Squabble Grows Into a Federal Case : Topanga: What started as a simple dispute over a building permit has escalated into a lawsuit accusing county officials of racketeering.

It began years ago as a squabble between a Topanga couple and county officials over a building permit.

Last winter, it festered into a shrill public debate aired in a newsletter called The Balance Sheet, written by the couple and mailed to every household in Topanga.

Next, it became a criminal case. After publishing their grievances for several months in increasingly hostile commentary, the couple were ordered in August to report to the Malibu Sheriff’s Station for to be arrested on 14 misdemeanor charges of building violations.

Then on Friday, the Topanga brouhaha became a federal case. With their criminal trial set to begin this week, Kathy Kenny and Art Starz filed a civil rights and racketeering lawsuit against Los Angeles County, three county officials and a private architect, alleging fraud, bribery and extortion.

Attorney James H. Fosbinder, who filed the lawsuit and represents Kenny and Starz in the criminal case against them, said his clients were denied a building permit because they declined to pay bribes to county officials.

The three county employees were unavailable for comment Friday. A county attorney said the county had not yet been served with the complaint.

“We will await with interest the service of this lawsuit and will defend it vigorously when it is served,” said Pat Meyers, principal deputy county counsel.

In the criminal case, the Los Angeles County Building Department alleges that Kenny and Starz illegally occupied a house constructed without a building permit, failed to vacate the premises when ordered, refused to uncover a plumbing and private sewage system for inspection and maintained a nuisance. A pretrial hearing is scheduled for Tuesday in Malibu Municipal Court.

Meyers said it is not unusual for criminal defendants to file civil suits in order to collect information through the discovery process that could bolster their defense in the criminal case. “This may be such an instance,” he said.

To the contrary, Fosbinder said, his clients were charged criminally in retaliation for their yearlong investigation to prepare the civil case. He said the newsletter drew out others who had similar experiences.

“That’s why Kathy started The Balance Sheet, to see if there wasn’t a pattern of racketeering,” Fosbinder said. “She did what I think was a fantastic job of researching through the public records, first to find a pattern of people who got permits they shouldn’t have got at all in a couple of days or weeks. Other people were not able to get permits they should have got even after trying over a period of years.”

Kenny and Starz own three adjacent lots on Cave Way in an old subdivision of small lots west of Topanga Center.

They live in a house they built with a permit on one of those lots. This spring, as part of the settlement of an earlier lawsuit they filed against Los Angeles County, they obtained a permit to build on another of the lots. Both the criminal charges against them and their federal racketeering cases involve a rental house the couple built on the third lot.

Kenny and Starz contend they merely remodeled a previously inhabited structure without a permit, a practice technically illegal but one they said is widespread in their community. County officials have said the prior structure was not a legal habitation.

The California Coastal Commission also sued Kenny and Starz this summer, alleging the structure lacked necessary coastal permits.

Fosbinder said his clients have tried to get permits for the structure, submitting every document and paying every fee demanded by county officials, but have been stalled and harassed by the three county employees.

The complaint alleges that the couple are the victims of a pattern of extortion involving the three county officials and the architect, who briefly assisted Kenny and Starz in their building permit application. The architect said he received only a $350 fee from the couple and does not know why he was named in the suit.

In its most detailed allegation, the complaint named three Topanga property owners who said that defendant Grant Lawseth, a building inspector, ordered them to stop grading property even though they had obtained permits for the work.

Lawseth, the senior engineer in the Calabasas office of the Building and Safety Division, only lifted the stop-work order after the property owners paid him a combined $75,000, the lawsuit alleges.

The lawsuit alleges that Lawseth, using numerous aliases to prevent detection, conducted complex real estate transactions with developers whose projects received approval through his office.

An employee in Lawseth’s office said he was on vacation Friday and unavailable for comment.