D.A. Opens Inquiry on Donations
The Los Angeles County district attorney’s office has begun a review of tens of thousands of dollars in political contributions funneled to Los Angeles Mayor James K. Hahn and two allies by developers allegedly at the center of a massive mortgage fraud scheme.
Prosecutors are trying to determine the source of approximately $30,000 in donations made by associates of Mark Alan Abrams and Charles Elliott Fitzgerald, partners in a Beverly Hills real estate network that collapsed last year in financial scandal.
The inquiry follows Times reports about more than $300,000 in cash directed to various Hahn causes by Abrams and Fitzgerald. Abrams relocated to the Westside during the 2001 campaign and quickly angled his way into the top echelons of the mayor’s political organization.
Three associates told The Times that Abrams repeatedly asked employees and their relatives to write campaign checks to Hahn and others and then reimbursed them with cash, a practice known as contribution laundering that is banned by state and local election laws.
The district attorney’s inquiry is a first step in a process that could lead to criminal misdemeanor charges and felony conspiracy charges, said Deputy Dist. Atty. David Demerjian, head of the office’s public integrity division.
The unit has begun examining records compiled by the Los Angeles Ethics Commission, Demerjian said. The commission has been investigating possible violations of city election laws related to contributions arranged by Abrams, according to several sources interviewed.
A decision to launch a criminal investigation could come in the next several weeks, after additional information is evaluated, Demerjian said. He said the inquiry includes contributions to Councilman Tony Cardenas and former Councilman Nick Pacheco, who both backed Hahn in the 2001 race and helped bolster his City Hall influence.
Hahn, Cardenas and Pacheco have said they knew of nothing improper in the contributions.
“If Mr. Abrams has done something wrong, then absolutely he should be prosecuted and punished,” said Julie Wong, a spokeswoman for Hahn’s reelection campaign.
After Hahn’s victory, Abrams received high-level City Hall access and assistance from the mayor’s office on a troubled, multimillion-dollar development near Bel-Air. Hahn, who lunched with Abrams and visited his office, also placed the developer’s real estate attorney on the city Planning Commission.
As contributions flowed, Abrams and Fitzgerald allegedly were skimming millions from highly inflated mortgages on homes and development properties in some of the city’s wealthiest neighborhoods, according to federal court records. The FBI and federal prosecutors are conducting a criminal fraud investigation of the scheme. Lehman Bros. bank and other lenders have sued, claiming the developers operated a massive conspiracy involving $140 million in loans.
Abrams’ attorney, Nathan J. Hochman, said he is aware that the district attorney’s office and the Ethics Commission are looking into alleged money laundering.
“We haven’t had a chance to fully review the allegations, but anticipate addressing them fully in the future,” he said.
Fitzgerald fled the country last year and could not be located.
Hahn has said he had no indication that Abrams was involved in the alleged fraud. A Hahn campaign spokesperson has said that Abrams did not receive special treatment from the mayor’s office.
The district attorney’s review is focusing on groups of $1,000 donations made to Hahn’s mayoral campaign by Abrams’ employees, business associates and their relatives from December 2000 to Hahn’s victory in June 2001. The contributions to Cardenas and Pacheco were made in 2002 and 2003.
One of those who wrote checks, Matthew Compton, told The Times that Abrams paid him and four relatives back with cash. The developer bragged about the influence he was gaining with the would-be mayor, Compton said, adding that he had no personal interest in the local campaigns. “We didn’t know who these people were,” he said. “We were registered in a different county.”
Two other sources familiar with Abrams’ fundraising corroborated his practice of reimbursing those who wrote checks at his request.
Similar allegations of contribution laundering led to criminal charges earlier his year against another Hahn fundraiser, attorney Pierce O’Donnell, who is accused of hiding the true source of $25,500 in donations to the mayor’s 2001 campaign. The case is pending.
In addition to the contributions made by individuals solicited by Abrams, approximately $27,000 in contributions to Hahn, Cardenas and Pacheco came from companies and partnerships named in the Lehman Bros. lawsuit in federal court.
A receiver appointed by the judge in the case is scrutinizing contributions arranged by Abrams. Attorney David J. Pasternak is trying to recover assets for hundreds of victims of the alleged real estate fraud. He wrote to Hahn’s campaign treasurer in October asking for the return of more than $30,000 in contributions. Earlier this month, he said he renewed the request because he had not received a response.
The return of additional funds from committees controlled by Hahn, and possibly others, is likely to be requested in coming weeks as forensic accountants reconstruct the paper trail of the contributions, Pasternak said. In all, Abrams raised more than $320,000, most of it going to Hahn’s fund to fight 2002 ballot proposals that would have allowed the San Fernando Valley and Hollywood to break away from the city.
Pasternak said he has no legal basis to demand money back. But elected officials have an obligation to return the funds to those who suffered losses, including small businesses and former tenants, he said.
“These are funds that were fraudulently obtained,” he said. “There are a lot of victims here. Basically, it’s the right thing to do.”
Hahn said he does not have an ethical obligation to return contributions from companies and individuals allegedly involved in the real estate fraud, calling such repayment a matter between Abrams and his business associates.
“It really doesn’t have anything to do with me,” Hahn said.