2 Special Crime Units Will Lose Prosecutors : Budget: District attorney will move some personnel to focus on street offenses. Business community protests.

As part of his running budget battle with county officials, Los Angeles County Dist. Atty. Gil Garcetti said beginning today he will transfer some prosecutors out of two special units--workers’ compensation and automobile insurance fraud--so they can concentrate on street crime.

If the county does not lift a strict hiring freeze on his office, Garcetti said, he will begin shutting down four other units later this month, including those that handle environmental and worker safety crimes, white-collar crimes involving more than $100,000, a unit that serves cities that don’t have a city attorney and an appellate unit.

“Street crime has to be the No. 1 priority,” he said in an interview. “I have no choice but to stop prosecuting those crimes that are not as serious as violent crimes.”

Garcetti said his decision was unavoidable because the Board of Supervisors is holding him to the hiring freeze.

But Chief Administrative Officer Sally Reed said the freeze was imposed because Garcetti consistently spends more than he is allocated, and he will get no relief until he finds ways to stay within his annual budget.

Garcetti said the freeze and budget cuts have devastated his office.

The only way he saved the jobs of scores of deputies, he said, was by putting them into special units, which, in many cases, are financed by the state or the federal government.

Now, he says, he must bring them out of those units to fight violent crime. “We have no choice,” Garcetti said.

It is the second time in seven months that Garcetti has threatened to stop prosecuting certain crimes if county officials don’t meet his budget demands.

Last summer, after the board gave him $12 million less than he asked for in his budget proposal, he told community groups all over the county that he would stop prosecuting misdemeanors if his budget was cut along with other county departments.

He backed off that threat, however, after business interests protested.

Representatives of the business community raised similar protests to Garcetti’s latest plan.

Clifford D. Sweet, a San Diego-based attorney who frequently represents insurance companies, said it would be “devastating” to the state’s business climate to cut back workers’ compensation fraud probes.

“Los Angeles has been the heart of organized workers’ compensation fraud for years,” Sweet said.

John P. Benson, head of the special investigation unit for Zenith Insurance Co., one of the biggest workers’ compensation insurers in California, also expressed dismay over Garcetti’s plan, saying that the work of the fraud unit was a major reason for the decline in bogus workers’ compensation claims over the past year.

“Does this mean to the person on the street that workers’ compensation fraud is no longer an important issue? Is it open season on workers’ compensation fraud again? If that’s the case, employers in this state will be subjected to a lot of injustices that they’ve already been forced to endure before.”

Bill Schulz, a spokesman for California Insurance Commissioner John Garamendi, said Garcetti’s action also would deal a serious blow to the state’s fight against auto insurance fraud. “Los Angeles is referred to as the automobile insurance capital of the country,” he said.

Times staff writers Frederick M. Muir and Stuart Silverstein contributed to this report.