Eastside Operation Leaves Youths at Loss

Dogged by allegations that it spent public money on political campaigns, a once-promising Eastside field operation has closed its doors, leaving in its wake a bitter neighborhood and a missed opportunity for a new type of political organization among Latinos in Los Angeles.

The district attorney’s office is investigating whether the organization, known as La Colectiva, took public money intended to educate poor people about low-cost health insurance and instead spent it on political work for City Councilman Nick Pacheco. Pacheco and Martin GutieRuiz--founder of La Colectiva and a childhood friend of the councilman--deny any impropriety.

That investigation, launched several months ago by prosecutors without public notice, is La Colectiva’s second brush with the district attorney’s office this year. In May, it was identified by the D.A.’s office as a player in one of the most criticized events of the 2001 mayoral campaign: a phone call placed to voters in which a woman impersonating county Supervisor Gloria Molina warned against voting for Antonio Villaraigosa.

Prosecutors said no laws were broken in that episode, but they traced the calls to the campaign staff of U.S. Rep. Xavier Becerra and to the phone bank run by La Colectiva.

La Colectiva is now out of business. And the first casualties are about 90 former employees, many of them high school and college students, who have been let go without back pay.

“It’s been a lot of mental stress, because you’re hoping on that money,” said Marcel Campos, 24, who said he is owed about $4,000. “I was hoping to pay my bills. I even worked weekends. Now he [GutieRuiz] has disappeared, and there’s nowhere we can find him.”

The bitterness over La Colectiva’s demise stands in contrast to the hopes many once had for the organization and its founder, GutieRuiz.

GutieRuiz, 36, was born in Boyle Heights to community activists, Juana and Ricardo Gutierrez, both well known in the neighborhoods where GutieRuiz was raised.

His father was a founder of the United Neighborhood Organization, a church-based activist group that has long been a fixture of Eastside politics. His mother helped organize a group of local women who fought construction of a prison in East Los Angeles.

After graduating from Princeton University in 1987, GutieRuiz returned to Boyle Heights and went to work on Molina’s reelection campaign.

At age 26, he lost a longshot bid for local office against veteran City Councilman Richard Alatorre. Then, GutieRuiz--who combined his last name with that of his wife--started La Colectiva in 1994 as a food collective that offered discount prices to Eastside residents. When that effort failed, he branched out into political work, doing canvassing for businessman Al Checchi’s 1998 Democratic gubernatorial bid and education outreach in East Los Angeles about the impact of Proposition 187.

In 1999, GutieRuiz’s troops helped elect Pacheco, overcoming Los Angeles’ politically influential labor unions, who had backed Victor Griego. Pacheco paid La Colectiva almost $19,000 for its efforts.

Once in office, Pacheco returned the favor. The new city councilman set up a nonprofit organization--called CAL Inc.--to raise money from lobbyists and other sources for his own neighborhood outreach efforts. In the fall of 2000, CAL Inc. agreed to lease its phone bank to La Colectiva for $75,000 a year, giving GutieRuiz the ability to use computer-generated calls to reach thousands of households a day. (Now CAL Inc. has shut down too, after Pacheco came under scrutiny for his efforts to raise money for the organization.)

After Pacheco was elected, La Colectiva moved to carve out its own niche of political work: a bilingual phone bank that combined grass-roots outreach with computer technology.

This Was to Be ‘a Breakthrough Year’

During the last few years, GutieRuiz amassed a sizable portfolio of work, winning dozens of jobs with political candidates and hefty contracts to do public health outreach projects for the state and county. Often, La Colectiva did both at the same time.

In 2000, the organization won thousands of dollars in campaign contracts from the Democratic Party and congressional candidates around the country.

Last spring, Pacheco urged a number of candidates--including then-mayoral candidate James K. Hahn--to hire La Colectiva to work on their campaigns in the recent city elections. Hahn did not hire the organization, but several candidates did.

La Colectiva earned more than $62,000 for field work it did for Becerra and Ed Reyes, now a city councilman. GutieRuiz said his organization also did work for City Council candidates Woody Fleming and Hector Cepeda, both of whom lost in their races. (Cepeda said he still has not paid the organization because the bill is in dispute. Fleming denies he hired La Colectiva.)

The organization also benefited from $145,000 in two city contracts that Pacheco helped it secure this year, including an outreach effort for the 2000 census and a massive Earth Day cleanup in El Sereno, according to GutieRuiz and city officials. City staff involved in both contracts praised the group’s work, which involved calling residents, walking door to door, and handing out T-shirts and buttons.

This fall, GutieRuiz was hoping to win contracts related to 50 congressional races around the country, each worth about $20,000.

“This was supposed to be a breakthrough year,” he said.

Instead, 2001 brought a series of controversies and setbacks.

In 1999, La Colectiva had been hired by the Community Health Foundation of East Los Angeles, a nonprofit health provider, to help poor people sign up for low-cost health insurance. The Eastside health provider received a $1.47-million county grant to do outreach, and contracted out much of the work to La Colectiva for more than $700,000 over two years.

GutieRuiz and his staff of about two dozen were in charge of educating people about Medi-Cal and the state’s Healthy Families program, which provides coverage for children whose parents earn too much to qualify for Medi-Cal.

But county officials raised questions about whether La Colectiva was using the public funds to help support its political efforts.

