. The bank, according to a city audit, was awarded the deposit even though another bank through competitive bidding had submitted a higher interest-rate bid.

THE DEPOSIT

Almost one year to the day later, on March 22, 1989, Rittenberg, who controls $2 billion in city funds, returned a telephone call he had received late the previous day from the mayor.

The mayor had a question for Rittenberg about Far East. Bradley would say later that he called Rittenberg to “confirm a statement that was made to me (by Hwang) that a deposit, which had been made to Far East National Bank, was being terminated.”

“I had a brief conversation with the mayor,” Rittenberg would later recount for a City Council committee.

“The mayor related to me (that) he spoke to the chairman of Far East and made an inquiry to me if we had a deposit with Far East,” Rittenberg explained. “I told him we did and we intended to maintain it.”

Rittenberg hung up.

Question From Rittenberg

In the second-floor offices of the city treasurer, Cash Management Officer I George W. Sehlmeyer said Rittenberg “stuck his head in the door and said something to the effect that ‘I have just finished talking to the mayor . . . and I want to know what’s going on with Far East.’ ”

A staff decision had been made not to renew the Far East deposit.

Sehlmeyer said he could not believe what he heard next from Rittenberg.

“He said, ‘Put that money back in there,’ which, of course, I proceeded to do,” Sehlmeyer said. “I was stunned to hear that the mayor was even involved.”

He added: “I can’t remember any other time that the mayor called and wanted to know what was going on with a particular account.”

After the $1 million was placed back in Far East, Rittenberg had a telephone conversation that same morning with Hwang in which the banker solicited even more city money.

Asks for $2 Million More

Rittenberg told the council committee that he telephoned Hwang to say that if the banker had any problems, he should speak with him and not Bradley. So Hwang asked the treasurer for $2 million more, but Rittenberg only agreed to deposit an extra $1 million at Far East.

The $2 million was the largest deposit the bank had ever been given in one day by the city.

Significantly, the $2 million was deposited without competitive bidding, as called for by city policy.

Across the office, Sehlmeyer picked up a rectangular form on which he routinely records the competitive bids offered by 32 banks seeking city deposits.

Of the countless forms that bureaucrats use to log the daily workings of city government, it was this form alone that would jeopardize careers and reputations.

Writes ‘Per the Mayor’

Using a pen, Sehlmeyer dutifully put down the Far East transaction and then added three words that were to become fateful: “per the mayor.”

He would later say that he wrote those words as a “reflexive” action in response to Rittenberg’s earlier comments about his conversation with the mayor.

Rittenberg, he said, next told him that he had been contacted by a reporter for the Los Angeles Herald Examiner, who interviewed him for 45 minutes and “all he wanted to talk about was Far East.”

A COVER-UP?

On the afternoon of March 22, according to Sehlmeyer, he met with Rittenberg and William T. Hoss. The topic of discussion, Sehlmeyer said, was what to do about the non-existent bids from other banks, should reporters examine the records.

As Sehlmeyer recounts the meeting, Hoss suggested--and Rittenberg agreed--to retroactively call the other banks and put their interest rate bids for that day onto the form that Sehlmeyer had already filled out.

Hoss presumably then contacted five other banks and their bids were written onto the sheet to fool the press. It was later revealed that one of the bank officers that Hoss claimed to have contacted actually was on extended medical leave at the time.

Rittenberg said he asked Hoss “as a favor” to call other banks to see what interest rates they were offering, even though the deposit had already been made at Far East, in violation of competitive bidding requirements. He said he did this to see whether the 10% interest offered by Far East was “in the ballpark.” Rittenberg said he had implemented the competitive bid policy and had the authority to break it.

Put on ‘Work Sheet’

The treasurer said the results of Hoss’ survey were then put on the bid sheet, a document that Rittenberg described as nothing more than a “work sheet.”

He said this occurred in the morning, before any inquiries from the news media.

Rittenberg also has said that he decided on his own to award the $2 million deposit to Far East and that the mayor in no way influenced his decision.

Hoss has denied any wrongdoing and confirmed Rittenberg’s account.

But a more pressing problem was at hand. There were those three words written by Sehlmeyer on the sheet: “per the mayor.”

According to Sehlmeyer, it was Hoss who came up with the idea of using correction fluid to blot out the phrase “per the mayor” on the bid sheet.

‘We Can’t Have This’

“No, we can’t have this,” Hoss allegedly told his colleague.

When the white correction fluid dried, the reference to the mayor was gone. The phrase “per Leonard Rittenberg,” which he also had written, remained.

As Rittenberg looked at the altered document, Sehlmeyer said, the treasurer became incensed. Rittenberg said he demanded to know from Sehlmeyer why there was correction fluid on the document. He said his investment officer had no explanation.

