Rittenberg to Resign, Get City Consulting Fee : Settlement: Deposits in bank tied to Bradley were treasurer’s downfall. Council approves $50,000 payment.

City Treasurer Leonard Rittenberg, a central figure in a controversy involving Mayor Tom Bradley, will resign in return for a $50,000 consulting fee under an agreement approved Wednesday by the Los Angeles City Council.

Sources said Rittenberg sought the settlement to avoid being fired for eight alleged offenses related to his handling of city deposits in a bank that had employed Bradley.

Council members said they settled to avoid lengthy and costly Civil Service proceedings and possible litigation.

The agreement, approved in a 10-3 vote, brings to an end disciplinary proceedings in which a city panel meeting in private voted to fire Rittenberg for his actions surrounding the placement of $2 million in Far East National Bank.

Rittenberg’s resignation from the $83,416-a-year post is to take effect June 1. He will be paid as a consultant until the end of the year.

The council approved the settlement without comment in an open session after a two-hour closed meeting on the matter.

“Personnel matters at the very best can be very prolonged, expensive and litigious,” said Councilman Hal Bernson, who supported the agreement. “I think that all sides recognized that the quickest settlement . . . was in the best interest of the people who pay the taxes.”

The consulting contract would pay Rittenberg $50,000 to “facilitate the orderly transition” of his office to a new treasurer. Rittenberg is expected to assist the treasurer’s office for several months while the city searches for a new treasurer, then to help the new treasurer until December, council members said.

Councilman Marvin Braude, who voted against the deal, said: “We don’t want consulting services from someone who has these kinds of questions raised about him. This is not a good message to send to the other general managers of this city.”

Braude said the agreement underscores the need for a change in the city Charter that would remove top managers from Civil Service status.

“For all practical purposes, it has become impossible for the people of this city to fire a general manager,” Braude said. “That’s an intolerable thing.”

Councilman Ernani Bernardi said Rittenberg had been made a scapegoat in the Far East affair and called the consulting fee a “bribe.”

Bernardi voted against the deal, as did Councilwoman Joan Milke Flores, who said she objected to the $50,000 payment. Council members Gloria Molina and Nate Holden were absent.

Rittenberg signed the resignation agreement Wednesday morning, according to Bernson, chairman of the Board of Referred Powers. The board worked out the deal with Rittenberg after voting about a month ago to fire him, sources said.

The board had concluded that Rittenberg had misled city investigators, lied to the council, created false records and damaged the credibility of the treasurer’s office, sources said.

Rittenberg did not return phone calls on Wednesday; his secretary said he would have no comment on the matter.

A spokesman for Bradley said the mayor had no comment.

Rittenberg was thrust into the middle of a controversy over Bradley’s relationship with Far East National Bank just over one year ago.

The controversy centered on a March 22, 1989, telephone call Bradley made to Rittenberg. Later that day, Rittenberg placed two $1 million deposits in Far East without competitive bidding.

Both Bradley and Rittenberg have said that Bradley did not attempt to influence the decision. Bradley was paid $18,000 by the bank in 1988, but returned the money in early 1989.

Bradley requested a Personnel Department investigation of Rittenberg last July after a series of disclosures about possible irregularities concerning city deposits in Far East.

The resignation agreement, worked out last Friday by Rittenberg and the board, was sent to the council for approval. The board, composed of five council members, was acting in place of the mayor, who normally would handle such personnel matters. Bradley had asked to be removed because of a potential conflict of interest.

Throughout a series of private board meetings that began last December, Rittenberg declined to participate or defend himself, board members said Wednesday.

Rittenberg, 59, is a career civil servant who worked for the treasurer’s office for 21 years. He has headed the office for 2 1/2 years, overseeing 54 employees who control the investment of nearly $2 billion in taxes.

Citing personnel rules, council members refused Wednesday to discuss the specific complaints against Rittenberg.

“It has been a matter of public record for some time going back to last year that the office is in disarray,” said Councilman Zev Yaroslavsky, chairman of the council committee that oversees the treasurer’s office.

In the months that followed the Far East deposits, the treasurer’s office became the subject of a number of investigations that indicated ambiguity and confusion in investment policies, especially concerning minority banks.

Rittenberg told a City Council committee that his policy on placing deposits in minority banks was largely unwritten. He said it was under that policy that he placed the money in Far East, whose owner is Chinese.

But evidence also emerged that someone in the treasurer’s office had used white correction fluid to obliterate a notation “per the mayor” on a city document regarding Far East.

The agreement reached Wednesday “will make it possible for a new broom to come in and sweep (the treasurer’s office) clean,” Yaroslavsky said. “And that office needs a lot of work.”

The agreement will save the city money in the long run, Yaroslavsky said. “It will cost us much more to pursue anything . . . of any disciplinary consequence than it would to settle this,” he said. “It’s absolutely the right decision.”

The councilman defended the consulting contract, saying Rittenberg’s services are necessary while the city searches for a new treasurer.

“There’s going to be a vacancy for some time,” he said. “You don’t just hire treasurers by putting a want ad in the newspaper.”

Asked whether Rittenberg had been made a scapegoat, Yaroslavsky said, “There are some people who become scapegoats through actions of their own. . . .”

After a lengthy investigation, City Atty. James K. Hahn concluded last September that there were no criminal violations involved in the Far East matter, but he criticized Bradley for “indifference” to ethical concerns.

Hahn also accused Rittenberg and his top aides of repeatedly lying to investigators and concealing crucial documents that linked the mayor to efforts by Far East to obtain city deposits.