This spring, a county audit, which was referred to the district attorney’s office, found no evidence that the organization was performing its public work, but rather seemed devoted to political outreach on the days in April that auditors checked in.

Indeed, La Colectiva was engaged in several campaigns during that period. In the waning days of the first round of the mayoral campaign, an anonymous phone call smearing Villaraigosa was placed through La Colectiva’s phone banks at the direction of Becerra’s campaign manager. Both Becerra and GutieRuiz denied any knowledge of the call, but it tarnished both and raised anew the question of whether La Colectiva was properly handling its business, the central question of the county audit.

GutieRuiz denies any misuse of public money. According to him, La Colectiva stopped doing the health care outreach for the Community Health Foundation in September 2000, something he said the auditors would have discovered had they asked. As a result, he said, only political work was underway when auditors visited because that was the organization’s only work at the time.

GutieRuiz alleges that officials conducted a malicious and erroneous “sham investigation” aimed at discrediting his organization. He has filed a complaint against the county and said he plans to sue.

GutieRuiz also accuses Molina of pushing the audit and leaking the results to the media.

“It pretty much tainted us,” GutieRuiz said.

Molina declined comment, citing the pending litigation.

But the underlying accusations probed in the audit have not gone away.

Outreach Workers Tell of Doing Political Tasks

District attorney’s investigators are trying to determine whether La Colectiva used the county grant money intended to educate and help enroll poor people in Medi-Cal and the state’s Healthy Families program instead to pay people working on Pacheco’s campaign in 1999.

“It is an ongoing investigation,” said Joe Scott, the district attorney’s communications director. “Beyond that, we have no other comment at this time.”

Individuals interviewed by the district attorney’s office say the questions posed to them focused on the first few months of work La Colectiva conducted for the Community Health Foundation.

According to former employees and associates interviewed by The Times, GutieRuiz hired workers for the outreach program in the spring of 1999. Rather than being assigned to that work, however, some said they were taken to Pacheco’s Boyle Heights home, where they joined other campaign workers making phone calls and knocking on doors on behalf of Pacheco, an attorney in the district attorney’s office running for City Council.

One worker told The Times she thought she was being hired for the health insurance outreach program and was surprised to be instructed to walk the neighborhood for Pacheco and identify herself as a volunteer. She asked not to be named because she is afraid of how GutieRuiz and Pacheco might react.

The worker said she was paid in cash for her efforts. At one point, when GutieRuiz was late in paying her, he told her he was waiting for money from “Rudy.” Rudy Diaz is chief executive officer of the Community Health Foundation.

“I was confused,” the worker said. “What did the Community Health Foundation have to do with La Colectiva and the campaign? Maybe I was ignorant not to realize it at the moment.”

The worker said she was recently approached by an investigator with the district attorney’s office, but she said she refused to say anything, fearing retribution. Prosecutors will not comment on what others have told them, other than to confirm that the investigation continues.

Other business acquaintances of former La Colectiva workers said Pacheco referred to the La Colectiva workers on his campaign as “the Healthy Families volunteers.”

Pacheco denies that, as does GutieRuiz, who said he never used the grant money for political purposes. He said he hired 22 people to work on Pacheco’s campaign during evenings and weekends, 11 of whom were also doing health care outreach work during the day.

“It was kept separate,” he said. “We had different time sheets. It was very clear to [the employees] that there were two separate pots of money.”

Copies of invoices shown to The Times document the time La Colectiva workers spent on health care outreach and the amount they were paid, but do not demonstrate that GutieRuiz kept the sources of funding for the two activities separate.

Ricardo A. Torres II, La Colectiva’s attorney, said the organization is allowed to do both kinds of work at the same time.

“I understand the appearance,” Torres said. “But La Colectiva is not an entity elected to public office . . . that has to be concerned about public appearance. They are a political, for-profit entity that can do whatever they want.”

As the investigation continues, GutieRuiz admits that questions about La Colectiva’s finances have taken a toll on him and his former employees. He said he still owes about 90 young people who worked for La Colectiva about $60,000 in wages. GutieRuiz said he cannot pay them because Becerra, Cepeda and Fleming still owe him about $85,000--bills that each of those campaigns dispute.

Craig Steele, an attorney for Becerra’s mayoral campaign, said the campaign paid every invoice from La Colectiva, totaling $50,000. He said he is not aware of any dispute about money still owed to GutieRuiz.

GutieRuiz Vows That Back Wages Will Be Paid

Meanwhile, former employees of La Colectiva said they have struggled to pay their college tuition because of the missing paychecks. Others who are students at Roosevelt High School said they had to skip the prom because they couldn’t afford to rent formal clothes.

“It’s been very frustrating,” said Raymond Parra, 23, who said he is still owed $3,000 and can’t afford to buy books for classes at East Los Angeles Community College. “It’s like you’re trapped in a hole and you can’t get out.”

GutieRuiz acknowledges that the young people are angry but vows to see that they get paid.

“When we closed the office, I’m sure they got the impression that we’re dodging them,” he said. “They definitely have a right to be upset.”

He said that if he is unable to collect the money from his former clients, he will take out a loan on his house to pay the young people.

In the meantime, GutieRuiz said he’s been relying on his family for financial assistance. He said he is considering starting a new business.

“I would like to shy away from these political contracts for while,” he said. “It brought a lot of pain and suffering.”

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Times staff writer Greg Krikorian contributed to this report.