Panelist’s $500,000 ‘Finder’s Fee’ Raises Questions in Beverly Hills

Even in Beverly Hills, eyebrows rose as word spread about the $500,000 “finder’s fee” that City Councilman Tom Levyn was paid in September for introducing Merv Griffin to the entrepreneur who later bought the celebrity mogul’s Beverly Hilton Hotel.

Levyn’s fee, which the state Fair Political Practices Commission recently concluded was not a prohibited political gift, has nonetheless become a symbol of a city government that critics contend has lost its ethical way amid a surge of high-end development.

Beverly Hills has forged past a post-Sept. 11 rough patch in high style. Purveyors of pricey threads and baubles have poured millions of dollars into renovating the city’s business triangle, now looking its spiffiest in years after acquiring glossy storefronts by A-list architects including Rem Koolhaas, wider sidewalks, designer streetlights and even new palm trees.

With the grand plans comes money, and that, some say, is the problem.

“The ethics of the city at the moment are very peculiar,” said Betty Harris, a veteran activist who represents Beverly Hills on the Metropolitan Water District board. “I think the council has lost touch with the people of their city.”

At the center of the storm is Beverly Hills’ decision to act as co-developer of an eight-story luxury hotel and condominium complex, the Montage, part of which would be on what is now a city-owned parking lot.

Opposition leaders say the City Council has no business being involved in this public-private venture, which they fear could trigger more high-rise development and destroy Beverly Hills’ scale and charm.

In recent months, the council’s actions on the project have earned it scoldings from the Los Angeles County district attorney’s office and a Los Angeles Superior Court judge.

Then there is the issue of Levyn. In anticipation of receiving the $500,000 finder’s fee for the Beverly Hilton sale, Levyn recused himself from all votes on the Montage. The reason: The proposed five-star resort might have an effect on the four-star Hilton’s fortunes.

Levyn, a real estate attorney, said he had done nothing illegal or unethical. City Atty. Laurence S. Wiener confirms that view, saying it was necessary for Levyn to refrain from voting on the Montage because of his tie to the Hilton deal.

But many residents complain that it leaves them with one fewer representative as the city faces its biggest development battle in years.

“Because the Montage was such an important project to the city, I think his duties as city council member should have eclipsed or risen above trying to make money on that particular transaction,” said Steve Webb, a fellow attorney and councilman.

The proposed Montage development -- which would include public gardens and parking and a three-story city-owned building -- is just a block off Rodeo Drive, the symbolic heart of this ritzy enclave of 34,000, which serves up Prada, Chanel and other fancy boutiques to the Boxster and Ferrari set.

Athens Group, a builder of luxe resorts that wants to develop the Montage, is among a small army of developers lining up to cash in on the resurgent cachet of Rodeo Drive and environs, with more than half a dozen projects in the works for condos, shops and restaurants.

Behind this glitzy facade, the city’s development role in the Montage has left the town deeply divided.

When citizens began a drive this summer to gather signatures to put the Montage development on the ballot, the hotel’s developers -- with what appeared to be the tacit acceptance of the council -- hired “signature blockers” in an ultimately futile attempt to thwart the opposition. Many residents reported that the blockers intimidated elderly residents and used other aggressive tactics to keep people from signing petitions.

Fighting the Montage is a group called the Beverly Hills Residential-Business Alliance for a Livable Community. While hardly a typical grass-roots organization -- by far its largest financial contributor is the owner of the Peninsula Hotel, another five-star hotel in Beverly Hills -- the group asked for public records that it believed any member of the public should have been entitled to.

When the city refused to turn over the documents earlier this year, both sides hired lawyers. After a ruling by a Los Angeles Superior Court judge, the city eventually handed over most of the information.

Last month, the judge administered a further slap, ordering the city to pay the group’s attorneys $70,000. Lawyers for the city charged $130,000 for defending its attempt to keep the records secret.

If all that weren’t enough, the Los Angeles County district attorney’s office last month chastised the Beverly Hills City Council for violating the Brown Act, the state’s open-meeting law, for hurriedly adjourning a meeting before three Montage opponents had had their say.

The coming March election, when voters will be asked to fill three council seats and decide the fate of the Montage, promises to be one of the most vicious and costly in the 90-year-old city’s history.

