New Ethics Bill Sought by Panel : Reform: Commission wants legislation to close loophole in city’s code. Most top managers and aides are protected from being penalized for violations.

The Los Angeles Ethics Commission on Friday agreed to seek quick-fix legislation to close a gaping loophole in the city’s new conflict of interest code that protects most top city managers and political aides from being penalized for violating the law.

Meeting amid a new wave of controversies and complaints over the voter-approved ethics reforms, the commission ordered the drafting of a corrective ordinance to ensure that criminal and civil penalties can be imposed on key City Hall employees. The proposal, which would cover hundreds of influential, non-union city personnel, is expected to be finalized and forwarded to the City Council next month.

As the frustrated commissioners tried to fix one problem, they complained Friday of being dealt yet another setback when a respected member of their panel was unexpectedly removed after only one year in office.

Earlier in the week, the commissioners were surprised to learn that the city’s much-touted ethics law--described as the nation’s toughest--was largely toothless on enforcement. They acted on Friday despite advice from the city attorney’s office to go slow and await completion of related negotiations with the city’s major employee unions.

Union workers can only be subject to the ethics penalties through contract agreements, city lawyers told the commission. Assistant City Atty. Fred Merkin said it would be awkward, and perhaps illegal, to establish penalties for other non-union employees before negotiations with the unions are completed, even though those could take years.

Margo Anne Feinberg, an attorney representing several city unions, said her clients believe that strict financial disclosures are among the ethics rules that are unconstitutional, vague and do not apply to union workers.

Commissioner Ed Guthman angrily told the city and union lawyers: “This looks like a dance by a bunch of people around a procedure. . . . I think you’re thinking of everything but the public interest.”

The commissioners and their staff, who have been struggling to get the ethics law off the ground, also disclosed Friday that a respected member of their panel, Alice Walker Duff, was dropped by City Atty. James Hahn.

Hahn’s action was described as an “outrage” by Benjamin Bycel, the commission’s executive director. Guthman called the move a “disgrace.”

Mike Qualls, a spokesman for Hahn, who appoints one member of the ethics panel, said the city attorney feels Duff “has done an exemplary job (but) the commission needs a constant infusion of fresh ideas.”

However, some City Hall sources speculated that the move to oust Duff was political. They suggested that Hahn, a potential mayoral candidate, was miffed by sharp criticism leveled at him in the Rodney G. King controversy by civil rights leaders, including Duff’s husband. Joseph Duff, president of the Los Angeles chapter of the National Assn. for the Advancement of Colored People, has suggested that Hahn sided with the City Council and Police Chief Daryl F. Gates and worked against the Police Commission, which sought to temporarily oust the chief.

Duff and her husband could not be reached for comment.