Riordan Seeks to Use Tobacco Fund to Cover Rampart Suits

Los Angeles Mayor Richard Riordan, confronted with the financial fallout from the worst police corruption scandal in city history, said Thursday that he favors diverting $300 million in expected tobacco settlement money to pay the cost of resolving lawsuits that arise from the LAPD’s Rampart Division investigation.

At a news conference Thursday morning, Riordan insisted that the scandal would not bankrupt Los Angeles. He vowed to protect city programs and taxpayers, while still making amends to people who have been abused by Los Angeles police officers implicated in the still-growing list of misdeeds, which include improper shootings, framing of suspects, thefts, beatings, perjury and cover-ups.

“We will get by this,” said Riordan, who appeared relaxed as he addressed a crowded room full of reporters and cameras.

Still, the mayor agreed that even the staggering sums that he proposes to set aside may not cover the full cost of the lawsuits. Others, meanwhile, warned that the mayor’s approach--which essentially entails swapping $300 million over 25 years for $100 million now--is a clever but problematic way to come up with a huge amount of money quickly. Riordan’s proposal will require City Council approval.

Councilman Mike Feuer and Chief Legislative Analyst Ron Deaton, two key officials in that approval process, said they were impressed by certain aspects of Riordan’s recommendation, but expressed worry that it might take money away from a program that is aimed at helping handicapped people and that is required by the federal government.

Councilman Mark Ridley-Thomas was less evenhanded. The mayor, he said, was a “headline grabber” whose news conference had angered a number of council members--none of whom were consulted in advance.

Under Riordan’s proposal, the city essentially would turn over to a private entity all its anticipated tobacco revenue, which Los Angeles and other governments are scheduled to receive to settle government lawsuits against the nation’s leading tobacco companies. That money is expected to come in over a 25-year period. The private entity would use that steady revenue stream to back an immediate $100-million bond.

The result is that money would be set aside to pay off plaintiffs who sue the city for their mistreatment by police. Any risk would be borne by the private entity, not the city.

That means Los Angeles would not get the education, health and other programs that the tobacco money would have paid for, but also would not face as crushing a financial burden from the police scandal.

How much of a down payment the funds would represent is unclear, however. No one at this point, including Riordan, can accurately predict the full scope of the scandal or its financial impact.

“This will allow us to cover our liability for the first several years, I believe, and hopefully, the total liability,” Riordan said. “Though we have no way of knowing the dollar amount, we must expect and prepare for tens of millions of dollars of liability,”

Asked whether he had confidence that the tobacco money would be enough, Riordan responded: “I have no confidence one way or another.”

The city attorney’s office has estimated that the first 99 cases alone could cost the city $125 million to resolve, and both prosecutors and police anticipate that the final number of tainted convictions will go much higher than that. Some City Council members and others have proposed cutting new city programs or trimming existing ones to begin bracing for the inevitable legal and financial fallout.

On Thursday, Feuer, who heads the council’s Budget Committee, called Riordan’s proposal “promising,” but he and others expressed some skepticism, both about the amount and about the programs that would have otherwise been paid for by the tobacco money, most notably a $10-million-a-year campaign to make sidewalks more readily accessible to the handicapped.

“At first blush, I think there is some promise to the mayor’s proposal,” said the councilman, who is a candidate for city attorney. “It’s worth pursuing. All of us want to find responsible ways to deal with the Rampart crisis and preserve and enhance our core programs. We need to be exploring innovative ideas.”

But Feuer added that the city “cannot lose sight of its legal mandate” to ensure that its streets are wheelchair-accessible, as required by federal law.

Under orders from the U.S. Department of Justice, the city has agreed to make “curb cuts” at intersections in heavily traveled pedestrian areas.

“It’s not only a legal requirement, but it’s also an ethical requirement,” Feuer said. “None of us should be backsliding from that mandate.”

Officials estimate that about 40,000 curbs must be retrofitted over the next five years. That program is expected to cost $50 million. On Thursday, officials from the city attorney’s office were reviewing Riordan’s proposal to examine its impact on the curb cuts program, which is required under the Americans With Disabilities Act.

Deaton echoed the worry that cutting back on the curb program after promising the federal government otherwise might invite trouble. Deaton, always conservative in fiscal matters, has urged the council to abandon any new programs until officials have a better sense of the Rampart scandal’s reach.

“One should not put revenue into new programs until we are assured we have enough money put aside for Rampart,” Deaton said. “This is not a revolutionary concept. It seems only prudent.”

Riordan’s approach, though novel, is not unprecedented. The mayor was joined Thursday by a financial analyst from the investment firm of Morgan Stanley, who said similar diversions had been used in New York and elsewhere as municipalities faced financial crises.

Also, the city attorney’s office often issues so-called “judgment obligation bonds,” which help the city cover the cost of large court judgments by increasing the city’s debt--as opposed to drawing on a specific revenue source, as is the case in the Riordan tobacco proposal. That more traditional approach is being used to help pay for a $40-million police overtime case.

Although the city government is feeling the brunt of the Rampart scandal, other jurisdictions are being drawn into it as well.

Los Angeles County Supervisor Zev Yaroslavsky, who has spoken more passionately about the crisis than any other local leader, said he will propose that the Board of Supervisors ask its special counsel, nationally recognized police expert Merrick Bobb, to examine how the county agencies involved in the criminal justice system “could have done better.”

Yaroslavsky said he hoped that Bobb would look at how the district attorney and public defender’s offices, as well as the Probation Department, could have scrutinized the allegedly false information they were given by LAPD officers that led to innocent people pleading guilty and serving time in jail.

“It’s not an easy thing for them to do,” Yaroslavsky said. “You can’t question every single piece of evidence in every single investigation or you’re going to have a system fueled by paranoia.”

Yaroslavsky said he did not see the review as a drawn-out process and added that the focus of the scandal should remain with the LAPD. Some city officials have criticized Yaroslavsky, who has been increasingly vocal about the need for action in the scandal, for grandstanding over the issue without substantively addressing the county’s role in it.

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Times staff writer Nicholas Riccardi contributed to this story.