Lawyer Throws Wrench Into Governments’ Fiscal Juggling

In one lawsuit, he hammered out an agreement with the state of California that required lawmakers to return $119 million they had plundered from special accounts to balance the budget. In another case, he reached a settlement with the cities of Los Angeles and Long Beach to repay $6 million they had grabbed from their port revenues.

Attorney Richard I. Fine devotes most of his time these days to battling the government--or as he puts it, making sure elected leaders spend public money for its intended purposes without siphoning off a dime to resolve budget crises.

The Century City lawyer, who once worked as a government attorney, has filed 19 lawsuits on behalf of taxpayers against public agencies across the state over the last three years. In the process, he has secured agreements that require officials to return more than $200 million to various accounts they have raided--earning himself a hefty $2 million in attorney fees.

Fine’s latest legal victory came just last week, when a Los Angeles Superior Court judge declared as unconstitutional a state law that allowed Los Angeles County to tap $50 million in Metropolitan Transportation Authority funds to help avert last year’s budget crisis.

In a tentative ruling, Judge Richard C. Hubbell found that the law violated a state constitutional provision that prohibits special statutes from benefiting only one county; the county’s lawyers will ask the judge to reconsider his ruling in a hearing next month.

And now Fine is thinking about suing Orange County, where a similar state law helped officials emerge from bankruptcy earlier this year. Fine is currently studying the Orange County legislation and says it appears to mirror the law he challenged in the MTA case.

“These lawsuits only exist because the politicians didn’t do their job,” said Fine, 56, from the plush confines of his high-rise office. “If there is someone to blame, they should look in the mirror.”

But some government officials question Fine’s motives. They say his lawsuits have more to do with exploiting the system than keeping a vigilant eye on government accounting practices.

“I can sum it up in three words: fiscal ambulance chaser,” said one state finance official familiar with lawsuits Fine has filed against the state. “It seems he has found a niche in the litigation field in which he has been successful, and no doubt profitable.”

Elected leaders criticize Fine for threatening delicate financial plans they say are designed to preserve vital services at a time when funding is becoming increasingly scarce.

In Los Angeles County, for example, supervisors say the $50-million MTA transfer last year was essential to keep the beleaguered health care system operating.

Paying the money back, they warn, would punch a huge hole in county finances and create a devastating scenario.

“We may end up having to close some of our clinics and reduce beds in our hospitals,” said Supervisor Yvonne Brathwaite Burke. “There [could be] many victims as a result of his lawsuit. It’s really a tragedy.”

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Plaintiffs whom Fine represents have little sympathy for the difficult decisions that elected leaders say they face. Indeed, many say they are angered by how their tax dollars get spent and that Fine’s lawsuits provide a legitimate vehicle to pursue their outrage.

Raymond Veltman, a retired business owner from Brentwood and the plaintiff in the MTA lawsuit, said he opposed the transfer because the transportation funds were being improperly diverted from what he considered their original purpose.

“Politicians are being unfair to the voters, their constituents, by not telling us what they are doing,” said Veltman, 72, who served two years on the Los Angeles city Transportation Commission. “They should know that when they run for office, they are going to be held accountable.”

Veltman learned about the MTA fund transfer by reading press accounts of the state law that made it possible. At the time, he wondered whether the transfer was legal and asked Fine to look into the matter.

The two knew each other after having worked together on a previous class-action lawsuit against the state.

In that case, the pair targeted port cities that had sought to use state-administered harbor trust funds to pay for municipal services. Veltman once owned a trucking company that served ports across the state, and he learned about the issue in a trade publication.

The Legislature in 1992 allowed cities to tap port revenues during the next two years to make up for local funds the state had grabbed to balance its budget. As a result, Los Angeles and Long Beach transferred $69 million and $21 million, respectively, from their harbor trust funds. Fine argued that the transfers were illegal because the funds were intended to be used to promote commerce, fisheries, navigation and other harbor-related activities.

In the end, the cities agreed to restore $3 million each and to refrain from seeking millions more in reimbursements for services they had provided to the ports. In addition, the cities--along with San San Diego, San Francisco and Oakland--all agreed not to seek any additional port funds.

Fine did not set out to fight the government when he launched his law career nearly 30 years ago. Ironically, the Milwaukee native started out in government.

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After earning his law degree from the University of Chicago and a doctorate in international law from the London School of Economics and Political Science, he served four years as an antitrust lawyer for the federal Department of Justice in Washington. He moved to Los Angeles in 1972 to practice international law at a private firm. A year later, he went to work for the Los Angeles city attorney’s office, where he headed the antitrust division.

Fine founded his own law firm in Los Angeles in 1974 and spent the next two decades building a lucrative practice handling international legal matters, as well as antitrust and securities cases.

By outward appearances, he does not come off like an aggressive, hard-boiled litigator. Instead, he seems more like an affable professor--what with his trademark bow ties, rosy cheeks and round-rimmed glasses. One of his clients over the years was the California State Electronics Assn., a trade group of 300 computer, appliance and electronic repair shops.

The group’s leaders contacted Fine in 1992 when they learned that a special state fund that financed their regulatory board in Sacramento had instead been tapped to help balance the state budget that year. The shop owners, who pay annual fees to keep the board running, objected to the money shuffle.

Fine filed a class-action lawsuit, and the state agreed in 1994 to spend $35 million to repay 49 accounts, including the Electronic and Appliance Repair Fund and those that pay for the oversight of dentists, podiatrists, contractors and landscape architects.

“Had the government not been challenged on this, the possibility exits today that we would be without bureaus that protect the consumer,” said Eloy Fierro, the electronics association’s immediate past president. “We were looking to make something that was wrong right, and to make sure it doesn’t happen again in the future. I think the lawsuit served its purpose.”

Fierro signed on as a co-plaintiff in a subsequent lawsuit that challenged similar fund transfers the state had carried out in its budgets between 1991 and 1994. The state settled that suit earlier this year, agreeing to repay $119 million plus interest to the special accounts--among them, a job training fund that lost $22 million. A lawsuit challenging fund transfers in the 1995 state budget is pending.

“I never thought when we took the first case that we’d have so many other cases,” Fine said. “But then it just came out of the woodwork. People just kept calling.”

Fine said he has resolved 11 of the 19 lawsuits he has filed since 1993.

He has lost one--a case in which he alleged that the Los Angeles County Board of Supervisors and the county auditor illegally shifted money from various internal accounts to the county general fund in the 1994 fiscal year. A Los Angeles Superior Court judge ruled in October that the board had the authority to authorize the temporary transfers--which were all returned to the appropriate accounts--because it governed the funds themselves. Fine said he plans to appeal the decision.

Fine has several pending cases, and they involve a range of matters.

One lawsuit alleges that the city of Los Angeles illegally diverted about $90 million from a special fund generated by the city’s parking meters to balance the general fund budget.

Another class-action suit alleges that the state raided $24 million in off-highway vehicle funds for its general fund. A third class-action suit seeks the return of $51 million that was allegedly raided from a state insurance reserve fund for veterans.

Fine said that taxpayer litigation now accounts for about 80% of his practice. But he expects the suits to diminish in the coming years. He says he will devote more time to his antitrust cases and to his year-old role as honorary consul general to the Kingdom of Norway.

Fine was chosen for the post by Norwegian officials he met through his involvement in the Los Angeles World Affairs Council. “When the government learns not to take the money anymore, when they stop misappropriating the funds,” he says, “the business will fall off.”