Federal investigation of former city attorney’s wife dropped, attorney says

A private attorney who represents former Los Angeles City Atty. Rocky Delgadillo said Monday that a federal probe into the business dealings of Delgadillo’s wife has ended without charges being filed.

Delgadillo’s lawyer, John Potter, said the U.S. attorney’s office in San Francisco, which was handling the matter, informed him personally that the investigation of the couple was over.

The Times reported a year ago that federal prosecutors, working with the FBI, had sought information regarding two companies that had performed work for the city and also had retained Michelle Delgadillo as a consultant.

Potter said Michelle Delgadillo’s business relationships were appropriate and had no connection to her husband’s work at City Hall. “The United States attorney’s office has informed me that the investigation has concluded and there will be no charges brought,” he said.

An official in the U.S. attorney’s office in San Francisco would not discuss the matter. “We just don’t comment on whether we’re charging someone or not charging someone,” said Jack Gillund, a spokesman for the agency.

Prosecutors had issued a subpoena to California Litho-Arts, a company that had retained Michelle Delgadillo as a consultant and performed work for the city between 1993 and 2002. The vast majority of those contracts expired before 2001, when Rocky Delgadillo became city attorney.

Investigators also had sought information regarding Diane Castano-Sallee & Associates, which had hired Michelle Delgadillo and had received $350,000 in contracts from the city attorney’s office between 2001 and 2004.

Rocky Delgadillo, who now works in the Los Angeles office of the law firm Goodwin Procter, is laying the groundwork for a possible 2010 run for state attorney general. He was forced out of his city post by term limits June 30. He has raised $935,624 in campaign funds during the first six months of this year.

“It appears that somebody teed this up to go after Rocky, because all the earmarks of this investigation suggest that somebody with some juice leaned on the feds to look at this thing,” Potter said. “And from there, there were frankly a parade of witnesses who came in and told the feds that this was all on the up and up.”

The last two years of Delgadillo’s tenure at City Hall were overshadowed by questions about his wife’s potential legal woes. She made headlines in 2007 when The Times revealed that she had damaged her husband’s city vehicle while driving on a suspended license.

Delgadillo also confirmed that some of his staffers ran personal errands for him and baby-sat his children. He said those services were provided on the employees’ own time.

The Times also found that Michelle Delgadillo’s home-based consulting business, C.R.D. Inc., had failed to file state tax returns and operated for years without a required city tax registration certificate. The state Franchise Tax Board suspended the business in 2005 for not filing returns.

Potter said that the federal government would not pursue any tax charges against the Delgadillos. Still unclear, however, is whether the city’s Ethics Commission has any active investigations related to the former city attorney.

Delgadillo opened a legal defense fund in 2007 to deal with the possibility of an Ethics Commission investigation into his wife’s activities. Potter said that agency has not asked for any documents or sought to meet with Delgadillo.

The L.A. County district attorney’s office has no investigation of Delgadillo, spokeswoman Jane Robison said.

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david.zahniser@latimes.com