How D.A.’s Office Failed to Follow Up on Graft Allegations

The Los Angeles County district attorney’s office missed a rare opportunity to plumb back-room patronage and deal-making when it shut down a corruption investigation earlier this year without fully exploring allegations that an influential lobbyist had engaged in bribery and other wrongdoing.

The lobbyist, Art M. Gastelum, is a prominent political fund-raiser and owns a company that has managed numerous government construction projects in Southern California. The allegations about him surfaced during the district attorney’s two-year investigation into the Belmont Learning Complex, a failed school construction project in which Gastelum was a partner. Gastelum said in an interview that the allegations were unfounded

The D.A.’s 220-page public report on the Belmont probe contained no hint of the material gathered about Gastelum. The report, released in March, said prosecutors had found no evidence of wrongdoing related to the high school, a half-finished eyesore that has become a symbol of governmental waste and incompetence.

The Times reviewed thousands of pages of confidential files from the Belmont investigation, conducted dozens of interviews and found that senior prosecutors had failed to pursue three key leads about Gastelum and his associates:

* A veteran Los Angeles Police Department detective told prosecutors of an informant who claimed to have delivered bribes from Gastelum to public officials. The district attorney’s office did nothing with the information for months, and still has not contacted the purported bagman.

* A lobbyist representing an operator of airport newsstands and gift stores told the D.A.’s office that Gastelum and a city airport commissioner had pressured him to steer LAX business to Gastelum’s daughter and son-in-law. The lobbyist identified a witness who, he said, could corroborate his account. Prosecutors did not contact the man.

* A deputy district attorney uncovered information suggesting that Gastelum had been a hidden source of campaign contributions to school board members at a time when he needed their votes to earn a $1.2-million fee on the Belmont project. The prosecutor’s superiors prohibited him from looking into the matter.

Gastelum said that he had never laundered campaign contributions or paid bribes and that he had obeyed the law in all his business dealings.

“I’ve worked very hard to get to where I’m at. No one gave it to me,” he said, attributing his success to “having good relations and being honest with people.”

Asked for comment, Dist. Atty. Steve Cooley acknowledged that his subordinates might have mishandled the leads on Gastelum. “I think your scenario indicates maybe a ball was dropped, but I would never suggest, I would have no sense, it was done for the wrong reasons,” he said.

A spokesman later said that Cooley had ordered a reinvestigation -- “a fresh look at the whole Gastelum matter.”

The earlier indifference by top officials in the D.A.’s office was noteworthy because prosecutors had independent reason to be suspicious of Gastelum, records show.

The FBI notified them during the Belmont probe that it had recorded Gastelum discussing how to arrange a $1-million payment to an official of a water board in San Diego County. The project in question, unrelated to Belmont, never materialized, and no charges were filed.

The office’s inaction was all the more striking because the deputy district attorney assigned to focus on Gastelum had argued insistently for a more thorough look at the lobbyist’s activities.

In internal memos, prosecutor Matt Dalton pleaded for permission to pursue the tips about Gastelum, particularly the one about alleged payoffs to public officials.

“This could be an opportunity to hook Gastelum,” Dalton wrote on Nov. 15, 2002. “We should attempt this before any report on Belmont is released by our office.”

The request was ignored, and Dalton resigned from the D.A.’s office three months later.

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Fund-Raising Touted

Gastelum, 54, is a self-made man who wears finely tailored clothes and owns a 6,700-square-foot home in San Marino, where he holds political fund-raisers.

Born to Mexican immigrants, he worked his way through East Los Angeles College selling used cars.

As student body president, he got to know Mike Antonovich, then on the college’s Board of Trustees and now a Los Angeles County supervisor.

Gastelum made another important connection in those years -- with mayoral candidate Tom Bradley.

Gastelum worked on Bradley’s 1973 campaign and followed the new mayor to City Hall, serving as his Latino liaison and eventually as his director of economic development.

In 1990, Gastelum went into business for himself. A registered lobbyist, he also owns the construction management company Gateway Science and Engineering of Pasadena. He had no construction background but hired people who did. Gateway has secured millions of dollars in minority-business contracts from cities, school districts and community colleges.

Gastelum, a registered Democrat, describes himself as “probably the best fund-raiser in L.A.” The beneficiaries of his skill have included Gov. Gray Davis, City Council members and Mayor James K. Hahn, who has appointed Gastelum to two advisory boards.

Public records do not show how much Gastelum raises from friends and associates -- only the relatively modest contributions that he himself makes.

