Private Firm Was Hired to Probe CRA Operations

Alarmed by allegations of financial improprieties in the Los Angeles Community Redevelopment Agency, interim administrator Jerry Scharlin said Wednesday he had hired a private detective firm to investigate agency operations.

The private investigators’ work has been turned over to the city controller’s office, and helped spark a more detailed audit of agency land transactions now underway, Scharlin said.

In an internal memo to agency staff members Wednesday, Scharlin said, “Audit findings indicate a significant breakdown in the agency’s internal controls in . . . acquisition/disposition of real estate and the selection of relocation consultants.”

In an interview, Scharlin said he retained the Agoura Hills firm Discreet Intervention Inc., which has counted former Los Angeles Police Department detectives among its investigators, to look at numerous allegations made to him by employees when he took over the agency 15 months ago.

Those complaints included criticism of the agency’s purchase of a Hollywood parking lot from a politically active property owner for nearly twice what a city appraisal said the parcel was worth, Scharlin said.

After the redevelopment agency board approved the 1998 purchase--part of the effort to keep Capitol Records in Hollywood--an agency official went outside normal procedures to secure a second appraisal, which justified the high price.

Last week the Los Angeles City Council called for an investigation of the agency after the city’s director of auditing, Jim Armstrong, said a pending audit has found other transactions in which the agency purchased properties at prices different from the appraised values. The CRA has 200 employees and a budget of $388 million.

On Wednesday, Councilman Joel Wachs wrote a letter to the Los Angeles County Grand Jury asking for an immediate investigation into purchase of the Argyle Avenue parking lot.

Assistant City Atty. Leslie Brown called the use of private investigators by a government agency uncommon but appropriate in certain cases.

Scharlin quietly hired the investigative firm a year ago without agency board approval. But in recent weeks word spread rapidly through the agency work force, leaving some employees wondering whether they had been put under surveillance.

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David Cochran, a union official representing agency employees, said the decision to hire a private investigator is troubling, especially because the city has auditors and other employees charged with investigating financial improprieties.

“The concern I have is an outside investigative firm doesn’t have the restrictions on what they can look at that agency employees have, and might snoop around into people’s private lives, which is inappropriate,” said Cochran, business representative for District Council 36 of the American Federation of State County and Municipal Employees.

The decision to hire a private investigator also concerned Councilman Mark Ridley-Thomas.

“If there is any wrongdoing involving any agency employee, that ought to be dealt with. But you can’t cause the CRA to begin to mimic the LAPD in going after bad guys and using improper means to do so,” Ridley-Thomas said.

The councilman said he has never heard of a city manager hiring private detectives. “The potential for abuse is just too strong to allow it to be at the discretion of any single person or general manager,” Ridley-Thomas said.

Citing the continuing investigation, Scharlin declined Wednesday to release the findings of the private investigators or discuss whether activities included surveillance. He also refused to discuss specific projects and allegations, except to say he decided to hire the private investigator after consulting with the city attorney’s office.

“I felt that I couldn’t ignore what I was hearing. I couldn’t sweep it under the rug and I needed to learn more,” Scharlin said.

Mayoral spokesman Peter Hidalgo said he did not know whether Scharlin consulted with the mayor on the private investigator, but said, “The mayor has supported the general manager consistently and praises him for the fact that he took the initiative on the audit.”

The administrator, who was hired to turn around a beleaguered agency, said he arrived to find a “considerable amount of chaos” and allegations of financial misconduct that preceded his appointment. “Especially coming in from the outside it was very difficult to judge what the veracity of what the complaints were,” Scharlin said. “Key individuals in the mayor’s office and in the commission were aware of my actions.”

Dov Lesel, a city attorney advising the agency, confirmed the private firm was hired in consultation with attorneys for the city.

The private investigative firm was given a $20,000 contract for “research” in November 1999. The most recent payment was made last month, according to internal records obtained by The Times.

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Scharlin said the private investigators’ initial findings caused him and the controller’s office to decide to pursue more investigation by auditors hired by the controller.

Scharlin said he has already made some changes, creating a project review committee to analyze new proposals so that one manager does not have complete control of the process. He refused to say whether any employee has been disciplined as a result of the investigation and the city audit.

“What I have been trying to do is deal with the organizational chaos that existed in this agency, which I believe abetted these breakdowns,” he said. “My focus is not to punish individuals . . . but rather to clean up and dry up an environment that leads to non-accountability or maybe worse.”

When asked whether there is evidence that any taxpayer money has been misappropriated, Scharlin said, “That is what we are in the process of trying to determine.”

Former LAPD Officer Lawrence Skiba, who handled the CRA project for Discreet Intervention Inc., declined comment.