Audits Seek to Plug Loophole in Laws on Fund Raising by Council Members

In a bid to toughen enforcement of a local campaign contribution law, Los Angeles city officials are conducting audits of campaign funds of City Council members who may be taking advantage of a loophole allowing them to raise or spend unlimited funds, The Times has learned.

Questions revolve partly around funds raised by state-regulated political action committees. The city clerk is auditing the use of PACs, or political action committees, which ostensibly spend money in members’ districts for charity but which may also be used to enhance the political stature of council members.

Among those being audited is City Councilman Gilbert Lindsay, who has stocked his state committee--known as LINPAC--with thousands of dollars from contributors, including financial companies wanting a piece of the city’s municipal bond business.

Last year, Lindsay reported raising more than $300,000 from contributors who gave to either his political action committee or to a private, charitable foundation run by the council member.

“The audits are in process and are nearly complete,� said Michael Carey, the city clerk’s executive officer, who added that the audits were requested by the city attorney’s office to determine whether the expenditures by the PACs and other fund-raising efforts by council members might have violated the city campaign contribution law.

The law limits campaign contributions to $500 from individuals or groups. The state laws, however, under which the PACs operate, have no such limit.

While Assistant City Atty. Shelley Rosenfield stressed that no irregularities have been found, she said that “there is a great deal of concern that the money not regulated may be spent on city elections.�

In addition to the Lindsay audit, the city clerk, which enforces the campaign contributions law, is also auditing political action committees or fund-raising efforts of Councilmen Robert Farrell and John Ferraro. The three council members were among those singled out by Common Cause, a political reform group that claims that City Council members are taking advantage of “loopholes� in the city campaign law.

“We received information that spurred us to action to see if any violations were involved,� Rosenfield said.

Many council members have used money from their political action committees to donate to community groups, to mail Christmas cards and to participate in other activities that some critics--including Councilman Ernani Bernardi and Common Cause--have argued can aid an incumbent politically.

Ferraro, who said he does not have a state political action committee, confirmed that his funds have been audited and said he has agreed to return about $1,500 in checks that he had received for his mayoral bid in 1985. Officials of the city clerk’s and city attorney’s offices contended that the pledges and money he received fell under the city campaign contribution limitation.

Ferraro said he disagreed with the finding but “we reached an agreement with them, and we are sending the money back.�

Lindsay, meanwhile, said he was told that he was not being singled out for an audit. He said officials told him that the contributions of all members of the council will be reviewed. “I turned over all the papers. I’m clean as a hound’s tooth,� he said.

Farrell could not be reached for comment.

The council, meanwhile, voted Tuesday to place on the June ballot a measure giving city officials more power to enforce the city’s campaign reform law. In a 13-0 vote, the council approved a measure that, if passed by voters, would give the city clerk power to subpoena contribution records and to hire investigators, and would add civil penalties to the existing criminal penalties for violators.

The measure, however, was missing a provision voted down last week. It would have banned council members from using PAC money for anything other than county and state legislative races.

But the council sent the restriction on political action committees back to a council committee.

City Atty. James K. Hahn said the ballot measure would “toughen up basically a good law.�

But that was not the view of Lindsay, who, outside the council chamber, told Hahn he did not like his support of reform measures.

“Common Cause is running the city attorney’s office,� Lindsay told Hahn. Hahn, who has long known Lindsay, a political protege of the city attorney’s father, County Supervisor Kenneth Hahn, listened politely while Lindsay talked. Later, asked if he agreed with Lindsay’s statement, he said, “No, I don’t think so. I’m still in charge of the city attorney’s office.�

Rosenfield said she thinks that even without the provision the ballot measure would improve enforcement of the reform law, which was approved by the voters in 1985 and which imposes a $500 limit on contributions to City Council elections and a $1,000 ceiling on citywide races.

She said it would give the city clerk power to subpoena bank receipts and other financial documents “any time we feel we need to do an audit.�

That, she said, would end the roadblock faced by investigators in the case of Councilman Richard Alatorre, accused last year of violating campaign laws. Alatorre declined to turn over his papers to city officials, hampering the investigation, which ended in Alatorre agreeing to return to his PAC fund $141,966 in contributions that he spent on the council race.

In a revised settlement agreement announced Tuesday, Alatorre promised to repay another $79,711 to his state political action committee.

In the case, three Alatorre aides were charged with diverting thousands of dollars from the then-assemblyman’s legislative campaign treasury to his council political fund. Such a diversion from the state fund, in which contributions have no limit, violate the city law limiting municipal contributions to $500.

Under the settlement, Alatorre must raise the money under city rules, with no contribution over $500, and return it to the state political fund.