Gastelum was an early advocate of building a new high school to relieve classroom crowding in largely immigrant neighborhoods of central L.A.

The Belmont project, a combined school-retail development, was to rise on a former oil field at the western edge of downtown, beside the Harbor Freeway.

Gastelum assembled the group of construction and architectural firms that won a hard-fought competition in 1993 to design and build the school.

As the walls were going up, high concentrations of explosive methane were found directly underneath.

The Los Angeles Unified School District abandoned the unfinished project in 1999. By then, $180 million had been spent, making Belmont the most expensive high school in California history.

The debacle spilled into the campaign for district attorney in 2000. Cooley, running as a corruption-buster, promised to get to the bottom of the mess. Soon after taking office, he assembled a Belmont task force. As a partner in the project, Gastelum came under scrutiny.

Gastelum’s political reach was quickly evident. Antonovich, a political ally of Cooley, called the D.A., telling Cooley that Gastelum would be “happy to cooperate” and would turn over financial records voluntarily, Cooley said. Gastelum acknowledged having asked Antonovich to make the call, but the supervisor said in an interview that he had called on his own, out of “curiosity.”

Task force members spent six months looking for environmental crimes, overbilling and other wrongdoing. In July 2001, Cooley tentatively decided that there wasn’t enough evidence to pursue felony charges related to the school.

Prosecutor Dalton, meanwhile, was looking into Gastelum’s other activities when new information came to the D.A.’s office.

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Meeting Is Taped

Gastelum had been lobbying members of an obscure water agency in southern San Diego County in the spring of 2001.

He wanted the Otay Water Board to invest in an electrical transmission line that would cross its property en route from Arizona to Baja California.

Gastelum’s company had a financial stake in the project.

As it happened, the FBI was investigating alleged corruption at the water board and using its president, Jaime Bonilla, as an informant.

In May 2001, Bonilla secretly recorded a conversation with Gastelum at a seafood restaurant in Chula Vista.

The FBI gave L.A. prosecutors a transcript.

Over sandwiches and fried calamari, Gastelum explained how he could generate $1 million for Bonilla by having a subcontractor on the transmission-line project pad its bill.

“Let’s say that [the subcontractor] is gonna charge me $25 million for the [transmission] towers,” the transcript quotes Gastelum as saying. “And I tell [the subcontractor], ‘You give me an invoice for $26 million, rather than 25....’ ”

“So that’s how we get our money?” Bonilla asked. “OK.”

Bonilla asked: “Are you sure it’s safe?”

“Yeah,” Gastelum said, “because we’ll do it in increments.... I let him do, you know, a little at a time.”

Both men were laughing, according to the transcript.

The transmission line was never built, and there is no evidence a bribe was paid.

The transcript does not make clear who initiated the talk about bribes -- a source of dispute.

Two water board members testified later in a civil lawsuit that Bonilla had demanded bribes from Gastelum. Bonilla denied this.

Gastelum’s attorney, Donald Steier, did not dispute the accuracy of the FBI tape but said the lobbyist had not been “a willing participant.” He declined to elaborate.

Gastelum’s taped words energized Dalton and other Los Angeles prosecutors. They wanted to gather more evidence about him.

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Family Interest Pushed

At the same time, Gastelum was busy trying to win his family a city-controlled concession at Los Angeles International Airport. He had an insider’s access.

Gastelum had signed on in 1999 as a lobbyist for W.H. Smith, the conglomerate that operates about 40 newsstands, shops and candy carts at the airport. He says the company’s sole lobbyist at the time, Clark Davis, asked him to help out.

Davis, a former Los Angeles County sheriff’s deputy, tells a different story. He says he was pressured to hire Gastelum by Gastelum’s close friend, Airport Commissioner Leland Wong. Davis says Wong threatened to hold up W.H. Smith’s contract to run the stores unless Gastelum got the lobbying job, something Wong denies.

While working for W.H. Smith, Gastelum tried to get one of the airport stores for his daughter and son-in-law, who operate the Havana House cigar shop/lounges in Whittier and Alhambra.

He touted Havana House to Sean Anderson, Smith’s chief executive in Atlanta, without disclosing his family tie, Anderson said.

Gastelum said others in the company knew of the relationship, and he made no apologies. “Do you want me to recommend someone I don’t know?” he asked in an interview. “Do you support your family?”

Gastelum did not give up. Davis said Gastelum continued to press him for an opportunity for his family members.

