Hollywood Chamber May Retain Landmarks Control : Government: After a private meeting with Lungren, group can renegotiate rights to sign, Walk of Fame.

The state attorney general’s office has allowed the Hollywood Chamber of Commerce to renegotiate a tentative settlement of complaints about the chamber’s financial management of the Hollywood sign and the Walk of Fame in which the business organization was to give up control of the two landmarks and pay $220,000 in restitution.

Lawyers in the state Justice Department told chamber officials they could propose alternative settlement terms shortly after three top leaders of the business group traveled to Sacramento to discuss the case with Atty. Gen. Dan Lungren.

The state attorney general’s office and the chamber’s lawyer had reached the tentative settlement early last summer, after a two-year investigation into the chamber’s financial practices, including about one year of negotiating. Under that proposed deal, the chamber would have given up control of the two landmarks and as much as $300,000 in funds set aside for their upkeep, and pay the restitution.

But then the Sacramento meeting was arranged by Johnny Grant, a chamber board member and celebrity announcer who often serves as emcee at Republican campaign events. He is a longtime friend and political ally of Lungren, also a Republican.

Neither the Justice Department lawyer handling the case nor the chamber’s lawyer was asked to attend the meeting in Lungren’s office.

“Quickly after” the meeting, the attorney general’s office decided not to force the chamber to accept the deal or face charges in court as it had threatened, according to sources familiar with the investigation. Instead, chamber leaders were told that the proposed settlement was off the table, and that they would be allowed to return with an offer of their own.

Although Lungren’s staff has described the meeting as a “get-acquainted” session, interviews and documents show that the chamber officials not only discussed the case personally with Lungren, but also took the opportunity to seek a better settlement.

There is no evidence Lungren acted specifically to help the chamber during or after the meeting.

“No deal was made,” said Grant. “Nothing went on that day.”

But Lungren’s handling of the case has prompted criticism and concern not only from former state Justice Department officials, including Lungren’s predecessor, John K. Van de Kamp, but from current Justice Department officials and Los Angeles city leaders as well.

Now, more than three months after the closed-door meeting, it is no longer certain that the chamber will have to relinquish control of the marketing rights to the sign and walkway, which bring an average of more than $100,000 to the chamber each year.

“We’re not counting out any possibility,” said Christopher Baumgart, board chairman of the chamber. “Everything is under consideration.”

The chamber has yet to submit a counteroffer, and Baumgart refused to say how much the organization will offer to pay to settle the case. Any settlement would have to be approved by the chamber’s board members and by Lungren and his aides.

Los Angeles city officials, eager to take over the sign and funds for its upkeep as part of the proposed settlement, are complaining that the chamber is being let off too lightly, at the city’s expense.

“All of a sudden, the chamber jumps into a plane, goes up to Sacramento, and our deal is blown out the window,” said Tom LaBonge, field deputy to City Council President John Ferraro. “If this deal has been scaled down . . . something is really wrong.”

State Justice Department officials have alleged that the chamber misappropriated as much as $595,000 in royalty payments and usage fees from souvenir makers and companies that used the two landmarks for filming and advertisements. The walkway and the sign logo are both registered service marks.

The money was supposed to have been put into trust funds for maintenance of the landmarks. instead, state investigators said, the chamber used the money for its own operating expenses and allowed the sign and walkway to fall into disrepair.

As a result of the investigation, the attorney general’s office threatened to sue the chamber. To avoid a suit, the chamber was to pay the restitution to the trust funds and relinquish control of those trusts. The Hollywood sign trust fund was to be taken over by the city, and a nonprofit corporation was to be created to administer the Walk of Fame and its brass and terrazzo stars.

As the agreement was being wrapped up, however, Grant arranged the meeting with Lungren. Lungren and a top aide met in Lungren’s office with Grant, chamber Chairman Baumgart and chamber President Brooke Knapp, according to Grant and others.

The deputy attorney general who headed the investigation, Patricia Barbosa, was not invited, nor was anyone else from Lungren’s staff who took part in the investigation. Also absent was chamber lawyer Marshall Caskey, who negotiated the tentative settlement with Barbosa. He has since resigned, because the chamber rejected a settlement he had worked hard for and thought was fair and reasonable, according to chamber officials who requested anonymity.