“I do remember Mr. Sehlmeyer saying, ‘We white out all the time,’ ” Rittenberg said.

Rittenberg said anyone looking at the back of the paper could discern that the words “per the mayor” had been written on the front.

‘He Was Certainly Furious’

“This seemed to disturb Leonard (Rittenberg) more than anything that happened that day,” Sehlmeyer recalled. “He said, ‘You shouldn’t have put the mayor’s name down.’ He said, ‘I don’t want the mayor’s name on anything.’ He was certainly furious at me for having put it down.”

As for Hoss, he has denied having anything to do with whiting out the phrase.

At some point--it is still not clear when--somebody used a black felt pen on the back of the bid sheet to further obscure the words “per the mayor.”

Rittenberg warned Sehlmeyer “in no uncertain terms” never to mention that day’s events or Bradley’s connection with the Far East deposit, Sehlmeyer later told reporters.

Rittenberg, testifying months later before council members and under the hot glare of television klieg lights, summed up the actions in the treasurer’s office on the day of March 22 with one word: “fiasco.”

THE FALLOUT

On that same March day that the treasurer’s office was trying to cope with the complications of the Far East deposits, one floor up in City Hall the office of the mayor also was starting to move.

“We might have a problem here,” Deputy Mayor Michael Gage quoted Bradley as telling him.

Bradley, who at the time was on the final leg of his campaign for a fifth term as mayor, said he had learned from his March 21 conversation with Hwang that the city had deposits with Far East at the time the mayor was serving as a paid adviser to the bank.

“They did not (have the deposits) when I went on the board,” Gage quoted Bradley as saying. “Perhaps I should have asked if they were going to. In any case, would you please look into it? Help me . . . kick it around with a couple of people and determine a course of action.”

Reporter’s Inquiry

Later, Gage said, he received a phone call from Rittenberg, who told him that a reporter was asking about Far East and a “high placed official.”

Bradley and Gage maintain that they were not told by anyone that documents in the treasurer’s office had been altered.

The next day--March 23--Bradley returned the $18,000 he had been paid by Far East and he wrote Henry Hwang a letter, reminding Hwang that he no longer was in the bank’s employ.

“As you know, I terminated my relationship with FENB effective Dec. 31, 1988,” he wrote in a letter that would shortly be distributed to the press.

“While I am not legally compelled to return any monies earned as a member of your advisory committee,” the letter went on, “ . . . I am voluntarily and immediately returning to FENB the entire sum. . . . Enclosed please find a check for $18,000.”

THE CONSEQUENCES

* On March 31, City Atty. James K. Hahn opened an investigation into Bradley’s personal and political ties with Los Angeles financial institutions, including Far East National Bank. It is not expected to be completed until mid-September.

* On April 11, Bradley was reelected to his fifth term as mayor, carrying only 51.98% of the vote--the lowest percentage he had amassed.

* On May 10, the mayor went before the council and, while asserting that no laws had been broken, admitted that he had made “an error” in judgment: “I was insensitive not to realize that accepting outside employment could create the perceptions we see today. . . . I now recognize that error, and I will always regret it.”

* On July 20, the City Administrative Office released an audit of the treasurer’s office making public for the first time allegations that Rittenberg and aides had sought to cover up the $2-million deposit in Far East. The audit report prompted the council hearings of last week.

* On July 25, Bradley said he would not resign.

“To anyone who has any such thoughts,” Bradley told reporters, “I’ll be around here four years from now as mayor of this city.”

THE PLAYERS

TOM BRADLEY, 71, elected Los Angeles’ 38th mayor in 1973 and reelected four times; served on City Council from 1963 to 1973; retired Los Angeles Police Department lieutenant; lawyer.

MICHAEL GAGE, 44, Deputy Mayor/Chief of Staff since June 15, 1987; Bradley campaign manager for 1985 reelection; former public relations and government consultant in private industry; state Assemblyman from 1969 to 1976.

LEONARD S. RITTENBERG, 57, appointed City Treasurer by Bradley on April 15, 1987; duties include managing an office of 53 employees, handling city’s $2-billion cash flow and investing all city funds; joined treasurer’s office 21 years ago.

WILLIAM T. HOSS, 68, city treasurer’s cash management officer; serves as an “economic forecaster” for the treasurer’s office; for two decades, headed the investment section where responsibilities included placing city funds with banks; joined treasurer’s office in 1951.

GEORGE SEHLMEYER, 55, investment officer whose duties in the treasurer’s office have included obtaining competitive bids from banks seeking city deposits; joined treasurer’s office on Nov. 15, 1982.

HENRY YUAN HWANG, 61, founder and chairman of Far East National Bank, which was established in 1974; certified public accountant; a registered Republican, he is a longtime Bradley acquaintance who contributed at least $16,000 to the mayor since 1980.