FEC Probing 2000 L.A. Gala for Hillary Clinton

The Federal Election Commission is investigating a Hollywood gala that raised more than $1 million for Hillary Rodham Clinton’s 2000 Senate campaign, according to people familiar with the probe.

The FEC investigation, launched several weeks ago, comes atop a U.S. Justice Department inquiry that has focused in recent months on the event and former Clinton finance executive David Rosen.

In addition, documents reviewed by The Times indicate that a federal grand jury in Los Angeles has been examining evidence of wrongdoing by a number of people in connection with the activities of Aaron Tonken, the fundraising impresario behind the event.

The scope of the grand jury inquiry and the identity of its targets remained unclear. The Justice Department is believed to be focusing on whether anyone made false statements about how contributions were collected and disbursed.

Tonken, who in December pleaded guilty to two fraud counts in connection with his high-profile charity galas, has been cooperating with federal authorities while awaiting sentencing, according to people familiar with his case.

Since last month, Federal Election Commission investigators have been seeking testimony from a number of witnesses with knowledge of the August 2000 political gala.

Held on the eve of the Democratic National Convention, in Los Angeles, the event at the Mandeville Canyon estate of radio mogul Ken Roberts was billed as a tribute to outgoing President Clinton. But the gala simultaneously gave a much-needed cash infusion to the then-first lady’s successful Senate campaign.

Internet entrepreneur Peter Paul -- who paid for the event and is awaiting trial on federal fraud charges -- asked the commission nearly three years ago to investigate the Clinton campaign for allegedly underreporting his contribution but was unsuccessful. At the time, Paul was in a Brazilian jail, awaiting extradition to the U.S. He currently is being held without bail in Long Island, N.Y.

Paul was among those asked recently to cooperate with the election commission probe, according to people with knowledge of the situation.

The event he helped underwrite has been estimated to have cost as much as $2 million, including expenses associated with a roster of star entertainers that included Cher, Sugar Ray and Diana Ross. Earlier this year, Paul sued the Clintons and others in Los Angeles Superior Court for allegedly defrauding him in connection with the fundraiser.

David Kendall, who is representing the Clintons in the suit, said he plans later this month to seek a dismissal of the suit. Kendall declined to discuss the Justice Department probe, and referred questions about the election commission action to another attorney, who did not return calls.

An attorney for former finance chief Rosen did not respond to a request for comment. Based in Chicago, Rosen is a longtime political contributions consultant who recently worked on retired Gen. Wesley K. Clark’s failed presidential campaign.

The election commission is an independent agency that monitors compliance with federal campaign laws. Typically, the agency conducts inquiries in secrecy. It prefers to reach settlements with candidates or campaign officials found in violation rather than proceed with court action.

A commission spokesman declined comment on the probe. Joseph Zwicker, an assistant U.S. attorney in Los Angeles, said his office is still investigating activities related to Tonken’s fundraising. “But with regard to specific subjects or targets, we cannot comment.”

The cascade of law enforcement actions connected with Tonken broke loose last year when California Atty. Gen. Bill Lockyer sued him for fraud in connection with a number of star-driven Hollywood galas.

Last week, at a creditors’ meeting in Tonken’s Chapter 7 bankruptcy case, armed guards provided unusually tight security. Tonken’s attorney, Philip Dapeer, said his client “has been personally threatened.”

“Obviously, if he is threatened, that’s something we would take very seriously,” said Zwicker.

Filings connected with the bankruptcy listed over $2 million in charity money Tonken contends was diverted to nearly three dozen Hollywood celebrities and power players. Dapeer said a key issue in the bankruptcy would be whether the federal trustee is permitted to collect that money for payment to Tonken’s creditors, or whether California officials would be allowed to recoup it for return to various charities.

People familiar with the state case said Lockyer and the bankruptcy trustee have had preliminary discussions about an arrangement under which the state might recover funds directly for defrauded charities.

During Thursday’s meeting, Tonken refused several dozen times to answer questions, invoking his right against self-incrimination. George Bird, who represents him in criminal matters, said his client couldn’t answer freely because Lockyer’s office had served notice that it was considering criminal charges against him.

Still, the day’s testimony brought a number of revelations. Tonken, for instance, said he had landed a book contract subsequent to filing bankruptcy earlier this year and was negotiating to sell film rights through his publisher, Nashville’s Thomas Nelson Publishers. The book’s working title is “King of Cons: Exposing the Dirty Rotten Scandals of the Washington Elite and Hollywood Celebrities.”

A Thomas Nelson spokeswoman said her company expected to publish the Tonken book in November 2005 under its WND Books imprint, a joint venture with the conservative news organization WorldNetDaily. The spokeswoman said her company is negotiating a film with producer Michel Shane, who was credited as executive producer on the recent Steven Spielberg film “Catch Me If You Can.”

Shane confirmed he is attempting to option the book in partnership with fellow producers Anthony Romero and Raymond Caldiero. He declined to discuss terms.

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Times staff writer Greg Krikorian contributed to this report.