Legal Aid Chief Quits, Admits Embezzlement : Pacoima: James Steven Carroll, a 13-year veteran of the agency, says he took $400,000 to gamble.

The head of a Pacoima legal center that represents poor people has resigned after admitting he embezzled nearly $400,000 to feed his gambling habit, officials said Wednesday.

James Steven Carroll, 40, stepped down July 14 as executive director of San Fernando Valley Neighborhood Legal Services, a 25-year-old nonprofit, publicly funded agency that represents about 10,000 poor people annually.

Lew Hollman, acting executive director of the center, said that Carroll returned $50,000 when he resigned. Hollman said that Carroll has not been arrested or charged with any crime because the center has not yet filed a complaint. However, Carroll is cooperating with an investigation by police and the district attorney’s office, Hollman said.

“He advised our board that he had diverted program funds,” Hollman said. “He apparently is a compulsive gambler.”

Carroll’s attorney, Mark A. Gottesman, said his client gambled away all the money.

“He used the money to fuel his disease,” Gottesman said. “He is very remorseful and saddened about what has happened. He is preparing an accounting of the misappropriated funds.”

Gottesman said that Carroll, who bet primarily on sports, is receiving psychiatric counseling, attending Gamblers Anonymous meetings almost daily and attempting to get admitted to a residential program.

Gottesman said Carroll plans to make restitution. But he said he expects his client to be arrested and charged with a crime.

Hollman said that Carroll had an excellent reputation during his 13 years of working with the center, the last four as executive director. He said Carroll never gave any indication that he had a gambling problem.

“The staff is naturally very shocked and saddened,” Hollman said. “However, we do not believe this will interfere with our ability to represent our clients.”

Hollman said that the center’s funding sources have been advised of the stolen money, and that an internal investigation and audit is under way to determine how the money was diverted and exactly how much money was taken.

He said that Carroll apparently diverted center funds into a phony bank account as far back as 1989, with the largest amount apparently diverted within the last six to nine months.

The center, which is insured for embezzlement losses, has a $2-million annual budget funded primarily by the federal government. The State Bar Assn. and the city of Los Angeles also provide funding through community development block grants.