Duffy Diverted U.S. Drug-Seizure Funds to Secret Account : Sheriff: County officials call for investigation because more than $300,000 from federal program was not deposited into the county treasury.

Sheriff John Duffy, prohibited since June from spending money seized in drug raids without county approval, failed to deposit more than $300,000 worth of drug funds into the county treasury and instead set up a separate, secret account.

County officials said Wednesday that they will ask the district attorney’s office to investigate Duffy’s use of the money, which violates a county ordinance mandating the money be deposited into the county treasury and requiring the Board of Supervisors’ approval before it is spent.

However, because Duffy may have paid the district attorney’s office a share of the money for its part in the drug seizure program, the state attorney general’s office may be called in to avoid a conflict of interest, said William J. Kelly, the county’s assistant auditor and controller.

Duffy confirmed in an interview Wednesday that he set up the separate account but refused to elaborate. Assistant Sheriff Jack Drown, who is running in next Tuesday’s election to replace Duffy, said that his boss mentioned starting such an account, and that Drown warned against it.

“He’s been making mystifying decisions for 20 years,” Drown said. “I’m not John Duffy’s keeper.”

Sgt. Glenn Revell, a Sheriff’s Department spokesman, said Duffy believes that the money is legally under the sheriff’s control.

“These are not county funds, these are federal funds, and it’s our belief that we’re accountable to the federal government for this money, not the Board of Supervisors,” Revell said.

County Supervisor Brian Bilbray said he is astounded by such logic.

“These are public funds!” he said. “You can’t take checks and slip them into a different bank account. This is the United States, not South America.

“For a man who has years of public service as an elected official, this is one hell of a terrible way to depart the scene,” Bilbray said. “I don’t think there was criminal intent here; I think it was plain stupidity.”

Revell said he does not know how much money has been gathered in the separate account or what it was spent for. Duffy failed to respond within 10 working days to a request by The Times for a breakdown of the drug-fund program, as required by state law. He also ignored repeated requests for telephone interviews, except to chide a Times reporter for repeatedly calling him.

The U.S. attorney’s office said the Sheriff’s Department received $318,865 in drug seizure funds between July 1 and Sept. 30, a period when Duffy should have deposited the money with the county treasury. Overall, the department has received $3.134 million since the drug-fund program began in September, 1986.

Even the Sheriff’s Department’s finance manager, Harold Donahoo, was not told about the $318,865 in drug proceeds--called asset forfeitures.

“Nothing has come to my office,” he said Wednesday. “I heard about money floating around in another account, but we have not deposited anything in the county treasury since July 1. As far as I know, we’ve gotten no checks from asset forfeiture.”

County attorneys and auditors already were investigating Duffy’s use of nearly $70,000 in drug funds to pay an attorney in a civil lawsuit. Duffy paid the law firm of Martin J. Mayer to defend himself against lawsuits by six deputies who were disciplined by Duffy for their involvement in activities of the so-called “Rambo Squad” at County Jail in El Cajon.

The cases were settled out of court.

Auditors warned Duffy in June that he was wrong to spend drug money on his attorney. Asked to reimburse the drug fund account, Duffy refused.

Auditor Kelly said that Duffy may be forced to refund the money if county attorneys rule that the payment was illegal. Federal guidelines established in 1984 allowed law enforcement officials to keep money and property seized in drug arrests. Two years later, federal officials ruled that the money could be used “for law enforcement purposes only.”

Although the definition is broad, many police agencies prefer to use the money to fight drug offenders. Others have used it to build jails, buy police cars, pay for overtime and other uses.

In June, Duffy sought to use $450,000 in drug money for laptop computers. When county supervisors said they preferred that the money instead be used for jail security, Duffy insisted that spending money on jail improvements was a violation federal guidelines.

Supervisors decided to amend the ordinance governing the drug monies by requiring that Duffy get specific approval before spending the funds.

Duffy was angry.

“I cannot be a party to the charade that would be created by implementing the proposed ordinance by simply going along to get along,” he wrote the board.

In that letter, Duffy may have been warning the board of his intent to establish a separate account for the drug funds: “I will, therefore, undertake whatever action I deem appropriate to scrupulously adhere to all of the rules applicable to the spirit and intent of federal equitable sharing . . . .”

Sheriff’s Department spokesman Revell said Wednesday that Duffy is accountable only to federal authorities for how the money was used.

“It is Sheriff Duffy’s opinion on asset forfeiture funds that the Board of Supervisors has no business attempting to control those funds,” he said.

Auditor Kelly said that Duffy’s receiving the money is comparable to the county’s Department of Social Services getting state grant money or the housing department getting federal money and then turning it over to the county.

“My view is the the county of San Diego is the law enforcement agency, not the Sheriff’s Department,” he said. “The money goes to the local legislative body that appropriates it for expenditure.”

Bilbray said he could not believe that Duffy, who has challenged supervisors for years, would want to keep the drug account secret.

“I’ve never known John to be bashful in public,” he said. “If he was going to show the Board of Supervisors who was boss, why didn’t he do it face to face?”

Bilbray said it is inconceivable that another county department manager would have tried to set up a secret fund and keep if from the board’s control.

“The biggest problem is that the slush fund was created outside the county budgetary process,” he said. “It was done in such a clandestine way that nobody could get into the system to find out how much money he got, when did he get it and what did he spend it on. He violated every one of the rules.”

The emergence of Duffy’s secret account has become a campaign issue. On Wednesday, Drown’s opponent, Jim Roache, said Drown had to know about the account because he worked closely with Duffy as one of his assistant sheriffs.

“This could not have happened without Drown knowing about it,” Roache said. “He’s in the immediate vicinity of the sheriff’s office. Jack has looked the other way on a number of occasions and pretended problems weren’t there just to keep the benevolence of John Duffy.”

Drown told The Times Wednesday that Duffy mentioned the secret account, but Drown thought it had been established after he left the department in August to campaign full time.

“He talked about it. He said ‘Maybe I’ll take that money and put it in a separate account.’ I told him that the county ordinance doesn’t allow you to do that,” Drown said. “I commented against it. I wouldn’t have done it. This is the type of thing that creates a strained relationship with the board.”

Drown said he is tired of being tied to every Duffy decision.

“I’m not his attorney, and I’m not his auditor,” Drown said. “All of a sudden, I’m supposed to be John Duffy’s keeper. I’m not his right-hand man and Roache knows it.”