State Launches Probe of Child Welfare Group : Charities: The attorney general is looking into allegations that executives at L.A.-based Children’s Home Society received lofty salaries and engaged in questionable spending practices.

The state attorney general’s office is investigating allegations that top executives of the nonprofit Children’s Home Society of California were paid lofty salaries and engaged in questionable spending practices that included agency-paid meals at pricey restaurants.

Carole Kornblum, assistant attorney general in charge of the charitable trust section, confirmed that her office has initiated an investigation into the state’s oldest--and one of its largest--nonprofit child welfare organizations.

Kornblum said the investigation was spurred by Times stories last December detailing the pay, spending practices and perquisites for CHS President and Chief Executive Officer James T. Spradley Jr. and other officials.

“We were troubled by the allegations regarding alleged excessive compensation and other forms of financial benefits to the (chief) executive,” Kornblum said, but she refused to discuss details of the investigation.

Spradley and other CHS officials declined comment.

In a written response to The Times, attorney Richard J. Simmons said CHS will cooperate with any official inquiry and “is confident that any government agency that reviews (CHS’) practices will find them to conform with all applicable legal standards.”

Simmons added that the CHS board of directors “has expressed its unanimous support” for Spradley, who has headed the agency since 1985.

The Times, meanwhile, has learned that three of the two dozen CHS directors recently resigned after expressing concerns about the Spradley administration and the board’s handling of the controversy.

Georgia Drew Stewart and Barbara Pollard Massey confirmed that they had submitted separate resignation letters but declined to discuss them.

Massey--who represented an area that included Palm Springs, Riverside and south Orange County--would only say that her decision was a difficult one after 19 years with the agency.

Stewart, who had served for nearly two decades as a board member, employee and volunteer in SouthernCalifornia, said she departed after hearing from a number

of dissatisfied CHS supporters. “As a director, I felt I was having no impact on the direction of the agency during these difficult times,” she said. “It was a painful decision . . . but I simply could not continue under the current circumstances.”

Barbara Burns of Big Bear Lake said she also resigned from the board after three decades of supporting CHS.

“I just didn’t feel real comfortable with the way (the issue) was being handled,” she said. “I still have strong feelings about the agency, and I will continue to be supportive of it.”

John F. Branton, who chairs the CHS board, declined comment on the resignations or on the attorney general’s investigation.

Attorney Simmons said he would neither confirm nor deny that the directors had resigned. The departures marked the first time that board members have left the agency over the Spradley controversy.

The 102-year-old agency, with a $20-million annual budget, provides adoption, foster care and other services for more than 10,000 children statewide.

Last December, The Times disclosed that Spradley was paid $183,000 a year in salary and fringe benefits in 1991--the latest available figures--nearly double his compensation in 1988.

Other top CHS aides also saw their salaries rise sharply.

For a time, Spradley held agency-paid memberships at two athletic clubs, as well as a housing allowance and company cars in San Francisco, where he lives, and Los Angeles, where CHS is headquartered.

A CHS audit showed that Spradley spent more than $155,000 from July 1, 1988, through March 31, 1992, for meals, entertainment, travel and other expenses. Spradley approved his own expense reports.

He and his top three aides spent a total of $303,000 for such expenses, including $80,000 on meals and entertainment, the audit found. Auditors noted that most of the entertainment was for staff members and that it was “difficult to determine the necessity or business purpose of these staff meal and entertainment expenses.”

After the audit, CHS officials said any allegations of improprieties “were without merit.” But the agency tightened its policy on expenditures and expense reporting, and reported that Spradley gave up both athletic club memberships.

Jim Cordi, supervising deputy attorney general in Los Angeles, said he could not discuss the CHS investigation by the charitable trust division, which oversees about 63,000 active charities.

If a charitable group is found to be paying excessive compensation to its officials, Cordi said, the attorney general’s office could file a civil lawsuit for damages or restitution.

The controversy has divided CHS supporters, including some of the agency’s 147 auxiliaries--which raise about $1.5 million annually.

Several dissident CHS auxiliaries sent a letter last month to other auxiliaries, saying that the agency’s effectiveness “is being undermined” by the actions of Spradley, his aides and the board.

“While we are very concerned about the financial allegations, we are equally troubled by the treatment of volunteers that has occurred since this controversy began,” the letter added.

After a number of auxiliaries indicated that they would suspend fund-raising events or withhold contributions from CHS, the agency suggested that the dissident auxiliaries should turn over their money and sever their ties.

“It’s that insensitivity and adversarial approach that I simply don’t understand,” said Ann Scanlin, who has been involved with CHS for 12 years and is past president of the Ojai auxiliary.

Officials with other auxiliaries said the dissidents represent only a minority of volunteers. “We do not appreciate those few disgruntled employees and auxiliary members who are wasting our time, energy and money,” Betty Newman, president of the Las Companeras Auxiliary, wrote in a letter to The Times that was forwarded by the agency.

Janis Werschkul, vice president of a CHS auxiliary in San Diego, said her group also supports Spradley. “I think he is paid adequately if not enough,” she said.

One critic among the employees, Gail Howard, alleged in The Times article that employees suffered low morale and were mistreated for daring to question Spradley.

A month later, Howard said, her job as development coordinator was eliminated and she was forced to leave the agency.

“I definitely think it was (done) in retaliation,” Howard said.

Simmons, the CHS attorney, said the elimination of Howard’s job was based on “legitimate considerations” that resulted in a number of staff reductions. “Any suggestion that such a decision was made for an improper purpose is ludicrous and entirely unfounded,” he said.

The agency also filed a lawsuit against a former CHS official several days after the first Times story was published.

The suit alleged that Michael Love, CHS controller for five years ending in 1991, breached his “fiduciary trust” by obtaining and disseminating “confidential financial and proprietary information” belonging to CHS.

Love declined comment, but his attorney denied the allegations. “We believe that the lawsuit is a fishing expedition . . . to find out who is criticizing (Spradley),” said Paul Hoffman, legal director of the American Civil Liberties Union of Southern California.

Simmons called Hoffman’s statement “ridiculous and unfair. This is not a lawsuit that relates to any articles.”