IRS Agents Join Growing Alatorre Investigation

The Internal Revenue Service has joined the widening federal investigation of Los Angeles Councilman Richard Alatorre, examining whether the Eastside lawmaker hid income from the agency, The Times has learned.

Although the FBI’s public corruption squad is spearheading the investigation, the addition of agents from the IRS’ criminal investigation division brings sophisticated money-tracking skills to the examination of Alatorre’s personal finances, said law enforcement and legal experts.

“The IRS [agents] are experts in the criminal field of financial investigation,” said a law enforcement source familiar with the agency’s operations.

Alatorre’s office did not respond to requests for comment Thursday. Previously, he has broadly denied any wrongdoing but has said his lawyer has directed him not to answer specific questions about his finances.

An IRS spokeswoman also declined to comment Thursday. However, knowledgeable sources said IRS agents specializing in sensitive public corruption investigations are helping the FBI and federal prosecutors examine allegations that Alatorre showed up with thousands of dollars in cash after meeting with people who had business ties to City Hall.

The Times last week quoted Alatorre’s former personal secretary as saying the councilman directed her to set up meetings with three people--whom she declined to publicly identify--when he was having trouble covering bills. He would return, she said, with wads of $100 bills, which she then deposited in his checking account.

The secretary, Linda M. Ward, declined to say Thursday whether she had been contacted by federal agents or received a subpoena.

In addition to investigating Ward’s allegations, IRS agents are assisting the FBI in sorting through financial dealings surrounding Alatorre’s purchase of a new home last year, sources familiar with the probe said.

The Times reported two weeks ago that associates of a businessman with a multimillion-dollar city housing deal being pushed by Alatorre assisted the lawmaker in purchasing his Eagle Rock home.

Along the way, the newspaper learned, the councilman cashed a $2,800 check from an associate of the businessman as part of an allegedly phony lease on a money-losing condominium he was attempting to sell. The goal, according to a key participant, was to enhance Alatorre’s financial status with a bank so he could qualify for a new home loan. The businessman, Samuel S. Mevorach, has denied any wrongdoing.

If Alatorre failed to account for taxable income on his IRS forms, he may have violated federal laws, law enforcement and legal sources said.

“The falsehood is the crime,” said lawyer Marvin L. Rudnick, a former prosecutor who worked on white-collar criminal cases in the U.S. attorney’s office in Los Angeles. “The purpose of this law is to impose penalties for perjury on the taxpayers who willfully falsified their tax returns.”

Under some circumstances, tax violations are easier to establish than public corruption charges, law enforcement sources said, because it is not necessary to show that a politician provided legislative support in exchange for money.

But other sources cautioned that the presence of sizable cash transactions does not necessarily mean tax laws were violated.

“They can always say it was a gift,” said a law enforcement source familiar with tax prosecutions. “Gifts . . . are not taxable.”

In such cases, establishing a connection between financial assistance and any official actions then becomes more important, the sources said.

Meanwhile, investigators appear to be casting a wide net around Alatorre’s activities at City Hall.

As part of a federal grand jury subpoena served on the councilman’s office last week, authorities demanded the names and Social Security numbers of all his present and former employees in recent years. City Hall sources said the information indicates that a new wave of subpoenas may be in the works.

The possibility of being summoned before a federal grand jury was causing alarm for some current and former Alatorre aides, a number of whom are scattered across local government agencies and private businesses.

“People are real upset,” said one City Hall insider.