Judge Halts Ethics Panel Probe of City Attorney’s Office : Inquiry: But court allows D.A., Grand Jury to continue investigating alleged payroll irregularities.

In a blow to the new Los Angeles Ethics Commission, a Superior Court judge on Tuesday temporarily halted the agency’s criminal investigation of alleged payroll irregularities in the city attorney’s office.

Judge Robert H. O’Brien, however, ruled that the district attorney’s office and the county Grand Jury, which have been cooperating in the investigation, could proceed with the probe until another court hearing is held this month.

Officials said that because of the ruling, investigative Grand Jury hearings scheduled to begin today would be postponed until after Jan. 24, when O’Brien is scheduled to hear further arguments and decide whether to issue an injunction against the ethics agency.

The Ethics Commission issued a statement saying it was disappointed by O’Brien’s ruling, but will comply while it explores its legal options. “We must emphasize that this is only a temporary delay in this matter,” said commission Executive Director Ben Bycel. “Allegations of serious misconduct have been raised and will continue to be thoroughly investigated.”

Sandi Gibbons, a spokeswoman for Dist. Atty. Ira Reiner, said Reiner’s office “will continue with the investigation.” Should the Ethics Commission be permanently barred from the case, the district attorney “will proceed with this matter,” she said.

While the investigation can continue, the ruling, won by attorneys for two key figures in the probe, cast a cloud over the year-old ethics agency’s role in the probe--its first major investigation--and in future inquiries.

Commission President Dennis Curtis said he would not comment “about what is going to be the future of our agency or its duties until we get this thing settled.”

Attorneys for Charles P. Fuentes--a top aide to City Atty. James K. Hahn--and Anthony C. Roland, a computer specialist in Hahn’s office, argued that the Ethics Commission was exceeding its authority and not following proper procedures in conducting what could be a felony investigation.

The Times has reported that the the investigation focuses partly on Fuentes, a vice chairman of the state Democratic Party, and Roland, who runs a private consulting business on the side that serves prominent Democratic candidates.

The investigation centers on allegations that “ghost employees” performed political tasks on city time, or failed to show up for work.

Attorneys for Fuentes and Roland both said Tuesday that their clients had done nothing improper.

Neil Papiano, Fuentes’ attorney, told O’Brien that the Ethics Commission’s special counsel, David Alkire, was not authorized to act as a prosecutor before the Grand Jury. Alkire, a former prosecutor, has been deputized by Reiner’s office to present evidence to the Grand Jury.

Papiano said virtually all of the evidence gathered so far is inadmissible because of flaws in the way the Ethics Commission conducted the investigation. “We are not intending to halt the investigation,” Papiano said. “But the investigation at this point should not be conducted by the Ethics Commission.”

Brian O’Neill, Roland’s attorney, said the Ethics Commission was in effect conducting a felony investigation, a power that even the city attorney does not have.

But attorneys for the commission and the district attorney argued that there was nothing improper in the way the investigation has been developed.

They said a judge issued the search warrants served on Hahn’s office, Fuentes and Roland Dec. 26. The Grand Jury issued the subpoenas to some 20 city employees to appear for questioning this week.

Alkire said Fuentes and Roland were seeking to “stop the investigation of evidence of a felony.”

O’Brien issued his temporary restraining order without comment.

A focus of the probe is a city attorney’s public liaison unit overseen by Fuentes. Questions have been raised about Roland’s activities as a member of the unit. Payroll records for Fuentes and Roland have been subpoenaed.

Tuesday was the first time Fuentes and Roland, through their attorneys, responded.

O’Neill, Roland’s attorney, said it was not surprising that allegations have surfaced that his client was often away from the office. He said Roland sometimes took time off without leave and worked by “telecommuting”--performing work by computer from home.

The investigation, which began with a tip to the ethics agency’s whistleblower hot line, appears to be based on complaints by a disgruntled co-worker who was at odds with Roland, O’Neill said.

Papiano also complained that the Ethics Commission has not made clear its suspicions about Fuentes. “Are they saying he didn’t properly supervise people? Are they saying he did something on city time?” The Ethics Commission has declined to provide details of its investigation, or the evidence it has developed.

Earlier Tuesday, in an interview taped for KCBS’ News Conference program, Bycel acknowledged that the stakes are high for the ethics agency. He said he may step down if it turns out the commission has erred in the probe.

“I will be back practicing law in Santa Barbara if we’re wrong, there’s no question about it,” he said. “We believe we were right and nothing we’ve found so far has shown us we were wrong at all.”