Officials’ city loans probed by D.A.

The Los Angeles County district attorney is investigating two Inglewood elected officials who borrowed hundreds of thousands of dollars through a low-interest loan program originally intended to help city administrators and executives afford to live in town.

The probe stems from complaints about Inglewood’s Residential Incentive Policy program, in which Mayor Roosevelt Dorn and Treasurer Wanda Brown participated.

“We’re conducting a criminal investigation at this point,” said David Demerjian, head deputy district attorney for the office’s Public Integrity Division.

Dorn, 71, a two-term mayor and former Municipal and Superior Court judge, borrowed $500,000 in taxpayer money in November 2004, five months after he voted with a bare majority of the City Council to extend the loan program to elected officials, documents show.

At the time he received the 30-year loan with a variable interest rate of 2.39%, the rate for adjustable mortgages nationally was above 5%, according to the Federal Housing Finance Board.

With nearly half the proceeds from the city’s loan, Dorn paid off the mortgage on the Inglewood home he and his wife had bought in 1966, according to the documents. He put the rest -- about $265,000 -- in a bank account, he said.

Dorn repaid the loan in October of this year, records show. By then it had become an issue in his reelection campaign. He narrowly failed to win a majority of the vote on Nov. 7, and now faces Councilwoman Judy Dunlap, a longtime political opponent, in a Jan. 9 runoff.

Brown, the treasurer, who is in her early 60s, took out a city loan for $235,000 in 2005, records show. In an interview, she said she was attracted by the low interest rate (2.868% in her case) which, according to the loan program rules, could never vary by more than 2 percentage points.

Brown, who is paid $64,848 a year and plans to seek reelection in April, said she did nothing wrong and does not intend to return the loan unless the city requires it.

City residential incentive programs are not unusual. In Santa Barbara, for example, city Finance Director Robert Peirson said officials launched an employee mortgage assistance program in 2001 for all city employees -- except elected officials.

“The purpose of the program is to assist with recruitment and retention of staff,” Peirson said. “The housing cost in Santa Barbara is one of the main hurdles we have to deal with.”

Peirson said he was not aware of any cities that extended loans to elected officials.

Under Inglewood’s original program, created in 1992, executive employees could take a loan “for the purpose of purchasing a residence” in the city.

That changed June 29, 2004, when the City Council extended the program to include the mayor, council members, city clerk, treasurer and some unelected administrators. The purpose of the program expanded too, from merely “purchasing a residence” to include “maintaining residency.”

Dorn, Councilman Eloy Morales Jr. and former Councilman Curren Price voted for the amendment. Councilman Ralph Franklin did not vote, records show; Dunlap was absent.

The mayor said in an interview recently that he wanted part of the loan to revamp his four-bedroom, two-story home in the city’s Morningside Park neighborhood.

“My wife wanted a sun room, and she wanted me to totally redo the upstairs too,” Dorn said. “So that was what the loan was for.”

Robert Stern, president of the nonpartisan Center for Governmental Studies in Los Angeles and former general counsel to the state’s Fair Political Practices Commission, said he had never heard of an incentive program that applied to elected officials.

“It’s outrageous. It’s giving an elected official a favor, when the official is already required to be in the city,” Stern said. “It looks like the official is taking advantage of a program for officials that you need to recruit. You don’t need to recruit elected officials.

“Elected officials get the perk of power,” he added. “They don’t need the perk of a loan.”

Dorn, whose annual salary as mayor is about $95,000, said the city’s program was no different from housing incentives that private corporations offer to recruit employees.

The council repealed the 2004 modifications in November of this year, after residents complained and officials said they realized it conflicted with the City Charter. It states that no city officer or employee “shall be financially interested, directly or indirectly in any contract, sale or transaction to which the city is a party and which comes before said officer or employee or the department ... with which he is connected, for official action.”

Accounts differ on how the 2004 change to the loan program came about.

Mark Weinberg, the former city administrator who prepared the staff report accompanying the modification proposal, said Dorn asked him about extending the program to elected officials.

“I was approached by the mayor to research and investigate extending the executive loan program to elected officials,” said Weinberg, 56, now retired, in a telephone interview. “He indicated that it would be an appealing benefit to members of the council.”

Dorn initially denied speaking to city staff about the loan program. But, when pressed, he acknowledged that he had talked to Weinberg about taking out a loan under the original program. “He indicated that there was some question there -- whether I qualified or not. I said, ‘I don’t see how I don’t qualify as an executive because I’m a chief executive.’

“I assume that led him to expand it to all officers,” Dorn added.

Dorn and Brown said they relied on the city administration to ensure the program’s legality. Last month, when city administrators recommended removing elected officials from the loan program, Dorn apologized to residents for “not doing my due diligence.” He also said he had been “set up,” trapped into participating in a program later deemed to violate the City Charter.

Weinberg disputed that: “I can tell you that he wasn’t set up. Roosevelt Dorn was an attorney and a former judge, and if there was a question of legality related to the loan program for elected officials, I don’t think he would have relied on city administration to form a legal opinion.”

Including Dorn and Brown, six people have borrowed a total of about $1.8 million since the program was created.

The others were Oliver Thompson, a former chief of police; Lawrence Kirkley, a former city administrator; and Jerry Givens and Jeff Muir, both assistant city administrators, according to the city.

Loan amounts for these four ranged from about $200,000 to $360,000.

Muir has repaid his loan, he said in an interview.

Inglewood’s program requires no formal application. A city employee expresses interest by telephone or a note requesting an amount. The city performs an appraisal on the property involved, and then requires the borrower to sign a deed of trust. The city administrator’s office has the authority to approve or reject a loan; no council vote is required.

The loans are funded through a cash reserve account currently valued at about $100 million, Muir said.

Dorn and Brown said Inglewood had earned more interest through their loans than it would have otherwise. “It did not benefit me at the expense of the city,” Brown said.

Critics, noting that there is a 2% cap on how high the loan rate can rise, are skeptical that the loans were a good deal for the city.

Councilwoman Dunlap, Dorn’s opponent in next month’s runoff, said as much during an Oct. 24 council meeting.

“There’s nobody sitting out here today who can go and get a loan at a bank and only pay 2.3%,” she said. “That’s such an unfair advantage, and so self-serving on its face.”

Dorn and Brown said the loans have one disadvantage: The city can recall them at any time.

“It is the worst of possible loans,” Brown said. “How would you like to take out a mortgage loan on your primary residence that can be called at any time at the discretion of the city?”

Dorn said he never remodeled his home with the extra loan proceeds as planned but instead let them collect 1.5% interest in a bank account.

“The city has really benefited,” he said. “I’ve lost, and the city has benefited across the board.”

*

ashley.surdin@latimes.com