Davis said he was so upset he volunteered to become an informant for the district attorney’s office, which gave him the authority to tape conversations with Gastelum and Wong. He recorded one meeting with Gastelum, but two others fell through.

Then, in the spring of 2002, W.H. Smith, the concession operator, found itself in an awkward position.

A subcontractor, which ran two stores and three candy carts with combined sales of $4.5 million a year, was in a politically charged labor dispute. Rather than anger the union, Smith decided that the Asian-owned firm had to go and asked Davis to find a replacement.

Davis turned to a friend, business consultant Ron Martinez, for help. Davis says he hoped the presence of Martinez, the husband of county Supervisor Gloria Molina, would be enough to dissuade Gastelum from pressing for his daughter to get LAX business.

Martinez lined up another Asian-owned business, and W.H. Smith prepared to ask the Airport Commission for approval.

But in late May 2002, Davis said, he got a call from Wong.

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Plan to Split Openings

At a meeting of the two, Wong laid out his ideas for the retail outlets that were coming open.

According to Davis, Wong demanded that they be divided between Gastelum’s daughter and a Chinese American businesswoman Wong knew.

Davis said he had complained that Martinez would lose a commission if the business he had found was not approved. Wong volunteered to give Martinez the bad news, then did so on his cell phone, according to Davis.

Martinez says Wong warned him that “if we didn’t go along with it, he was going to blow up the whole deal.” Martinez adds that Wong “wasn’t suggesting this. He was dictating.”

Wong says he merely recommended that Gastelum’s daughter get a store and that he suggested the Chinese American businesswoman because she had asked him for help and because the business W.H. Smith wanted to replace was Asian-owned.

“One of my big concerns was that Asians were going to be left out of this thing,” he said.

Martinez scoffs at that, noting that the business he had recruited was Asian too. “Where’s the Asian in Art Gastelum’s family?” he asked.

Wong says he did nothing inappropriate. “There would be an ethical problem if I had something to gain personally, but I’m not benefiting from any of this,” he said.

Davis did see a problem. He told his handlers at the D.A.’s office that Wong had tried to use his position to benefit Gastelum’s daughter and the Chinese American businesswoman.

He did not tape his meeting with Wong. His authority from the district attorney had expired.

But Davis told prosecutors that Martinez could vouch for his account and urged them to contact him.

They did not.

Davis says he was baffled. “How do you not check this out?” he asked.

Cooley aides say they had lost faith in Davis. They say that some of his previous statements had not held up under scrutiny and that he had inexplicably failed to record other conversations when his authorization was still valid.

“If you’re asking why we don’t run out and try to interview the husband of a member of the Board of Supervisors, or an airport commissioner ... well, maybe that’s part of the answer right there,” said Scott Goodwin, another prosecutor on the case.

Davis says that he told a consistent story from the beginning and that prosecutors failed to offer him proper support.

In the end, no stores or candy carts changed hands.

But Cooley said prosecutors’ failure to follow up on Davis’ information when the jockeying was underway “is worthy of some review. Maybe there was a foul-up.”

The district attorney said that if Davis and Martinez were telling the truth, what happened “would be criminal.”

Asked to elaborate, Cooley said he could not comment until his office had finished reinvestigating the matter. On Monday, Cooley aides said investigators had finally spoken with Martinez.

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Prosecutor Frustrated

Davis was not the only one frustrated. Deputy Dist. Atty. Dalton, 40, felt as if he were hitting a brick wall.

He had soldiered through the usual assignments in branch offices, prosecuting gang members, rapists and other street criminals. He was working in the D.A.’s Pasadena office when he heard about the Belmont task force in early 2001 and begged to join.

Dalton wasn’t interested in the technical aspects of the investigation. He wanted to find a flesh-and-blood criminal. Early on, he focused on Gastelum.

He was particularly interested in the one conversation that Clark Davis had secretly recorded. Davis had met with Gastelum at a Pasadena restaurant in October 2001 and discussed the transmission-line deal, which was then still before the Otay Water Board. Gastelum, who by then knew about the FBI investigation, complained that he was being hit up for bribes that he would not pay.

Then he turned the conversation to how the two lobbyists could cultivate influence with public officials in San Diego County. Gastelum proposed giving Davis $10,000 annually for five years to make campaign contributions.

“What I would do is, I would put, I would put, like, $10,000 aside every year for you to donate money,” Gastelum said on the tape.

“So we can go get some friendships,” Davis interjected.