One key Montage Hotel investor is Pierre M. Omidyar, billionaire founder of EBay. Even with the support of the Peninsula, Montage opponents say they will be hard-pressed to counteract the other side’s deep pockets.

Levyn, preparing to run for a fourth term, offers no apologies for accepting the $500,000 finder’s fee.

In an interview, Levyn, 55, proudly recalled some of his accomplishments as a councilman, a position he first won in 1992 at age 42. He pushed to establish the weekly Beverly Hills farmers market. He launched Team Beverly Hills, a community training program for residents who wanted to get involved in city government.

Like many small cities, Beverly Hills rotates the mayor’s post among the five-member council. Levyn, who got his undergraduate and law degrees from USC, has held the job three times.

Council members, Levyn noted, are paid $655 a month. Many of them make their livings as doctors, lawyers and other professionals.

The Hilton deal “was no different than any other business deal I’ve done,” said Levyn, noting that he was simply bringing together two acquaintances -- Griffin and Beny Alagem -- whom he has known for years. Alagem purchased the hotel from Griffin for a reported $130 million.

Levyn said he had made it clear to both parties in the Hilton matter that he was acting as a private citizen, even though at the time he was serving his third term as mayor.

Still, both Levyn and Alagem were so concerned that the finder’s fee might be construed as an illegal political gift under the Political Reform Act that they independently sought counsel from the state Fair Political Practices Commission.

Wiener, the Beverly Hills city attorney, sent the first query last May, seeking advice as to whether Levyn, who introduced Griffin and Alagem in the summer of 2003, could accept the fee as legal income.

In late May, Alagem’s attorneys wrote to the FPPC, taking issue with some of Wiener’s and Levyn’s assertions.

Whereas Wiener’s letter said Alagem had “agreed in concept” to a finder’s fee before negotiations between Alagem and Griffin began, Alagem’s attorney said Alagem “did not have any written or oral agreement” with Levyn. Alagem said Levyn brought up the issue after Oasis West Realty -- the corporate entity that was negotiating to buy the Hilton -- had signed a definitive purchase agreement for the property in October 2003.

Levyn, Alagem’s letter said, asked for $1.3 million plus an equity interest in the Hilton, but Alagem told him that was unacceptable. After further discussions, Alagem said, he agreed to consider a $500,000 fee.

Levyn said in the interview that he had never proposed a $1.3-million fee but that he had asked to receive his fee as an equity interest in the hotel.

In a letter dated Sept. 1, the FPPC concluded that, although there remained a factual dispute about whether Alagem owed Levyn a finder’s fee, such a fee could be considered legal income “if consideration of equal or greater value” had been provided in exchange. On Sept. 24, Oasis West Realty paid Levyn $500,000.

“There’s absolutely nothing unusual about Tom being involved in real estate deals,” said Karen Getman, a former chairwoman of the FPPC whom Levyn hired to advise him on the finder’s fee. Levyn, she said, followed the conflict law “to the letter here.”

Since the Beverly Hilton deal, Levyn has come under fire for another reason. In October, he accepted a partnership at a high-octane law firm -- Christensen, Miller, Fink, Jacobs, Glaser, Weil & Shapiro -- which has billed the city about $1.8 million for past work.

The firm is known for its stable of hard-nosed litigators, among them Louis R. “Skip” Miller. It was Miller who appeared on behalf of Beverly Hills with Levyn, then mayor, in May 2003 on CNN, where they challenged Erin Brockovich and an attorney. Brockovich, the environmental crusader made famous by the 2000 film starring Julia Roberts, had three months earlier made a media splash by alleging that an oil well on the Beverly Hills High School campus was causing cancers among graduates.

Levyn and the rest of the council had hired the firm -- which had successfully guided Beverly Hills through a tricky racial-profiling case in the 1990s, charging $1.5 million for its work -- to serve as co-counsel on the case.

After Levyn’s announcement that he would join Christensen Miller, the council announced that it would not do any further business with the firm while Levyn was on the council.

Government ethics experts said it appeared that Levyn followed the letter of the law in dealing with his new employers. But the issue is sure to come up in the March election if Levyn decides to run.

“They can make a big issue of this if he runs,” said Robert M. Stern, president of the nonprofit, nonpartisan Center for Governmental Studies in Los Angeles. “It should be debated.”

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Times staff writer Ted Rohrlich contributed to this report.