Ethics Commission Receives Stinging Rebuke From Judge : Courts: The agency is barred from taking a role in a felony criminal investigation of alleged payroll irregularities in the city attorney’s office.

In a stinging rebuke to the Los Angeles Ethics Commission, a Superior Court judge on Tuesday barred the fledgling agency from participating in or directing a felony criminal investigation into alleged payroll irregularities in the office of City Atty. James K. Hahn.

Judge Robert H. O’Brien found that the ethics panel had overstepped its bounds when its legal adviser assisted in the criminal investigation, which is being conducted by Los Angeles County Dist. Atty. Ira Reiner’s office.

In his 10-page ruling, which makes permanent a 3-week-old temporary order, O’Brien said the district attorney’s probe could go forward on its own. But he complained that the meshing of the two agencies in this case had resulted in “a disjointed, mixed-up investigation that leaves all concerned . . . confused as to who is investigating what and for what purpose.”

The decision also states that the Ethics Commission, like most other city agencies, has powers that are limited to the investigation of misdemeanors--not felonies. Thus, the ruling could have broad implications for the Ethics Commission, which has been struggling to carve out a niche for itself since it was created in June, 1990, to investigate political corruption in Los Angeles.

But commission officials have argued vehemently that the City Charter entitles them to investigate any violations of state laws that relate to government ethics, conflicts of interest or violation of campaign laws. The panel’s executive director, Benjamin Bycel, said he expects the agency to appeal Tuesday’s ruling.

“I think the decision is dead wrong,” said Bycel. “We have a right to investigate anything that could be a violation of state law. The judge keeps reading the wrong section of the charter.”

Bycel complained that the legal challenge to his agency, brought by a top Hahn aide, “creates a smoke screen around whether or not there were crimes committed. And the sooner we get to dealing with that issue in the court system, instead of these ridiculous procedural roadblocks that the suspects are throwing up, the quicker justice will be done.”

But the decision was lauded by the attorney for Hahn aide Charles P. Fuentes, who figures prominently in the probe. Lawyer Neil Papiano had argued that city agencies have no legal power to become involved in a felony investigation.

“I’m delighted,” Papiano said Tuesday afternoon. “I think that Judge O’Brien has come out squarely for the protection of individual rights.”

The investigation into Hahn’s office is the Ethics Commission’s first major inquiry. It began last year with a tip to a whistle-blower hot line, and centers on allegations that some Hahn aides improperly performed political work while on city time.

In part, the probe involves a small public liaison unit that Fuentes heads. Investigators have sought payroll records for Fuentes and an employee in the unit, computer specialist Anthony C. Roland. Neither has been charged with any wrongdoing.

After it began the probe, the commission turned to the district attorney’s office for help, and the two agencies have been cooperating for several months.

One of the central issues in the court battle waged by Fuentes was whether the commission’s legal adviser, David Alkire, should have been permitted to supervise a search at Hahn’s office and present evidence in the case to the Los Angeles County Grand Jury.

The district attorney’s office gave Alkire special, temporary status as a deputy district attorney so that he could present the evidence--a move that O’Brien described in his ruling as “a convoluted cross-arrangement.”

In his earlier order, O’Brien temporarily barred Alkire and the commission from any role in the probe. Following that development, Reiner appointed two of his top prosecutors to handle the case. The prosecutors, Paul Turley and William Hodgman, recently obtained convictions in the case of former Lincoln Savings & Loan chief Charles H. Keating Jr.

Turley said Tuesday that he does not believe O’Brien’s ruling will affect the district attorney’s probe. “There is nothing in the order that applies to the district attorney’s office,” he said.