U.S. Grand Jury Opens Probe of Bradley Conduct : Mayor Tom Bradley

A federal grand jury in Los Angeles has opened a wide-ranging criminal investigation into Mayor Tom Bradley’s conduct in office and his personal finances, including his business ties to eight banks and brokerage firms, it was learned Thursday.

The investigation surfaced through the serving of a subpoena this month on the city treasurer’s office, an agency that has been near the center of controversy surrounding the mayor over the last year. A copy of the subpoena was obtained by The Times Thursday.

Moved Slowly

The grand jury’s involvement in the case represents a significant acceleration of a federal investigation that had moved slowly for months.

A federal official close to the case confirmed that investigators now are seeking evidence to present to the grand jury for a possible indictment.

“There’s no two ways about it,” said the federal official, who asked not to be identified. “This is a grand jury that is looking at Mr. Bradley. It’s the old saying, ‘Where there’s smoke there is fire,’ and there is heavy smoke here.

“We don’t know yet if we are going to find criminality or just some bad judgment, but there’s certainly enough to go through the grand jury process. It’s a real thing.”

The federal grand jury has more powers than any of the city agencies that have investigated the mayor thus far. It has the authority to compel witnesses to testify under oath and can subpoena virtually any records, including personal income tax returns.

Assistant U.S. Atty. Jeffrey Eglash, whose name appears on the subpoena, said: “I can’t comment. I can’t say anything.”

FBI Special Agent Stanley Ornellas seemed surprised when told that the subpoena was made public Thursday. Citing FBI policy, Ornellas refused to discuss the subpoenas.

The subpoena was sweeping. Served Sept. 11 by FBI agents for the U.S. attorney’s office, it ordered the treasurer to surrender any and all documents relating to an assortment of allegations against the mayor. Among other items, the subpoena sought records related to a bank that hired the mayor as an adviser and a Beverly Hills brokerage house that sold him junk bonds.

Bradley has also has received a federal subpoena requesting documents, said Bill Chandler, the mayor’s spokesman.

Relevant Information

“The mayor will cooperate in providing all relevant and appropriate information to aid in this investigation,” Chandler said. “The mayor is confident that there has been no impropriety on his part.”

Chandler declined to specify when the subpoena was served on the mayor and what records it sought.

Disclosure of the grand jury involvement comes two weeks after City Atty. James K. Hahn issued a report that found insufficient evidence to prosecute Bradley on conflict-of-interest charges. Hahn nonetheless attacked Bradley’s “indifference” to ethical concerns in recent years and said the mayor had “clearly stepped into the gray area” between innocence and a chargeable offense.

Until recent weeks, federal authorities were divided over whether to pursue an investigation of Bradley in connection with his investments through Drexel Burnham Lambert Inc. and its former junk-bond king, Michael Milken, who has been indicted on charges of fraud and insider trading.

Sources have told The Times that authorities in New York City initially wanted to launch an investigation of Bradley, while officials in Los Angeles were reluctant.

However, the Justice Department’s public integrity section headquarters in Washington, which is overseeing the federal probe, ruled there were sufficient grounds to investigate Bradley. FBI agents in Los Angeles recently became active in the case.

Sources familiar with federal political investigations said that a grand jury subpoena generally indicates that a probe is becoming serious. A subpoena normally is issued after FBI field agents have already sifted through available evidence, including documents and interviews that are provided voluntarily.

The subpoena was disclosed Thursday as part of a status report to the City Council on the embattled city treasurer’s office. City Administrative Officer Keith Comrie said his auditors “stumbled” across the document while monitoring investment activities by the city treasurer in the wake of a controversy involving Bradley and Far East National Bank.

“We were over talking to the city treasurer and he said, ‘Look at this (subpoena). I’ve got all this work to do,’ ” Comrie said.

The subpoena demands the treasurer’s office produce by Oct. 10 “all notes, drafts, calendars, diaries, logs, account statements and other written material, photos, graphs, computer disks, tapes and other recordings” regarding four financial institutions and four brokerage houses.

The financial institutions are Columbia Savings & Loan Assn., Far East National Bank, Valley Federal Savings & Loan Assn. and Gibraltar Savings & Loan Assn.

Columbia is under the scrutiny of federal regulators as part of the insider-trading case brought against Drexel and Milken. Bradley has a close political relationship with Columbia Chairman Abraham Spiegel and has invested in Columbia stocks and bonds.

The grand jury subpoena requests all documents involving investment banker Ira Distenfield, a former Harbor Commission president and one of Bradley’s biggest contributors.

