Investment Suit Names Ex-Harbor Official : Court action: Ira Distenfield, former fund-raiser for Mayor Bradley, is accused of misappropriating money political insiders placed in a limited partnership.

A onetime Los Angeles Harbor commissioner who was one of Mayor Tom Bradley’s biggest fund-raisers has been sued by five current and former city commissioners for allegedly misappropriating their investments in a limited partnership that included several other political insiders.

Nine plaintiffs including Airport Commissioner Johnnie Cochran, Harbor Commissioner Jun Mori and other confidants of Bradley have accused Ira Distenfield of fraud and breach of contract in managing the $315,000 invested by partners in now-defunct Financial Services Group.

The lawsuit alleges that those funds, and at least $182,000 in other assets including office equipment and furniture, were converted to the personal use of Distenfield and other defendants. Just how that occurred is not explained in the lawsuit, which seeks release of FSG’s financial records and return of each partner’s $35,000 investment in the Century City company.

The lawsuit also seeks $3 million in punitive damages from Distenfield and other defendants including Integrated Resources Equity Corp., a subsidiary of a Delaware-based financial services firm whose fortunes plummeted last year along with its junk-bond investment adviser, Drexel Burnham Lambert Inc. Integrated Resources was named because it employed Distenfield as a West Coast representative and figures, according to the lawsuit, in the creation of FSG.

Distenfield, now an investment broker in Santa Barbara, declined comment.

His attorney, Jules Radcliff, denied the allegations, insisting FSG’s books have already been opened to plaintiffs. He also said plaintiffs were unfairly blaming Distenfield, not Integrated Resources, for FSG’s demise.

“They had a business go bad on them and everybody is trying to figure out why,” Radcliff said. “But I suspect all of them would acknowledge that the business was built largely on Integrated Resources and when it ran into trouble, it brought this business down.”

Attorney Christine Page, representing Integrated Resources, declined comment on the lawsuit except to deny wrongdoing by the company and disavow any knowledge of how Distenfield ran FSG.

“I am not denying he was a registered representative, but we deny he was acting at the behest of the company in entering into this transaction with the plaintiffs,” she said.

Distenfield resigned as president of the Harbor Commission in May, 1989, complaining that press inquiries about him were an unfair burden on his family, including wife Linda, a former employee of Bradley. Distenfield’s resignation was announced the day before The Times reported that he testified, at a New York Stock Exchange hearing in 1987, that he used his influence with Bradley to win a coveted City Hall contract for a former employer.

Since his resignation, Distenfield, once a political power broker and prolific fund-raiser for Bradley, has been exiled from the mayor’s inner circle, City Hall observers say. The lawsuit is the latest indication that Distenfield has fallen into disfavor.

“If I was speculating, I would say there is a correlation” between the lawsuit and Distenfield’s departure from Bradley’s inner circle, said Brian Sun, another of Distenfield’s attorneys. “Maybe some people thought, ‘Ira has fallen from grace, so we can dump on him.’ ”

Plaintiffs who could be reached for comment insisted the lawsuit was based on business, not politics, though several conceded it was sensitive because of the group’s connections to Bradley. And one said privately that the suit might have been avoided at all costs if Distenfield was still a Bradley insider.

“My guess is that there might not have been a lawsuit if Ira was still on the commission and had not gotten into the problems he did last year,” said the plaintiff, speaking on condition of anonymity.

Neil Papiano, a plaintiff as well as attorney for the group’s lawsuit, denied that suggestion. “This has absolutely nothing to do with politics,” said Papiano, another Bradley contributor and City Hall insider. “We just want to know where the (partnerships’) money went.”

Papiano and other plaintiffs claimed the lawsuit, filed April 27, followed months of unsuccessful efforts to obtain FSG’s records.

“No one wanted this on the public record. It was felt it would be better not to file the lawsuit because it would look bad politically,” said investor Stephen Moses, a prominent Los Angeles builder and political fund-raiser. “But we felt there was no other choice.”

Court papers and information provided by plaintiffs show Distenfield formed FSG in April, 1988, collecting $35,000 from each of the limited partners. The firm, according to its partnership agreement, was to operate, service and manage securities broker-dealer businesses and other types of ventures.

Before FSG opened for business, according to investor Moses, Distenfield told the eventual partners he had an agreement with Integrated Resources for a joint venture operation with the then-thriving financial services firm so long as he could secure local investors. “Ira needed a certain amount of capital and on his behalf we were investing,” Moses said.

But after assurances that their money would be secured in a special account, the limited partners found their investments were either paid to Distenfield in commissions or spent by him for unspecified personal expenses, the lawsuit alleges.

It further alleges the partners were repeatedly denied access to FSG’s records. The suit claims the books were not fully opened to the plaintiffs even after one of them, Lance Brisson, made a written demand on June 13, 1989.

Around August, 1989, according to plaintiff Raymond Veltman, Distenfield told the limited partners FSG was in financial straits because of problems facing Integrated Resources. At that time, Integrated Resources had just defaulted on $1 billion of commercial debt and was announcing a restructuring plan that included financing by Drexel Burnham Lambert, which earlier helped raise $2 billion for the corporation, most of it in junk bonds.

One month later, with partners unwilling to invest more money, FSG closed.

From that time until the lawsuit was filed, according to the plaintiffs, Distenfield refused to provide the financial records sought by the limited partners.

“We want to see the records,” said plaintiff Veltman, a city telecommunications commissioner. “We don’t want to let him off the hook.”

But Distenfield’s attorneys claim FSG’s records have been available for months and that the limited partners are demanding additional records for Integrated Resources, a separate business.

The plaintiffs include attorney Craig Cogut, former president of a company that provided support services to junk bond king Michael Milken’s high-yield bond group at Drexel, and Charles Winner and Ethan Wagner, partners in the political consulting firm Winner-Wagner & Associates. Winner also is a former telecommunications commissioner and the firm employes Brisson, another former member of the telecommunications commission.

The outside accountant for FSG is another telecommunications commissioner, Harvey Bookstein, a certified public accountant who is neither a plaintiff nor defendant.

A status conference on the lawsuit is scheduled for Sept. 27.