Neighborhood councils’ cash tempts some members

Los Angeles police are investigating a community activist and convicted felon accused of misusing tens of thousands of taxpayer dollars while serving as chairman of his neighborhood council.

The case of James Harris is just one of six involving neighborhood council treasurers or chairmen who are believed to have misspent as much as $250,000 in city money.

The investigations have raised questions about the city’s financial oversight of the volunteer community groups -- for example, none of the treasurers were subject to credit or background checks. And the probes have drawn attention to what some activists view as a system that poses challenges for even the most well-meaning participants.

Although the neighborhood council system was created in 1999 as a way to give residents a greater voice in community affairs, some members say they have been distracted by difficulties resolving internal quarrels, confusion over the laws governing their meetings and burdensome financial paperwork. Four councils are currently unable to hold meetings because of internal disputes, according to city officials.

To pay for projects in their communities, each of the city’s 89 groups has historically been allotted $50,000, which can be spent through city checks or a credit card issued to each treasurer. Although every expenditure is supposed to be approved by the full neighborhood council, investigators have found that some were not.

So far the Los Angeles County district attorney has filed felony charges against four treasurers. In addition to Harris’, at least one other case is still under investigation. Tips about misconduct have trickled in to the city’s Department of Neighborhood Empowerment ever since officials there began posting neighborhood council transactions on the Internet in 2007 to enhance transparency.

Two treasurers pleaded guilty to felonies involving misuse of public funds this summer, one faces her next court hearing later this month and one case was dismissed because the defendant died before trial.

“I can’t believe the city hands out credit cards like this -- it’s incredible,” said David Demerjian, head of the district attorney’s Public Integrity Division. He added “there wasn’t much of a defense in any of these cases.”

Michele Siqueiros, president of the Board of Neighborhood Commissioners, said “the majority of [neighborhood council] money has been spent to do great things” such as graffiti cleanups, community events and beautification projects.

“There are powerful things that neighborhoods are doing with these funds, and we want to them to continue,” she said.

BongHwan Kim, who assumed the role of general manager of the Department of Neighborhood Empowerment in late 2007, said the problems were confined to a small group of treasurers who acted alone and the department is proactively addressing the issues. But he said that at its inception, the $4.5-million neighborhood council funding program “was never really well thought out enough to prevent these kinds of criminal activities.”

Although an online ethics training session is required for every neighborhood council board member every two years, only a third of more than 1,600 members have complied, records show. And there have been few consequences for treasurers who fail to submit budgets or documentation for their expenses. Recently city officials have begun freezing their funds.

In the case of Harris, who served as chairman and temporarily as treasurer of the Empowerment Congress Southwest Area Neighborhood Development Council, city officials asked the Los Angeles Police Department to investigate repeated cash withdrawals that occurred without the knowledge of his council.

In a memo to police, Kim said Harris submitted what appeared to be fraudulent invoices and event sign-in sheets with fictitious names. Officials were also concerned about Harris’ “possible self-dealing with another community organization and gift cards purchased for questionable purposes.” The neighborhood council paid $6,784 to Harris’ employer, a South Los Angeles economic development and anti-drug-abuse group known as the Community Coalition. The group was founded by Assembly Speaker Karen Bass (D-Los Angeles), and its board includes the Rev. Leonard Jackson, a senior advisor to Mayor Antonio Villaraigosa.

City officials also asked police to look into what they described as excessive payments for two administrative assistants that totaled more than $53,000 between June 2006 and January of this year.

Harris’ work with ex-offenders, gangs and substance abuse organizations was praised by both by Deputy Mayor Larry Frank, who oversees community affairs, and the Community Coalition’s executive director, Marqueece Harris-Dawson.

“We have tremendous respect for James; we really hope this matter can be resolved where James can continue his work in the community,” Harris-Dawson said. “Losing someone like James in a community like ours can be devastating.”

Harris declined to comment for this report.

Officials would not comment on Harris’ background, but court records show that he was convicted in 1990 of disorderly conduct involving prostitution and of illegal possession of a firearm in 1996.

In the summer of 2007, members of the Central Alameda Neighborhood Council noticed curious charges by their treasurer, Genia Jackson, who did not turn in her financial reports.

Records show that she withdrew $5,000 in cash over two months alone and made more than 30 purchases at clothing, thrift and shoe stores and a school uniform shop after assuming the post in September 2006. There were also purchases at Hertz Rent-A-Car, the Premier Inn, New Wave Beauty Supply, New Fashion Wigs and L.A. Nails.

At Jackson’s preliminary hearing this year on charges of misuse of funds by a public official, her fellow neighborhood council member, Jimena Toscano, testified that council members never asked Jackson how the money was being spent “because we always assumed it was for our neighborhood projects.” After being alerted to the suspicious charges, it was three months before city officials took away Jackson’s city credit card. After entering a guilty plea in August, Jackson is now on a plan to repay the city more than $18,000.

Her lawyer, Louisa Pensanti, said there was no excuse for Jackson’s actions, but she noted that her client had cancer. Pensanti added that she was shocked by the city’s lack of oversight: “It was unlimited credit. It was like somebody handing you a credit card and saying: ‘Go ahead.’ ”

Similarly, Chris Elwell, former president of the Olympic Park Neighborhood Council said “it took an astonishing amount of time” for city officials to suspend treasurer Verna Jones, who is alleged to have withdrawn $15,000 in cash, according to a city memo, and used the council’s credit card for car rentals, gas, mailing charges and trips to restaurants across the city.

Elwell said the problems with Jones inflamed already fractious relations among the neighborhood council’s members who could not agree on how to handle the matter. “When the board did meet, it was ‘The Ricki Lake Show,’ ” Elwell said.

Advice from the neighborhood empowerment department was continually changing, Elwell said: “They kept trying to put it back on us to somehow review the expenses -- we were not capable of having a meeting.”

After discovering unauthorized charges online, members of the Empowerment Congress Central Area Neighborhood Development Council also had trouble getting answers from Chairman Frank Prater, who was later charged with illegally spending $30,797.

When Los Angeles County Supervisor Mark Ridley-Thomas served on the City Council and later in the California Assembly, Prater was on his staff. City Councilman Bernard C. Parks subsequently appointed Prater to the Neighborhood Council Review Commission.

Prosecutors alleged that Prater, who died before his case went to trial, made cash withdrawals at the Normandie Casino, and spent $8,315 at Jimmy Jam’s T-Shirt business, $4,500 in food purchases, close to $2,000 on vehicle expenses and nearly $250 at a jewelry shop.

Former North Hollywood Northeast Neighborhood Council Treasurer Jeffrey Brooks admitted to using his group’s city credit card for household expenses, including his cable bill, after losing his job, according to court papers. He was ordered to pay the city $28,637 in restitution.

The neighborhood empowerment department is considering tighter limits on cash withdrawals, a formalized system for councils to approve each transaction and a requirement that treasurers submit fingerprints.

Siqueiros said “there has to be a balance between providing support and adequate training for the neighborhood councils” while preserving their autonomy.

But with deep budget cuts over the last two years, Kim said that his staff struggles to stay abreast even of the quarterly audits they perform of each neighborhood council.

The 43-position department currently has just one auditor, who is assisted by two accountants, doing that work.

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maeve.reston@latimes.com