The grand jury has requested documents that involve three companies that employed Distenfield: ITD Inc.; Bateman Eichler, Hill Richards Inc., and Smith, Barney, Harris, Upham & Co. The fourth investment firm is Drexel.

Last May, Distenfield suddenly resigned his powerful Harbor Commission post as The Times was preparing a report on sworn statements he had made in 1987 before a confidential New York Stock Exchange arbitration hearing. In his testimony, Distenfield said he used his influence with Bradley to obtain a hotly contested contract for Smith, Barney, which employed him as an executive.

Bradley has denied that he was influenced by Distenfield.

It was not immediately clear how many individuals or agencies were served with grand jury subpoenas.

Ronald L. Olson, an attorney representing Far East Chairman Henry Hwang, whose payments to Bradley as a bank adviser ignited the ethics scandal, said late Thursday, “I am not able to respond on anything” regarding demands for records.

A banking source said Thursday that Columbia Savings apparently received a subpoena to furnish federal authorities with numerous documents.

Spokesmen for several city offices that have figured in the controversy and investigations--including the city controller, city administrative officer, city clerk, Community Redevelopment Agency and Harbor Department--said they had not received subpoenas.

According to sources familiar with federal investigations of public officials, such subpoenas are issued if potential witnesses refuse to turn over needed documents or if the case reaches a point where criminal charges are seriously contemplated.

“Once they start doing the subpoena process, that means that the case is very good,” said one source experienced in federal political cases.

It could take weeks, even months, from the time that documents are subpoenaed until the investigation takes its next step: calling witnesses before the grand jury, the sources said.

News of the expanding interest in Bradley’s financial affairs by federal investigators represents a major political setback for the mayor.

It comes as the mayor and his aides are pressing a new public relations offensive to put the six-month-old controversy behind them. That effort, including a series of image-building public appearances and dogged insistence that Bradley has been cleared of any improprieties, was launched Sept. 14 when Hahn concluded his investigation.

Chandler said Thursday that the expanded federal investigation will not affect the mayor’s performance.

“He is certainly attending to city business, and it is business as usual,” Chandler said. “The city attorney’s report is behind us, and the mayor is moving forward.”

Times staff writers Rich Connell, Frederick M. Muir, William Overend, Joel Sappell, Henry Weinstein and Tracy Wood contributed to this article.

UNDER SCRUTINY

The U.S. attorney subpoenaed documents relating to the following businesses and individuals as part of a grand jury investigation into Mayor Tom Bradley’s finances and conduct in office: FAR EAST NATIONAL BANK--Paid Bradley $18,000 as an adviser during 1988. Bradley later returned the money. In March, 1989, after the mayor talked to City Treasurer Leonard Rittenberg, the city reinstated a $1-million deposit with the bank and added another $1 million, both without competitive bids. A treasurer’s office employee later obliterated a notation on a bid sheet that had indicated that the investment was made “per the mayor.”

VALLEY FEDERAL SAVINGS & LOAN--For about 10 years beginning in 1978, paid Bradley up to $24,000 a year as adviser. During that period, the mayor signed ordinances that permitted a subsidiary of Valley Federal to develop land.

COLUMBIA SAVINGS & LOAN ASSN.--Bradley has a long and close relationship with Columbia Chairman Abraham Spiegel and has invested in the company’s stocks and bonds. Spiegel has won zoning variances from the city for real estate development projects. Columbia has been scrutinized by federal regulators as part of the insider trading case against Drexel Burnham Lambert junk bond king Michael Milken, who faces a 98-count federal indictment.

DREXEL BURNHAM LAMBERT--Bradley maintained a special trading account within Milken’s high-yield bond unit at Drexel and purchased at least one security, Gibraltar Financial Corp. bonds, when it was not available to the general public. Bradley later urged federal lawmakers to allow Drexel to maintain its junk bond division in Beverly Hills.

GIBRALTAR SAVINGS & LOAN--Held several hundred million dollars in city funds. The mayor had invested $100,000 in junk bonds issued by the thrift’s parent, Gibraltar Financial Corp., and apparently lost most of his investment. City treasurer’s office documents show white correction fluid was applied to numerous bid records involving Gibraltar deposits.

IRA DISTENFIELD--Resigned as president of the Harbor Commission last May as The Times was preparing a report that he used his clout with Bradley to steer city business to the investment firm of Smith Barney, Harris Upham. The request for records includes Smith Barney and two other investment firms that later employed Distenfield--Bateman Eichler, Hill Richards and ITD Inc. Since 1985, Distenfield has been one of Bradley biggest political donors, contributing more than $86,000.