Court Restores Ethics Panel’s Authority to Investigate Felonies : Inquiry: Appellate panel overturns ruling that the board had no power to aid probe of city attorney’s office.

A state appellate court on Thursday restored the power of the Los Angeles Ethics Commission to investigate felonies in a case that stemmed from a criminal investigation of alleged payroll irregularities in the office of City Atty. James K. Hahn.

The 2nd District Court of Appeal overturned Superior Court Judge Robert H. O’Brien’s decision in January that the panel had overstepped its authority when its legal adviser assisted Los Angeles County Dist. Atty. Ira Reiner in the investigation.

The panel only had the power to investigate misdemeanor violations, O’Brien ruled.

But in its 28-page opinion, the appellate court found that the commission, created by city voters in 1990 with passage of Proposition H, “proceeded in every way in accordance with state law and with its express mandate under the City Charter.”

“The commission has the complimentary responsibility of assisting other agencies in the enforcement of state laws and other laws directed toward the same goals of assuring honesty and fairness in government and in the conduct of elections,” the opinion said.

Ben Bycel, executive director of the commission, praised the appellate court’s decision saying, “Tomorrow it’s going to be sunny.”

“It’s clear this court believes the commission acted legally and is now free to do the work the people wanted it to do,” Bycel said. “As we’ve said all along, we never had the right to prosecute a felony, but we have the right to investigate felonies.”

The commission’s investigation started in December when it served a search warrant on Hahn’s office and subpoenaed employees to appear before a county grand jury.

The search included the offices of Charles P. Fuentes, one of Hahn’s top aides and vice chairman of the state Democratic Party, and Anthony C. Roland, a computer specialist who operates a private consulting business serving top Democratic candidates.

The investigation, triggered by a tip to the commission’s whistle-blower hot line, centers on allegations that “ghost employees” performed political tasks on city time and that some employees failed to report for work.

Bycel, whose staff was too small to conduct a thorough investigation, asked the district attorney’s office to conduct the inquiry into whether criminal violations involving campaign financing, lobbying, conflicts of interest and governmental ethics had taken place.

The commission later hired a consultant to act as a liaison between the district attorney’s office and the commission and to monitor the progress of the investigation.

“It was . . . entirely appropriate for the commission first to refer the mater to the district attorney’s office . . . and to provide assistance to the district attorney’s office,” the appellate court ruled.

Attorney Neil Papiano, who is representing Fuentes in the case, argued that the commission had exceeded its authority and had not followed proper procedures in the investigation.

But Papiano said Thursday that the power of the Ethics Commission is no longer at issue in the case against his client since the district attorney’s office has taken over the probe.

“From our standpoint it is moot because the investigation is being conducted by the district attorney’s office, which is where we believe it should be,” Papiano said. “It might make a difference in some investigation in the future.”

The appellate court ruled, however, that the commission is legally entitled to reopen its investigation of the Fuentes case. It could take administrative action or initiate a misdemeanor prosecution at any time within four years of the alleged misconduct, according to the ruling.

Bycel would not comment on whether the case will be reopened. But he said, “I’m pleased the appellate court supported the commission. There is a lot of work to do, and we’re ready to do it.”