Lungren spokesman Dave Puglia said the purpose of the meeting was for Lungren to “get acquainted” with Baumgart and Knapp, both of whom were recently elected, and that the settlement was not discussed. Puglia has not returned several calls seeking further comment.

The Times has learned, however, that Grant and Baumgart did discuss the case with Lungren, and even brought a seven-page “Current Direction of Negotiations” agenda and information sheet for him to read. Among other things, they complained that Barbosa was demanding too much for restitution and that they were almost broke.

Grant said he asked Lungren “to give us a way out, because if there was any levy here, the chamber would be bankrupt.”

Grant said he has been a friend of Lungren since the attorney general was a young man. Grant insisted, however, that he would never ask a personal friend to improperly intervene in the chamber’s behalf in such a situation.

Asked why he arranged the meeting, Grant replied, “That’s politics. . . . It was like calling an old friend and saying, ‘Can we come in and explain something?’ ”

Baumgart said he never discussed “specific numbers” with Lungren at the meeting, and that the new chamber officials wanted to settle the case quickly but avoid an unfairly harsh settlement. He said he, too, cautioned Lungren that “if the AG’s office pursues certain tacks, it could imperil the chamber.”

Puglia said there was “no order given to pursue a lower settlement.” He said he had “no idea” why Barbosa was not present at the meeting.

“We’re not here to put the chamber out of business,” said Puglia. “We’re here to receive fair settlements without causing undue harm to an organization.”

Barbosa would not comment, except to say, “The attorney general decided to have the meeting without me. It is his prerogative to decide who is there.”

But several current and former state Justice Department officials said they were particularly concerned that Lungren left Barbosa out of the meeting.

“Old-time friends, or even worse, political connections, meeting to discuss investigations at the state Department of Justice, stinks,” said Duane Peterson, who served as a top aide to Van de Kamp. “You can’t settle law enforcement cases at meetings among friends.”

The investigation and most of the settlement talks took place during Van de Kamp’s tenure. Van de Kamp, a Democrat, said he, too, knows Grant, but he resisted Grant’s efforts to discuss the case with him when the two crossed paths at a party.

“I told him to contact (Barbosa),” Van de Kamp recalled. “It was never a situation where I felt compelled to get in the middle of it. It was in good hands.”

When Lungren took office this year, Van de Kamp said he advised him never to meet in private with subjects of investigations, especially political allies.

“It was one of the things I wanted him to know,” Van de Kamp said. “When you do that, it opens you up to a lot of doubt and questions . . . suspicion among the ranks that something untoward happened. What you (also) don’t want to do is give a sign to the outside world that people can circumvent the chain of command.”

Lungren came under questioning about his role in the Hollywood case when he met Aug. 14 with about 100 members of his Los Angeles staff. Several Justice Department sources told The Times that Deputy Atty. Gen. Chester Horn Jr., who is soon leaving for private practice, expressed concern about Lungren’s involvement in the case and asked what his policy was on including subordinates in settlement discussions.

The sources said Lungren replied to Horn that, as attorney general, he could set his own rules and that “if he felt like having a meeting without deputies present, he could do so.”

Horn, who was not involved in the chamber investigation, declined to discuss the meeting, as did several other deputy attorneys general contacted by The Times. Several cited the case of Marian M. Johnston. Lungren removed her from her post as the head of the department’s Civil Rights Section in August shortly after she reportedly criticized him in private.

Lungren’s staff would not comment on the August meeting, but some of his top aides defended his decision to meet with the chamber officials.

“I’ve been here for 22 years, under five AGs, and I can tell you that each has his own style of management,” said Assistant Atty. Gen. Carole Kornblum, who is Barbosa’s boss. “Personally, I think it is unfair for Mr. Van de Kamp to tell the current attorney general how to do his job.”

Some Los Angeles officials expressed irritation at the lack of a settlement. Parks officials are particularly eager to take over the Hollywood sign--and at least $170,000 in the trust fund--so they can start dealing with some chronic complaints from nearby residents.

Although the steep hillside of Mt. Lee on which the sign sits is closed to the public, sightseers frequently cross private property to reach it. Parks officials are exploring ways to keep trespassers away and to develop lookout points that would enable tourists to approach within snapshot range.

“But we need money to do that,” said Sheldon Jensen, assistant general manager of the city’s Recreation and Parks Department.

“This has gone on far too long,” Jensen said of the chamber investigation. “We want a resolution. . . . I’d like to know who’s pulling the strings here.”