Villaraigosa to Face Probe of Donations

Los Angeles County Dist. Atty. Steve Cooley opened a preliminary investigation Friday into thousands of dollars in contributions to mayoral candidate Antonio Villaraigosa from employees at two Florida firms.

“There may be money-laundering issues,” Cooley said, citing media reports. “Sometimes information from an investigation opens a criminal filing, sometimes it doesn’t. But we still have to do the investigation to gather the facts.”

Villaraigosa said he welcomed the inquiry. He said he decided Thursday to return $47,000 from employees and relatives of two gift-shop companies and drew a distinction with opponent Mayor James K. Hahn.

“We returned those contributions,” Villaraigosa said. “The difference between me and Jim Hahn is I take responsibility for my actions.”

On Friday, the Los Angeles councilman also made his most extensive comments on the donations, seeking to quell a controversy that has muddied his message that the city cannot afford a mayor whose administration is dogged by ethics investigations.

“I want to demonstrate to everybody that my dealings are going to be honest and forthright,” he said as he stood amid dogs at the groundbreaking for an off-leash park in northeast Los Angeles. “I’ve got to maintain a higher standard, and that’s what I’m doing here.”

Villaraigosa has said the donors gave to him because “they think it’s time for a change.”

But one City Hall lobbyist has said the president of one Florida firm intended to seek lucrative concession contracts at Los Angeles International Airport.

On Friday, Villaraigosa again stressed that he did not talk about airport concessions at a Sept. 27, 2004, dinner with Sean Anderson, the president of Miami-based Travel Traders LLC.

“I have never discussed LAX with Sean Anderson, and I can say that absolutely,” he said.

Cooley’s decision to open an official, if preliminary, inquiry means that both candidates face probes of campaign donors. Cooley’s office is investigating two Hahn supporters who have been accused of laundering donations to the mayor’s 2001 campaign.

Villaraigosa has spent the last year relentlessly assailing Hahn’s ethics and fundraising practices. Some analysts said the controversy robs him of the moral high ground.

“It’s not a fatal blow, but certainly it’s a chink in his armor,” said political strategist Arnold Steinberg.

Jaime Regalado, executive director of the Edmund G. “Pat” Brown Institute of Public Affairs at Cal State L.A., said, “It appears to have some legs. It’s absolutely not what Villaraigosa wanted.”

Hahn, in measured comments, has cited the questionable donations and suggested that voters should be more skeptical of his opponent.

“I think from the very beginning this idea that he was going to paint himself as more trustworthy as a candidate was a sham,” said Hahn, who has repeatedly cited Villaraigosa’s fundraising from special interests in Sacramento. “Now, if he wants to keep running a one-issue campaign, he’s not got his own legs beneath him.”

Still, analysts said, the harm to Villaraigosa, who led Hahn by 18 points in the last Times Poll, was being muted by persistent questions about Hahn’s ethics.

The U.S. attorney’s office for the last year has been looking into whether campaign donors influenced city contracting decisions. The mayor’s e-mails and some of the administration’s top officials have been subpoenaed.

“While it raises serious concerns for voters, I don’t think it swings the election,” said Mike Shires, an associate professor of public policy at Pepperdine University. “If it were an issue where Hahn was not already vulnerable, it could have shifted the vote. But Hahn has had a cloud over his head.”

Questions were first raised about the donations earlier this week when some employees of Travel Traders and S.E. Florida Investments sounded confused when told of their donations, some offered unlikely reasons for the donations and others declined to discuss them.

Clark Davis, a lobbyist who worked with Anderson in the past, told The Times that Anderson was hoping to work with other concessions contractors who donated to Villaraigosa to land multimillion-dollar contracts at the airport. Anderson did not return calls Friday.

Anderson met with Villaraigosa for dinner last fall, along with Art M. Gastelum, who has been a lobbyist for years for companies with business at the airport. Gastelum earned $52,285 last year lobbying for two concessions contractors.

The day after the dinner with the councilman, on Sept. 28, 2004, employees of S.E. Florida Investments, which is affiliated with Anderson’s firm, contributed $10,000 to Villaraigosa. Their relatives gave $3,000 more. And employees of several other airport concession firms contributed $4,000.

