Project Builder Fined for Wage Violations

A developer of the controversial Sheridan Manor housing project was convicted of wage violations and fined $500,000 Friday after agreeing to cooperate in local, state and federal investigations into “possible public corruption” related to Los Angeles development contracts.

Details of developer Jerome Steinbaum’s plea-bargain arrangement were disclosed by the city attorney’s office during Municipal Court proceedings. Prosecutors provided the first confirmation that the federal government is investigating the Los Angeles Community Redevelopment Agency’s awarding of development contracts, but federal authorities refused to comment.

The Los Angeles Police Department and the district attorney’s office are investigating allegations by two informants that Sheridan Manor associates gave secret payments or campaign contributions to city officials to help win approval for the low-income housing project.

Steinbaum, 66, of Beverly Hills, was sentenced by Municipal Court Judge Susan E. Isacoff after he pleaded no contest to 15 violations of the state labor code. He was charged with failing to pay workers prevailing wages on redevelopment contracts as required by law.

Isacoff ordered Steinbaum to pay $100,000 in civil fines and $400,000 in restitution to underpaid workers. City Atty. James K. Hahn said that the penalties were the largest ever imposed in Municipal Court.

Steinbaum, a prominent developer and manager of low-income housing throughout Southern California, has denied intentional wrongdoing. On Friday, he accepted responsibility for the labor violations that allegedly occurred when he and two co-defendants rehabilitated two run-down buildings with $900,000 in CRA loans.

At the hearing, Steinbaum’s co-defendant, Harold R. Washington, 69, of Los Angeles, pleaded not guilty to 114 counts of prevailing wage violations. His trial date has been set for March 26. Charges were dropped Friday against the third defendant, Lanz Alexander, 35, of Sepulveda, after Steinbaum accepted responsibility as the project’s developer.

The local public corruption investigation grew out of an inquiry launched by the Police Department late last year into allegations that victims and witnesses in the labor violations case had been threatened and intimidated, said Deputy City Atty. Michael Guarino.

Guarino said he could not discuss any details of ongoing investigations. But the plea-bargain arrangement stipulated that Steinbaum must “truthfully and fully assist federal, state and and local law enforcement agencies in a continuing probe of possible public corruption in the awarding of CRA development contracts.”

If he does not, Steinbaum faces as much as 15 years in county jail and $15,000 in fines, Hahn said.

Earlier this month, at least a dozen investigators searched Washington’s office and apartment and questioned him at length about possible financial dealings with Mayor Tom Bradley, outgoing CRA Administrator John J. Tuite and other city officials.

The Times reported last Dec. 23 that Washington, a longtime acquaintance and campaign contributor to Bradley, used his connections to the mayor and then-Secretary of Housing and Urban Development Samuel R. Pierce to lobby for the right to develop the low-income housing project in the mid-1980s.

Tuite was on Washington’s payroll as a consultant on the Sheridan Manor project before Bradley appointed him to the top CRA post in 1986. In an interview Friday, Tuite said he was “not aware of a federal investigation in that regard. I have not been interviewed.” He said he took no part in any deliberations regarding Sheridan Manor.

The CRA said in a statement that no agency staff members have been questioned with regard to any criminal probe, and that it is “confident the agency’s (contract awarding) process will withstand any investigation.”

Bradley had no comment Friday. Through a spokesman, the mayor has denied wrongdoing and said that he did nothing improper by backing the project.

It was unclear what agency was conducting the federal probe of CRA. One federal official speculated that such an investigation could be based in Los Angeles or Washington and could be headed by the U.S. attorney’s office, the Justice Department, the Department of Housing and Urban Development or several other agencies.