“I would put up the money. I would say, ‘Clark, here’s our budget, man.... I’ll put down $10,000.... Let’s do it for five years to develop a relationship down there.’ ”

Davis says he thought Gastelum wanted to use him as a front for political contributions, in violation of state law. Gastelum says that is not what he intended and that he never gave Davis money for the donations.

But Dalton saw a wider significance in the taped chatter. He connected it with a 3-year-old Times article that he called “the Belmont smoking gun.”

The newspaper story described how two pro-Belmont school board members, in the midst of a tough 1999 reelection battle, had gotten $10,000 campaign contributions, ostensibly from publishers of bilingual textbooks. The board members received the cashier’s checks during breakfast meetings with Gastelum and his longtime friend Hal Mintz, who says he was representing the publishers.

At the time, Gastelum needed the school board to proceed with Belmont so he could earn a $1.2-million management fee.

The Times piece raised questions about whether the contributions had really come from the textbook publishers. The two board members said they had. But the president of one of the firms said he had never authorized such a payment.

In 2002, Dalton dug deeper. He checked campaign-finance records to see where the cashier’s checks had originated. He traced them to a mail drop in San Marino registered to Mintz.

Dalton thought he saw a pattern of Gastelum’s using intermediaries to make political donations.

“I believe Gastelum was working the same scheme he was planning to work in San Diego with Clark Davis. He is buying the influence of public officials, using illegal campaign contributions,” Dalton theorized in a memo.

Dalton was eager to investigate further but, as a prosecutor, could not conduct interviews himself. Doing so could make him a witness in his own case. He needed an investigator to take statements from the school board members, and asked his supervisor to assign one.

The supervisor, veteran prosecutor John Zajec, refused.

Dalton recalls being stunned.

“Art Gastelum is caught giving money to board members. Why can’t we interview those that were present?” he complained in a memo to another prosecutor. “Did Gastelum speak at these meetings? What did he say? Was there any influence or attempted influence on Gastelum’s part?”

Zajec says those questions were not worth investigating.

“I just didn’t think it was going to lead to a felony prosecution, particularly in the context of what I viewed was the central Belmont question: whether there was an environmental catastrophe that was perpetrated on the taxpayers and a cover-up,” he said in an interview.

Deputy Dist. Atty. Curtis A. Hazell, Zajec’s immediate boss, agrees, saying that, at most, the activity Dalton suspected amounted to “technical campaign violations.”

Cooley, however, acknowledges that his office is investigating similar allegations in several current cases, looking for evidence of felony conspiracies to launder campaign money.

Mintz said in recent interviews that textbook companies had made the campaign contributions and that the checks had been traced to his address because he was the publishers’ Los Angeles representative.

Gastelum said he had arranged the breakfast meetings as a favor to Mintz. “I had nothing to do with those contributions, other than setting up the meetings,” he said.

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Relationship Worsens

As the investigation wore on, the relationship between Dalton and his bosses worsened.

Cooley says he lost confidence in Dalton, adding that there was little to show for the wide latitude Dalton had been given.

“He absolutely was incapable of doing what any lawyer who wants to file a case, civil or criminal, should be able to do, which is sit down and write it out,” Cooley said in an interview. “What are your theoretical charges? What is your statement of the case?... And list your witnesses and what would your witnesses testify to. He couldn’t produce that document.”

Dalton says he was prevented from gathering the necessary evidence. “For Cooley to say, ‘We want the charges, the elements of each offense,’ is wrong,” Dalton said. “He’s not seeing it for what it is. It was an investigation. I kept telling them that.”

By the fall of 2002, top officials at the district attorney’s office were feeling pressure to release their conclusions on Belmont. Members of the task force were weary and wanted to move on. They came to regard Dalton’s activities as a wild goose chase.

Dalton’s final confrontation with his bosses began.

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‘White Hot’ Allegation

Det. Marcella Winn of the LAPD’s elite Robbery-Homicide Division had stumbled across allegations about Gastelum during an unrelated investigation. She mentioned it in casual conversation with a member of the D.A.’s office.

He referred her to the Belmont task force, and in September 2002, Winn sat down with Dalton, Zajec and Goodwin. Concluding that Winn’s information was unrelated to Belmont, Zajec left during her presentation.

Dalton says Winn told the prosecutors she had an informant who claimed to have delivered “kickbacks” from Gastelum to local politicians. Goodwin said she had described “a person who passed money on, like a middleman, for one of our targets.”

Dalton felt vindicated. He wanted to locate the informant, find out what he knew and, if possible, persuade the man to tape his conversations with Gastelum.

