Grand Jury in Bradley Probe to Hear Witnesses

A federal grand jury in Los Angeles investigating the conduct and personal finances of Mayor Tom Bradley is scheduled to begin hearing witnesses soon, it was learned Thursday.

The grand jury’s wide-ranging criminal probe also includes former House Majority Whip Tony Coelho, sources close to the investigation told The Times.

Federal investigators are “definitely interested” in possible insider-trading transactions made by Bradley and Coelho through the investment firm of Drexel Burnham Lambert Inc., said another source familiar with one of the grand jury subpoenas.

Bradley and Coelho shared the same broker, James Dahl, in the exclusive Drexel “junk-bond” unit in Beverly Hills headed by Michael Milken, who has been indicted in New York as part of a massive Wall Street insider-trading probe.

U.S. Atty. Gary A. Feess on Thursday declined to comment on the grand jury investigation of Bradley or the involvement of Coelho.

Bradley, Coelho and their attorneys said in interviews Thursday that they are unaware of the new developments in the grand jury probe.

Bradley insisted that he has done nothing improper.

“I have great faith and great confidence that when this inquiry is finished, it is going to show exactly what I have been saying all along,” the mayor said. “I haven’t done anything that is wrong.”

Coelho, reached in his New York office at the Wall Street firm of Wertheim & Schroder Co., said of the grand jury investigation: “I know nothing of it.”

Last month, the grand jury subpoenaed Bradley’s personal financial records from Bateman Eichler, Hill Richards Inc., a West Coast brokerage firm where a Bradley fund-raiser and former Harbor Commission appointee served as the mayor’s stockbroker.

Bateman Eichler is one of eight financial institutions whose relations with Bradley are under scrutiny by federal authorities.

The records demanded by the grand jury were to be turned in by Tuesday of this week, according to a subpoena issued on Sept. 11.

At the time the subpoenas were issued, a source close to the investigation told The Times that Bradley was the focus of the grand jury probe.

The federal grand jury will begin hearing testimony within days, said the sources, who asked not to be identified. The scheduling of witnesses often is the next step in a grand jury investigation after the subpoenaing of documents.

One of Bradley’s attorneys, Stephen D. Miller, said the grand jury testimony may have no significance in the case.

“I might say at this point that the issuance of subpoenas by a grand jury and even the calling of witnesses before a grand jury often means nothing,” he said.

“The fact that the grand jury might be hearing witnesses, first of all, does not mean that these witnesses are relating facts that have anything to do with Mayor Bradley,” Miller said. “And, secondly, it doesn’t mean that those people are relating any information that is prejudicial to anyone.”

The records subpoenaed by the grand jury include securities traded by former Bateman, Eichler broker Ira Distenfield, who abruptly resigned his Harbor Commission post in May amid inquiries by The Times into his links with Bradley. A Bateman Eichler spokesman, Gene Meeker, has confirmed that Distenfield was one of the mayor’s brokers and that he “probably” brought Bradley’s business to Bateman.

The grand jury also has subpoenaed city records related to Far East National Bank, which paid Bradley as an adviser at a time when it was seeking and receiving city business, and Columbia Savings & Loan Assn., whose founder and vice chairman is Abraham Spiegel, a personal friend of Bradley who served as the mayor’s investment adviser.

According to sources, a focus of the federal investigation is Coelho’s dealings with Donald Dixon, a financier who in 1982 took over Vernon Savings & Loan Assn. in Texas and built its assets from $82 million to about $1.4 billion before it was closed by federal regulators in November, 1987. Several officials with the firm have been charged or convicted of charges ranging from bank fraud and conspiracy to misusing thrift funds for political contributions and hiring prostitutes.

During 1985 and 1986, Coelho threw several parties for political donors aboard Vernon Savings’ 112-foot yacht, the High Spirits, which was moored along the banks of the Potomac River. Under Dixon, Vernon also acquired an air fleet that included a helicopter and a first-class corporate jet. Court documents show that Coelho and former House Speaker Jim Wright used the aircraft.

Coelho did not report the use of the aircraft and the yacht as in-kind political contributions and only reimbursed the thrift after the parties were made public.

When federal regulators began questioning Dixon’s financial activities, he complained andCoelho asked Wright to listen to Dixon’s complaint. Wright later intervened with the chairman of the Federal Home Loan Bank Board, asking him not to close down Vernon.

Coelho, who resigned from the No. 3 post in the House three months ago amid an investigation of his finances, said his failure to reimburse Vernon earlier was an “oversight.”

An attorney representing Dixon, who has not been criminally charged, said his client has not been subpoenaed or interviewed in connection with the Los Angeles grand jury investigation. “I have never heard Coelho mentioned,” said William Ravkind, Dixon’s lawyer in Dallas, referring to the federal probe of Vernon officials in Texas.

Coelho recently announced that he has decided to go to work for Wertheim & Schroder. His salary has been reported at about $1 million.

Coelho’s attorney, Robert F. Bauer, said that news of his client’s involvement in the grand jury investigation “comes as a complete surprise.” Bauer criticized media coverage of the Coelho investigation.

“We are outraged by the continued leaking of information, accurate or inaccurate, from theJustice Department, which the attorney general said publicly would stop.”

Also contributing to this article were Times staff writers William Overend in Los Angeles, and Ronald J. Ostrow and Sara Fritz in Washington, and Scot J. Paltrow in New York.