Service Center in Middle of Political Storm : Social services: Problems mount as Cudahy operation loses its state tax-exempt status, the executive director resigns and the city threatens eviction.

By the time 9 a.m. rolled around and Marian Wilkins slid open the huge gray warehouse doors of the Cudahy Social Service Agency, 50 senior citizens were waiting in the parking lot, huddled close together to keep out the uncommon morning chill.

“They camp out here from 8 o’clock in the morning,” Wilkins said, doling out grocery bags loaded with butter, rice, beans, granola bars and other food.

Inside, four other nonprofit agencies that rent offices from the agency prepared for their own hectic day. Social workers began seeing the first of the 200 to 300 mothers and babies they advise on health and nutrition. Down the hall an amnesty class was in full swing. In a small office with no heat, Mercedes Carrasco started tracking down potential employers for senior citizens. In an office behind her, Frank Fraire smoked a cigarette and waited for his first convicted drunken driver to show up for traffic school.

By the end of the day, hundreds of Cudahy’s neediest residents had traipsed through the drab brown building at 7810 Otis Ave. looking for food, clothing, advice or other help.

But the bustle of daily operations belied a political storm that has engulfed the agency for much of the two years that it has been in the building, leased from the city Redevelopment Agency.

The most recent crisis stems from the resignation of the Social Service Agency’s executive director and recent revelations that the agency was stripped of its tax-exempt status by the state.

City officials and the former director describe the loss of tax-exempt status as a bookkeeping problem that should have no direct financial impact. But the revelation has reignited a political battle among City Council members that could eventually lead to the eviction of the agency from the building, city officials say.

And the Social Service Agency, which was started with city money, might no longer be able to continue distributing food and clothing, former Executive Director James Graham said. Graham, who said he had not been paid for months, resigned two weeks ago.

“What’s happened is that personal and political battles have created financial instability,” Graham said. “Businessmen are reluctant to make contributions because they feel like they are choosing political sides. It’s come to a situation where there is just the absence of rhyme or reason. It’s actually devastating to the entire community, and the Social Service Agency is just part of it.”

The agency’s first encounter with controversy occurred in the summer of 1988 over a proposal to establish a bingo game as a way of becoming more financially independent.

In the ensuing months, the controversy generated a volatile split on the council that led to accusations that the agency was being used as a tool to further one council member’s political ambitions and was serving as a base for a recall effort against some council members.

On one side is Councilman John Robertson, who wants the agency evicted. On the other is Councilman Bill Colon, who wants the agency to remain and believes it is providing a vital service to the community.

Robertson and Colon were political allies and personal friends before the bingo proposal surfaced. They both served on the Social Service Agency’s board of directors. When Robertson ran for reelection two years ago, Colon served as his campaign manager.

But when the agency suggested that it be allowed to set up a regular bingo game on the premises to raise money, Robertson and Colon parted ways.

Robertson at first said he would support a small-scale bingo game, but balked at the more ambitious proposals presented to the council. He said he did not believe a building owned by the city should be used for gambling.

Colon, who was mayor at the time, became the strongest council supporter of bingo games. He appointed two other council members to begin negotiations with a Compton businessman who wanted to run the bingo operation.

The councilmen resigned from the agency board in the fall of 1988 after the city attorney said it was a conflict of interest for council members to serve as directors of an agency that receives money from the city. The bingo proposal was dropped.

Robertson has become a critic of the agency, raising questions about its priorities and how donations are being spent. Colon has remained a strong supporter, spending most of his days there as an agency volunteer. He recently formed Operation Upbeat, a youth agency that has an office in the building.

But Robertson expressed concern that Colon is using the city-owned building as his political headquarters. Colon has an office and a telephone in the building, in addition to the Operation Upbeat office, Robertson pointed out. Councilman Joe Fregeau and Mayor Joseph Graffio said they share Robertson’s concerns.

And it has not escaped the notice of Robertson or Fregeau that two of the three members of the Social Service Agency’s board of directors have been leaders of recall campaigns against them.

“If Bill Colon moved out of that office tomorrow you would not see this issue on the agenda again,” said one community leader.

Colon has denied using the building either to build a political base for an April reelection bid or to coordinate the recall campaign.

“I don’t have time to fool around with petty politics,” he told Fregeau at a recent meeting of the Community Redevelopment Agency. “I am just a volunteer worker. Anybody who wants to go in there and use the office as a volunteer is welcome.”

But critics of the agency now have more ammunition--the recent revelation that the state Franchise Tax Board last year revoked the agency’s nonprofit status for failing to file the appropriate tax forms.

“The only thing that makes sense is for the city to take back the lease, take over the facilities and use them in the manner they were meant to be used, to benefit Cudahy,” Robertson said. “They received money from the city, they received benefits, all because they were a nonprofit agency. Now we find out none of it is true. The city is stuck with a doggone mess.”

Graham told the council members recently that he had filed the necessary forms with the state, and expected the agency’s nonprofit classification to be restored in a few weeks. In any event, the tax status of donations to the agency has not been jeopardized because the agency has retained its tax-exempt status with the Internal Revenue Service, said IRS official Carol Levitsky.

But the state action has raised doubts among council members about the legitimacy of the program, said Jack Joseph, acting city manager. Council members are considering whether to cancel the agency’s lease as a result of the state action, Joseph said.

The relationship between City Hall and the agency deteriorated to the point two weeks ago that a Los Angeles County sheriff’s deputy was called out during a confrontation between Joseph and Colon’s son, Gary, at the agency’s offices.

Joseph said Gary Colon refused to let him ask the tenants of the building how much rent they were paying. After a brief argument, Colon acquiesced on the condition that he accompany Joseph. At that point, Joseph said, he asked his assistant, Nick Mull, to call the Sheriff’s Department.

While all this political squabbling has been going on, the agency has been operating on $1,500 a month it receives in rent from the other agencies in the building and about $1,500 a month in private donations, Graham said.

“It’s just so hard when we are going through this tough time and are stuck in such a politically explosive situation we can’t even make this place function,” Graham said.

But city officials point to other concerns about the agency’s operation.

In addition to losing its nonprofit status with the state, the agency fell behind in lease payments to the city Redevelopment Agency. City officials also suspended payments to the agency from Community Development Block Grant funds in September, 1988, after an independent audit found that the agency did not have documentation of how it was spending the money. The city had received about $130,000 up to that point, officials said.

Graham’s resignation leaves the agency with another dilemma--selecting a new executive director. And the agency board, which now consists of three members, has not met since the two councilmen resigned, Graham said.

City Council members have asked who was giving Graham direction and approving agency expenditures and budgets.

“The thing is what is this group doing? Who is responsible?” Robertson said.

City officials say that the services provided by the agencies in their building are vital to the area, but acknowledge that it may be difficult to extricate the agency from the political battlefield.

Both Colon and Robertson are up for reelection in April.

BACKGROUND Cudahy Social Service Agency officials planned to establish a bingo game to help raise additional money to pay for services for the needy. But the ambitious plan fell through before it got off the ground, attacked by some Cudahy City Council members who did not want a 500-seat bingo game run out of the city-owned building that the agency occupies.