“I was going nuts,” the prosecutor said. Winn “was describing everything that I told them was going on. She was from an outside agency, verifying what I said. I was ecstatic.”

Dalton soon found that his supervisors didn’t share his excitement. He says he went to Zajec at least twice to urge that they follow up immediately. He says Zajec told him: “We will do it when directed by the administration” -- meaning Cooley or his top lieutenants.

Zajec says he can’t recall such a conversation.

Dalton says he also went to Goodwin.

“I said, ‘Don’t you think it is incredible that we’re not following up with the informant?’” Dalton recalled. “He said, ‘Do what you’re told.’ He told me that about five times -- ‘Do what you’re told. You’re going to get into trouble.’ ”

Goodwin says no such conversation took place.

Dalton appealed to his one-time mentor, John Allen, the third-ranking executive in Cooley’s office, and wrote Allen a memo, laying out his complaints. The result was a recommendation to write memos to other senior prosecutors.

On Dec. 11 and 12, he did. This time he attached a two-page fax from the detective, who elaborated on her original tip.

Winn wrote that her “confidential reliable source” had told her “he has received money from Gastelum to pay off politicians, city attorneys and district attorneys. He has not named any names.” Gastelum allegedly paid the bribes, she wrote, to get government contracts “and to keep others from investigating his activities.”

The allegation that prosecutors as well as politicians were on the take got everyone’s attention. One senior prosecutor described it as “white hot.”

In December, top officials referred the matter to the D.A.’s Bureau of Investigation, which handles complaints of internal wrongdoing. For a month, nothing happened.

Investigators placed their first call to Winn in late January or early February, the district attorney’s office says. Prosecutors didn’t sit down with her until the summer, after The Times began making inquiries about the office’s handling of the Gastelum leads.

District attorney officials say they regret the “substantial delay,” attributing it in part to the detective’s failure to return their calls. She works two blocks from the D.A.’s headquarters and was regularly in the building on other cases.

Prosecutors say that when investigators finally spoke with her, they got nowhere.

“We can’t get past Winn to get to the source,” said Chief Deputy Dist. Atty. Curt Livesay. “It’s a dead end.”

Winn declined to comment, beyond saying she stood by her fax.

An internal memo by Zajec says she became distrustful after he walked out during her September presentation. When Winn returned to Parker Center, she got a call from the mayor’s office inquiring about the unrelated case that had aroused her interest in Gastelum. The timing made her suspect that the district attorney’s office had a leak, the memo states.

Reached by The Times, the purported bagman -- a building contractor in southeast Los Angeles County -- denied delivering bribes.

He said he knew Gastelum “real well” and regarded him as a “brilliant businessman.”

Gastelum said he knew the man casually and had had minor business dealings with him, but had never asked him to pay bribes.

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The Final Straw

For Dalton, watching the lead from Winn vanish into the bureaucracy was the last straw. “They just wanted this thing to end, and they didn’t want anything new to come up at that point,” he said.

He quit the D.A.’s office in February when he was reassigned to seek a life sentence in a 20-count robbery case against a vagrant.

A month later, Cooley released his report on Belmont, which said prosecutors had left “no stone unturned” in their search for wrongdoing.

At the time, the D.A. lamented the lack of indictments.

“Would I have liked to haul someone in by the collar? Absolutely, yes,” he told reporters. “We had to go where the facts led us.”

Two months later, the school board voted to spend an additional $111 million to revive the Belmont project.

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(Begin Text of Infobox)

Who’s involved in the case

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Below are the key characters in a secret chapter of the district attorney’s Belmont investigation:

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The Lobbyist-Businessman

Art M. Gastelum, above: An accomplished political fund-raiser, he was the subject of an incomplete investigation by the district attorney’s office.

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The Prosecutor

Matt Dalton: The deputy district attorney quit in frustration because he believed that his superiors

hadn’t pursued significant leads about Gastelum.

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The Informant

Clark Davis: The lobbyist worked with the D.A.’s office and says a commissioner pressured him to give Gastelum’s daughter the right to run a store at LAX.

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The Commissioner

Leland Wong: A mayoral appointee and close friend of Gastelum who suggested that the businessman’s daughter be a candidate to run a store at LAX.

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The Water Board President

Jaime Bonilla: The San Diego-area businessman who worked with the FBI and secretly recorded Gastelum discussing how to arrange a $1-million payoff.

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Source: Los Angeles Times

Los Angeles Times