Milken Case, U.S. Attorney Choice Expected to Delay Bradley Probe

The ongoing federal grand jury investigation into Mayor Tom Bradley’s financial dealings is expected to be delayed by recent developments in Michael Milken’s plea bargain arrangement and the pending appointment of a U.S. attorney in Los Angeles, according to knowledgeable sources.

Although the investigation began last fall, a decision on whether to charge Bradley with any criminal misconduct is not expected for several months, the sources said.

The mayor’s financial records were subpoenaed last September by the grand jury as part of a joint investigation by the U.S. attorney’s office in Los Angeles and the Justice Department’s public integrity unit in Washington.

The records are believed to cover all of Bradley’s controversial financial transactions in recent years. They include his service as an adviser to Far East National Bank while it was doing business with the city; his similar work for Valley Federal Savings & Loan Assn.; his investments through Columbia Savings & Loan Assn. and its founder, Abraham Spiegel and his relationship with Drexel Burnham Lambert Inc., the brokerage firm whose high-yield unit in Beverly Hills was run by Milken and sold potentially lucrative junk bonds to the mayor.

Bradley has vigorously denied any wrongdoing.

Daniel Fogel, one of Bradley’s attorneys, issued a statement on behalf of himself and his co-counsel, Stephen D. Miller: “We’re confident that when the inquiry is concluded that no action will be taken against him.”

Last week, Milken pleaded guilty to six felony counts, including tax fraud, and as part of the arrangement agreed to cooperate fully with federal investigators.

What role Milken might play in the investigation of the mayor remains a mystery. But one federal source said Milken’s activities and knowledge as Drexel’s junk-bond king carry some “obvious spillover” to cases being worked on in the Los Angeles U.S. attorney’s office.

Federal prosecutors here and in Washington have been investigating Bradley, as well as Irvine-based Lincoln Savings & Loan Assn. and Sen. Alan Cranston (D-Calif.). Investigators are also interested in hearing from Milken about his close relationship with Beverly Hills-based Columbia Savings, according to individuals familiar with an ongoing federal probe into the savings and loan industry.

Any cooperation that might be offered by Milken is months away, since he won’t begin providing information to prosecutors until he is sentenced Oct. 1.

Moreover, it is widely believed that no final decision on the Bradley probe will be made until a new, politically appointed U.S. attorney is in place. The office has been under interim leadership for 10 months after Robert Bonner became a federal judge.

Last November, California’s Republican U.S. Sen. Pete Wilson urged the Bush Administration to nominate Los Angeles Superior Court Judge Lourdes G. Baird as the new U.S. attorney here. Baird has cleared her FBI background check and the Justice Department has sent her nomination to the White House, according to a Bush Administration source. The source said they are bewildered as to why Bush has not made the nomination.

Aides to Bradley said they would like Bush to expedite the appointment.

“Naturally, we hope that the nomination process is completed as soon as possible and people are put in place to make a final decision because we’re absolutely confident in the outcome once those decisions are made,” Deputy Mayor Mark Fabiani said.

However, Fabiani said the investigation has had no impact on the mayor or his duties.

“There’s been no diminution in his power or authority that I can see,” Fabiani said. “He has won key votes in City Council regularly over the last several months . . . and he continues to do his job. The only time anyone around here ever thinks about this is when the L.A. Times writes about it. Otherwise, it is not an issue at all for people in the mayor’s office or for people in City Hall.”

Sources familiar with the investigation said that one area of focus is the mayor’s dealings with Far East. City Treasurer Leonard Rittenberg, whose office steered city investments to Far East after being contacted by the mayor, is among a number of people who have testified before the grand jury here.

Knowledgeable sources said the grand jury has not heard from Bradley. Rittenberg and Bradley have denied that the mayor influenced him to deposit city money in Far East.

Thus far, an unusual degree of secrecy has surrounded the investigation. The U.S. attorney’s office has refused to confirm that the probe is taking place or that a grand jury has been convened. Assistant U.S. Atty. William Fahey, who heads the office’s government fraud unit, continued that stance when contacted recently.

Times staff writer Ronald J. Ostrow in Washington contributed to this story.