Through April 2, Villaraigosa had raised at least $59,000 from firms in Florida and Georgia with ties to airport concessions.

Asked on Friday if he had anything to do with the donations, Gastelum said, “Absolutely not.”

In a short interview, he said, “I don’t even know those people out there.”

Villaraigosa said Friday that he could not say why the donors contributed.

“Let me say something and be absolutely clear about it,” he said. “People contribute to campaigns. I can’t get into everybody’s motivations why they do that.”

Earlier this month, Villaraigosa led an unsuccessful effort by several council members to review the Airport Commission’s decision to extend the current concession contracts. The move came a few days after Anderson had made the second of two $1,000 donations to Villaraigosa.

If the contracts had not been extended, Anderson’s firm could have bid on them. The airport agency now plans to put the concessions contracts up for bid next year.

The contracts are worth millions. DFS Group, which runs the duty-free shops at LAX, reported sales of more than $90 million last year. Airport Management Services, which runs the gift shops and newsstands, had sales of $55 million.

Villaraigosa said there was no connection between the contributions and his attempt to review the contracts. He said he decided that the City Council should review the contracts after the commission acted without debate.

As questions persisted this week, Villaraigosa has repeatedly tried to turn the focus to Hahn, criticizing the mayor for not returning contributions from developer Mark Abrams and associates. Abrams has been fined by the Ethics Commission for laundering contributions.

“We don’t want to allow anyone to say anything about my integrity or my veracity, and so we gave it back,” Villaraigosa said. That is in sharp contrast, he said, “to the incumbent who has never given back.”

Hahn dismissed suggestions that he should return the contributions. “I can’t give money back from a campaign account that is closed,” he said.

Hahn has denied knowing donors were allegedly laundering contributions. While receiving the endorsement of the Asian Pacific American Political Action Group in Chinatown, the mayor credited Villaraigosa with returning the donations but said investigations of the Florida donations should continue.

“Brownie points are nice, but I think we still need to know the answer to the questions: Were these contributions freely made? Were they made by the people who gave them?”

Cooley declined to discuss the specifics of his inquiry. “We have no timetable, no agenda,” he said.

He said he has launched other investigations, including the one that led to criminal charges that attorney Pierce O’Donnell laundered contributions to Hahn’s 2001 campaign.

It is not illegal for employees of a company to donate to a political campaign. But if a company reimburses them for the donations, that is considered laundering, a crime.

Anderson, the president of Travel Traders, has a long history with LAX concessions. He is the former head of North American operations for W.H. Smith, which once had the largest contract for gift shops and newsstands at the airport.

In the fall of 2003, he left to form Travel Traders, which bought W.H. Smith’s hotel shops business. Davis, the lobbyist, has told The Times that Anderson realized that to win LAX concessions he would have to form a partnership with a company experienced in the airport retail business.

Davis said Anderson chose Miami Beach-based DTR, which is a subcontractor for the firm that now has the gift shop and newsstand concession at LAX. DTR is owned by Bernard Klepach, who also heads Duty Free Air & Ship Supply.

Klepach also has connections with another airport concessionaire, Georgia-based Franklin & Associates, and a related company, Franklin & Wilson Airport concessions. Duty Free Air & Ship Supply and Franklin & Wilson operate concessions at Atlanta’s Hartsfield International Airport.

Employees of all these interlinked firms have donated $12,000 to Villaraigosa’s campaign, which recorded many of the contributions on the same days as those from employees of the two Florida firms were recorded.

The Florida controversy has not discouraged Villaraigosa’s supporters from continuing to attack Hahn on ethics issues.

A new pro-Villaraigosa radio ad previewed Friday by the Engineers and Architects Assn. begins: “Corruption, grand jury investigations, million-dollar settlements. Have you had enough scandal? We have.”

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Times staff writers Ralph Frammolino, Jennifer Oldham, Jeffrey L. Rabin, Daniel Hernandez, Caitlin Liu and Richard Fausset contributed to this report.