Mayor Limits Duties of Aide Facing Probe

Mayor Richard Riordan on Monday stripped top aide Michael Keeley of duties involving city litigation pending investigations into Keeley’s giving confidential papers on the city’s legal strategy to lawyers on the opposing side of a lawsuit.

“There’s no question Mike made errors in the way he went about this, errors I am taking seriously,” Riordan said, adding that Keeley will explain his actions at today’s closed City Council session on the incident.

City Atty. James K. Hahn stunned City Hall on Friday with the revelations about the case involving the city Department of Water and Power and his insistence that his office could not work with the mayor’s staff on any litigation matters until Riordan fired Keeley, the mayor’s chief operating officer and longtime friend and law partner.

Hahn said Monday he is investigating Keeley’s role in another matter, a years-old case involving a software design contract at the Department of Building and Safety. He said his office had wanted to end the contract and press its case against the contractor, Systemhouse Inc., in court. But the council followed Keeley’s recommendation to send the matter to mediation, and it eventually was settled for $350,000. Hahn said the city attorneys in the case had suspected that Keeley shared information with Systemhouse’s lawyers, but Hahn said he doubted there was a paper trail, as in the DWP case.

Riordan’s office said it knew nothing of the software matter. “We have not been contacted by the city attorney’s office on any additional case,” Noelia Rodriguez, Riordan’s press secretary, said Monday.

In the DWP case, Hahn released copies of the documents sent to the opposing side and a cover memo from Keeley that noted: “The city attorney did not want me to share these materials with you.” The memo asked the Morrison & Foerster attorney, John Shiner, not to let on that he had seen the documents. Hahn sent copies to City Council members and other officials, sparking outraged calls for an investigation.

Riordan, alluding to confidant Ted Stein’s challenge to Hahn’s reelection bid next spring, on Friday denounced Hahn’s handling of the matter as a “cheap trick” but promised to get to the bottom of the allegations.

The incident has broad implications for the administration, which already suffers from increasingly strained relations with the powerful City Council. And it has heightened questions about whether Keeley and others in the administration improperly bypass the rules and ignore authority or opinions to reach their goals.

Keeley, charged with carrying out many of Riordan’s key initiatives, long has ruffled feathers at City Hall, where he is viewed as bright and capable but arrogant.

“What this has people wondering about is whether this isn’t just the tip of the iceberg,” one veteran observer said Monday.

Meanwhile, fallout from the DWP case, which involved a company that sued the city over a lost bid, occupied center stage. Councilman Mike Feuer, chairman of the council’s Rules and Elections Committee, began a hearing on the issue.

Before committee members moved to a closed session, Deputy City Atty. Stanton J. Snyder said that he believed the leaking of the documents had had an effect on the lawsuit and that the opposing side seemed more knowledgeable after the documents were released against his direction and without his knowledge.

“I believe it was very helpful” to the other side, Snyder said.

Riordan said that, until the investigations are finished, he is turning over responsibility for matters involving the city attorney’s office to Deputy Mayor Gary Mendoza. Mendoza is an attorney, as is Keeley.

Riordan added that Keeley would continue with his other responsibilities, including trying to win City Council approval for the mayor’s 1996-97 proposed budget. Keeley was at work Monday but could not be reached for comment.

The mayor said his conversations with Keeley over the weekend bolstered his belief that “clearly, Mike believed he was acting with the best of intentions for the city and its taxpayers.”

Riordan said Keeley told him that he simply was trying to save time and money by resolving the case and that he believed the opposing attorneys would be persuaded they had no case when they saw the documents.

In his faxed memo, Keeley described the city attorney’s position as “well reasoned and persuasive.”

The mayor’s office said Keeley has prepared a strong case on his behalf, including an argument that he believes he had authority as a city agent to waive the attorney-client privilege and divulge the information.

Hahn said he is confident that the city charter gives that authority only to his office.

He praised Mendoza’s assignment as a “step in the right direction” but insisted that Keeley must go before the relationship between the city attorney’s and mayor’s offices can be repaired.

Riordan discussed the issue with some council members over the weekend and Monday. Most said they were waiting to hear from Keeley and for results of the investigations before passing judgment.

Feuer released copies of a letter to Morrison and Foerster asking that they conduct their own inquiry into the matter and the assurance from its managing partner that it would do so.