Conflict of Interest in Probe of Sheriff?

Orange County’s best-known political watchdog says a tangle of relationships among aides to the county’s two top law enforcement officers is compromising Dist.t Atty. Tony Rackauckas’ investigation of Sheriff Mike Carona’s campaign organization.

Activist Shirley L. Grindle, author of Orange County’s 1978 campaign finance law, asked Rackauckas in March to investigate allegations that a Carona supporter improperly reimbursed donors to the sheriff’s 2002 campaign.

Now Grindle says it is improper for GOP operative Michael J. Schroeder -- Carona’s point man on the controversy -- to serve as campaign advisor to both the sheriff and the district attorney.

Further complicating the picture is Schroeder’s marriage to Susan Kang Schroeder, a deputy district attorney who is chief spokeswoman for Rackauckas.

“How can you have the same guy working for the prosecutor who is investigating his other [client]?” Grindle asked. “How is this acceptable?”

Schroeder conceded that the political connections could raise questions, but denied any conflict of interest.

“It’s a legitimate thing to ask a question, but it’s irresponsible to assert there’s a conflict if there’s absolutely no evidence,” he said of Grindle’s concerns. “I have no title with the district attorney’s office, and I’ve never participated in their operation.”

Schroeder said that although he served as Rackauckas’ campaign chairman in 2002, he has no formal connection with the district attorney today because Rackauckas hasn’t said whether he will run for reelection in 2006. And he dismissed as “frivolous” any concerns about his wife’s role as a top aide to the district attorney.

A spokesman for the state’s top law officer characterized the political entanglements of Schroeder, Carona and Rackauckas amid an official investigation as troublesome, but said they did not amount to a legal conflict of interest.

At most, “there’s an appearance of a conflict of interest,” said Nathan Barankin, a spokesman for Atty. Gen. Bill Lockyer, who told Carona by letter in April that the matter was best handled by the district attorney. “The problem is all the overlapping relationships.”

The controversy began in the spring, when Carona hired Schroeder -- a lawyer and former chairman of the California Republican Party who supported the sheriff’s 1998 and 2002 campaigns -- to probe whether Newport Beach businessman Charles Gabbard was laundering contributions to the sheriff’s campaign.

Schroeder unveiled his findings this month, revealing that Gabbard reimbursed 10 Carona contributors with stock or cash, a violation of state law. However, Grindle is not satisfied, pointing out that the Carona campaign has not yet reimbursed Gabbard for $2,203 he paid for a Newport Beach birthday party and fundraiser for Carona in May 2002. Gabbard already had given the maximum $1,000 to the Carona campaign.

Schroeder acknowledged the problem in March and amended Carona’s financial reports to include the costs as an in-kind contribution from Gabbard, but no repayment has been made. Orange County’s campaign contribution law requires excess contributions to be returned to the donor within seven days of their discovery.

Grindle said she was told by Carona’s campaign treasurer, Lesley Fleischman, that Gabbard hadn’t been reimbursed, on the advice of Schroeder. Fleischman, who could not be reached for comment, added a note to the campaign report saying the campaign had “requested direction” on what to do next.

The failure to follow county law -- and Schroeder’s role -- should be an issue in the district attorney’s probe, Grindle said.

The reimbursement issue is complicated by conflicts between state and local laws, Schroeder said. State law changed in 2002, he said, ending the practice of sending reimbursements for excessive or illegal contributions to donors. The money now must go to the state general fund or charity.

The campaign set aside the tainted contributions and is awaiting word from the Fair Political Practices Commission on where the money should go.

Yet another complication in the district attorney’s investigation involves a computer seized by investigators last week.

George Jaramillo, a former top aide to Carona fired by the sheriff in March, said the computer contains information compiled by his wife, Lisa, who was treasurer of Carona’s 2002 campaign. The records include not only campaign contributions for Carona, but for Rackauckas and other Republican officials, including Assemblyman Todd Spitzer of Orange -- viewed by many as a likely candidate for district attorney in 2006.

Gabbard’s attorney has contended that the strategy for making the improper contributions came from the Jaramillos -- which George Jaramillo denies.

Jaramillo contends that Carona’s campaign is trying to blame him and his wife to politically shield those responsible. The district attorney’s investigation and its outcome could become political issues for Carona, who has indicated an interest in running for lieutenant governor in 2006, and for Rackauckas

“I’m hoping for a real and legitimate and fair inquiry [by the district attorney], not a public-relations stunt and a slanted vision of what might have occurred,” Jaramillo said.