FBI Probes City of Hope’s Former Chief

The FBI is investigating the former president of City of Hope in an alleged conspiracy to extort money from the cancer research and treatment center, according to court documents.

Dr. Sanford Shapero allegedly threatened to spread negative information about City of Hope if his demands were not met. Shapero denies the allegations and contends that the federal investigation of him and two associates was initiated by City of Hope in retaliation for attempts to bring to light problems at the Duarte-based charity.

In fact, Shapero’s allegations of financial wrongdoing have led to an investigation by the California attorney general’s office, which oversees charitable trusts. City of Hope says it will be exonerated, and says that the investigation should not be taken seriously because it is a side effect of what an FBI search warrant affidavit describes as an extortion scheme.

The federal investigation, which started in November 1996 after City of Hope contacted the FBI, intensified last month when the FBI searched Shapero’s former office for documents and computer files. No criminal charges have been filed.

The Jan. 30 search was only the latest step in a protracted, costly battle between Shapero, a 68-year-old Beverly Hills rabbi, and City of Hope, a renowned cancer research and treatment center that draws about one-quarter of its $250-million budget from donations.

“I’m still a City of Hoper,” said Shapero, who served as president of the institution from 1986 to early 1996. “I put my heart, my soul and my beliefs into this place. Would I go out and bad-mouth it?”

City of Hope officials said they went to the FBI to protect the institution’s reputation. Although the battle has been conducted largely out of public view, the institution has rung up $1.3 million in legal, media consulting and other bills. Officials there said the problems have not affected daily operations.

Shapero’s alleged conspirators are his former top assistant Andrew Leeka and the two men’s former attorney, Hugo Gerstl. Gerstl denied wrongdoing. Leeka, through his attorney, declined to comment, citing a legal agreement with City of Hope that prohibits him from discussing the institution.

According to the FBI search warrant affidavit, the tangled series of charges and countercharges can be traced to 1994, when three women made sexual misconduct allegations against Shapero. Two of the women made similar allegations against Leeka.

The women were eventually paid settlements, City of Hope officials said. An initial investigation found that Shapero and Leeka erred in judgment but did not harass anyone, City of Hope documents say.

The FBI affidavit, based on statements by City of Hope’s in-house attorney, says that a second investigation was begun and Shapero and Leeka were warned in July 1995 by City of Hope that “their jobs were on the line.” Soon thereafter, the affidavit states, Shapero and Leeka ordered thousands of confidential documents copied under the guise of an earthquake preparedness program, rented a storage facility in Arcadia and hired an outside company to “dig up dirt” on City of Hope.

Shapero said the actions were mischaracterized. He said in an interview that the copies were made for purposes of earthquake preparedness, but that the storage locker was rented for personal use and he retained the outside company to ensure that City of Hope was properly conducting its business.

Shapero left City of Hope in January 1996 with a compensation package worth about $1 million, according to the affidavit, and Leeka followed three months later.

The FBI claimed in its affidavit that several months later Shapero threatened to destroy the charity’s donor base by discrediting the organization--an allegation Shapero vehemently denied. Afraid that the two would kill City of Hope’s attempt to acquire a $50-million endowment from an Inglewood hospital, the institution reached a settlement with Leeka and upgraded Shapero’s agreement, the affidavit said.

City of Hope’s suspicions grew in November when Gerstl, a Monterey attorney who once represented the two men during the sexual harassment inquiry, filed a wrongful termination suit against City of Hope on behalf of Leeka’s former secretary. He demanded a $1.9-million settlement for her and five other current and former employees, the affidavit says.

City of Hope also learned that “60 Minutes” was looking into a possible story about their institution and found a telephone bill showing that one of their calling cards was used to call “60 Minutes” from Shapero’s home. Shapero’s girlfriend said she made the call.

After those two events, City of Hope officials asked the U.S. attorney’s office to investigate what they saw as an extortion conspiracy, said the nonprofit’s general counsel, Glenn Krinsky.

The FBI recorded settlement conferences between City of Hope lawyers and Gerstl. In one such meeting, Gerstl said his case had “blackmail value,” according to court documents. In an interview, Gerstl denied wrongdoing.

The California attorney general’s office entered the picture in December 1996, after a former City of Hope board member and friend of Shapero received a list of perceived problems at the cancer center from Shapero and asked for an investigation.

While state and federal authorities pursued their investigations, City of Hope opened up a new legal avenue last spring. They argued that Shapero and Leeka had breached their settlement agreements by talking to outside parties. Arbitrators ruled against both men in December and January.

In one judgment, the arbitrator ran through many allegations that were reported to the attorney general’s office and he generally dismissed them.

The arbitrators ruled that Shapero owes City of Hope more than $1 million for the costs associated with his case, and Leeka owes more than $200,000. Leeka could owe $500,000 more if he talks about the institution. Both men are challenging the judgments, their lawyer said.