Suits Claim City Illegally Diverted $116 Million in Funds

A Chatsworth businessman has sued the city of Los Angeles, claiming it illegally diverted about $116 million that was set aside to install fire sprinklers in city buildings, build parking lots and maintain parking meters.

Rex Foreman filed two lawsuits in Los Angeles Superior Court Wednesday demanding that the city return the money to its designated accounts. The money, his suits claim, was used, in part, to balance the city’s budget and to buy a new building to house city workers.

Ted Goldstein, a spokesman for the city attorney’s office, declined comment, saying his department has not seen the lawsuit.

In an unrelated case, Foreman’s attorney, Richard Fine, recently forced the city to repay $3 million to the Los Angeles Harbor Trust Fund that he claimed was illegally diverted. He also prevented the city from taking another $120 million that city officials planned to tap.

Fine said Foreman is not seeking any money for himself and is simply “hot under the collar” about the city’s action. The city would have to pay Fine’s attorney’s fees if he wins the case.

Fine said he learned about the alleged misuse of money from newspaper articles. He said Foreman became the plaintiff because he was one of many people who called his office complaining about such alleged misuse.

In one suit, Foreman alleges that between 1992 and 1994 the city illegally diverted about $90 million from a special fund generated by revenues from city parking meters to balance the city’s general fund budget. The special fund was designated to maintain the meters and to build off-street parking structures.

“We have them literally dead to rights on that,” Fine said.

The second suit charges that the city illegally diverted $26 million from a $60-million fund that was established by the sale of bonds to install fire sprinklers in six city buildings, including City Hall, Parker Center and Van Nuys City Hall.

The bond was approved by voters in 1989 after the City Council adopted a law requiring the sprinklers in all high-rise buildings, including city buildings, in the wake of the First Interstate Bank building fire in 1988.

Foreman charges that the city used $26 million from the fund to purchase and furnish a Downtown building at 212 N. Vignes St., which later became headquarters for the city’s Personnel Department.

In fact, city Auditor-Controller Rick Tuttle issued a critical report last month noting that the city had depleted the $60-million sprinkler account and had only completed retrofitting one of the six buildings and portions of three other buildings.