Wong, Stein Preparing Defense
Attorneys Retained Over Fundraising Investigation

Staff Reporter

Government officials and contractors being questioned in the investigations of political fundraising practices have retained some of L.A.'s priciest white-collar defense attorneys and could ultimately leave the city footing bills running into the hundreds of thousands of dollars.

Though no one has yet been named as a target in the ongoing probes by the U.S. Attorney in L.A. and the L.A. County District Attorney, those who have testified before a grand jury and answered questions from prosecutors may have already started running up hefty legal bills.

The retaining of white collar criminal defense attorneys is considered a telling development in the investigations because the attorneys are all specialists in public corruption and knowledgeable of federal laws, immunities and the types of charges that can be made by the U.S. Attorney's Office. But various sources familiar with the investigations would not categorize the status of the inquiries or their eventual outcome.

Because of the expenses involved in having representation, however, paying the final bills could be an issue for those involved. Many of the key defense lawyers come from a small circle of former prosecutors in the U.S. Attorney's Office. They charge between $400 and $600 per hour, some of the highest rates in the industry.

"This is a very complex and sophisticated area of the law," said Marvin Rudnick, a former federal prosecutor who is now a criminal defense attorney in Pasadena. "It could go into the hundreds of thousands of dollars to defend somebody. I wouldn't be surprised if some of these people might even need a team of lawyers. There's lots at stake."

While the city will not defend elected, appointed or civil service employees in criminal cases, it could end up paying legal fees if charges are not brought, are dropped or if an acquittal is reached.

Track records

The recent investigations arose soon after City Controller Laura Chick issued an audit in December criticizing the Airport Department's contracting procedures, which, in her words, have created an "environment ripe for abuse." She stopped short of saying any wrongdoing occurred but turned over the audit's findings to the District Attorney's Office and other government entities.

Earlier this month, L.A. District Attorney Steve Cooley announced for the first time that his office was in the early stages of a grand jury investigation into political fundraising practices.

The U.S. Attorney's Office has also issued subpoenas to the heads of the city's three proprietary departments: airport, harbor and water and power.

Airport Commission President Ted Stein, a Chatsworth lawyer who is believed to be at the center of the probes, has hired David Schindler, a partner in business litigation at Latham & Watkins LLP.

Schindler, who did not return calls, is best known as the prosecutor who obtained a successful fraud conviction of former Arizona Gov. John Symington in 1997. He left the U.S. Attorney's Office in 1999, after 10 years mostly spent prosecuting computer hackers. He has also represented Mattel Inc. and the Church of Scientology. Stein did not return calls.

Leland Wong, who resigned in January from his post as a commissioner for the Department of Water & Power, has hired David Scheper, former chairman of the L.A. litigation department at Winston & Strawn LLP. Scheper has recently formed his own firm, Overland Borenstein Scheper & Kim LLP. Scheper represented the former senior financial manager at Homestore Inc., Jeffrey Kalina, who pleaded guilty to securities fraud in January 2003.

Wong resigned as government and community relations director at Kaiser Permanente after an internal investigation alleged he had used company money to pay for cultural and sporting event tickets for elected officials. Wong could not be reached.

Scheper declined to comment in detail about his representation but said he would actively seek to "persuade those in power that I represent an innocent man."

"These guys are very good," said Mark Beck, a partner at Beck De Corso Daly Kreindler & Harris PLC, who has worked opposite both Scheper and Schindler. "They are among the best lawyers I have seen in the practice, in terms of thoroughness and ability."

Defending corruption cases

Schindler served on the volunteer panel appointed by the L.A. Police Commission in 2000 to investigate the Rampart scandal. The panel reported directly to the Police Commission's former inspector general, Jeffrey Eglash, a litigation partner at Howrey Simon Arnold & White LLP. Eglash now represents several Kaiser employees who worked under Wong. Eglash declined comment.

Before becoming inspector general in 1999, Eglash was chief of public corruption and government fraud at the U.S. Attorney's Office in L.A. He was involved in numerous grand jury investigations, including the O.J. Simpson trial, and a failed public corruption case against former L.A. Mayor Tom Bradley in 1989.

He was also a prosecutor in "Operation Big Spender," a joint operation of the U.S. Attorney's Office, the Internal Revenue Service and the Federal Bureau of Investigation in 1988 that ultimately convicted 19 L.A. County Sheriff's Department deputies who laundered money from drug busts.

Another former prosecutor involved in "Operation Big Spender," Thomas Brown, represents URS Corp. in the ongoing investigations. In November, the Business Journal reported that a URS officer told a senior city official that Stein asked for political contributions. URS, which has a $22.4 million consulting contract on the LAX Master Plan, has declined comment.

Brown, a litigation partner at Sheppard Mullin Richter & Hampton LLP, recently represented former South Gate Treasurer Albert Robles, indicted last year on five felony counts, including misuse of public funds. He also represented Cody Cluff, the former president of the Entertainment Industry Development Corp. who resigned last year amid allegations he used the organization's money for political contributions.

It is unclear whether Deputy Mayor Troy Edwards, who received a subpoena two months ago from the District Attorney's Office, has retained an attorney. His office did not return calls.

Legal reimbursement?

Under a California Government Code section, the city is not required to pay for the criminal defense of its employees or former employees but could pick up the tab if "the criminal action or proceeding is brought on account of an act or omission in the scope of his employment" or "such defense would be in the best interests of the public entity."

"The general rule is if you're acquitted, you're entitled to be reimbursed," said Rudnick. "The city is morally bound to protect somebody under those circumstances. But the city shouldn't reimburse someone a dime if he's indicted or pleads guilty. Part of the punishment is they have to pay out of pocket for their wrongdoing."

The questions become murkier in the recent investigations, said Daniel Lowenstein, professor of election law at UCLA's law school.

"You're saying that the commission is giving favorable treatment or unfavorable treatment to somebody depending on whether they made campaign contributions," he said. "You'd have to look at that individual's official conduct, which is at the core of the question. If it's a problem that arises out of his official activity, he may very well be entitled to have the city defend him."

From 1997 to 2002, the City Council voted to spend more than $1.5 million for private attorneys to defend former City Councilman Nate Holden against two lawsuits alleging he sexually harassed several women, and a later suit claiming he forced an on-the-clock staff member to work on his political campaign.

"It's standard," said Tim Agajanian, the partner at Agajanian Law Group LLP, and one of the attorneys who defended Holden. "The city does this all the time. They enter into a contract, the City Council approves it, and they pay out of the budget."

But Holden was not involved in a criminal investigation, and, in general, the L.A. City Attorney's Office does not provide legal counsel for city officials involved in a potential criminal matter. That rule applies because committing a crime is outside the perceived role of a city official, attorneys said.

In 1995, a jury on one harassment case found for Holden. The other case was dismissed on summary judgment. An appellate court reversed the ruling, and the City Council approved paying a $175,000 settlement. The City was also a defendant in both cases.

"If someone is accused of misconduct, it would be incumbent upon them to hire counsel, as long as their perceived criminal activity is outside the scope of their job," said Eric Moses, spokesman for the City Attorney's Office. Moses said the rule applies to both city employees and other city officials, such as commissioners, who are appointed by not employed by the city.

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