Officials Admit Failure on EIDC

Los Angeles City Council members, county supervisors and a former mayor acknowledged to a criminal grand jury last month that they failed to oversee Los Angeles County film czar Cody Cluff, unwittingly allowing him to spend more than $150,000 on a country club membership, strip clubs and donations to his children’s high school.

The elected officials testified that even though they sat on the board of directors for the Entertainment Industry Development Corp., most never attended meetings or monitored spending -- until media reports last year indicated that the district attorney’s office was investigating the agency.

Several also testified that they weren’t aware that they had received political contributions from the EIDC and would not have approved them if they had known.

Some 1,628 pages of grand jury transcripts, which were made public Monday, reveal new details of heavy spending by Cluff, including $7,000 for a baseball camp in the Dominican Republic and $8,000 to attend strip clubs in Arizona.

The Los Angeles County Grand Jury indicted Cluff on Aug. 20 for alleged misappropriation of public funds and embezzlement. Cluff, 44, and EIDC General Manager Darryl Seif, 37, were also charged with forging a letter from the mayor’s office and using a counterfeit city seal to obtain city badges. Both Cluff and Seif have pleaded not guilty, and are scheduled to return to court Sept. 24.

According to the transcripts, prosecutors Max Huntsman and Jennifer Snyder told the grand jurors that the EIDC was a “shop of horrors,” run by a power-hungry man who sought to turn the EIDC into a public-relations agency for the county and city.

“That was just something that Cody decided he was going to try to do, because that would justify trips to Cannes and to Scottsdale and all over the place, and a lifestyle that, frankly, didn’t have anything to do with film permitting,” Snyder said.

The elected officials’ lack of oversight resulted in Cluff approving a $10,000 bonus for himself and making a total of $167,800 in political donations, prosecutors told the grand jurors. “If you are the supervisors or the City Council, heck, this is great,” Snyder said. “This is like benign neglect squared ....They make political contributions to me. My constituents are happy.”

During 11 days of testimony this summer, more than 50 witnesses -- including former Mayor Richard Riordan, 17 current and former council members, and the entire Los Angeles County Board of Supervisors -- testified about the role of the agency and what they knew of its finances. The EIDC was created in 1995 to streamline permitting and promote film production in Los Angeles County. Cluff resigned in December.

Cluff’s attorney, Mark Werksman, said the grand jury transcripts only provide part of the story.

“The grand jury process is a one-sided presentation of information intended to incriminate a defendant,” he said. “Every transaction described has a valid and legitimate business purpose, and we will prove that in court.”

Prosecutors argue that the EIDC was a government agency and therefore prohibited from spending money on political contributions and private luxuries. The defense, however, maintains that the agency was a private, nonprofit corporation, and that no public funds were involved.

Several elected officials admitted that they should have watched more closely, should have known that there was no written contract for Cluff, and should have realized that there were no financial guidelines for EIDC operations. After news reports, the officials -- who had ignored the agency except as a source of political contributions -- began attending meetings and returned donated money.

“I was embarrassed by it all, and unfortunately, I was even more embarrassed when I found out I was on the board,” said county Supervisor Gloria Molina. When asked his reaction upon learning he was a board member, Supervisor Don Knabe said, “I was shocked.”

Former councilwoman and now city Controller Laura Chick said, “My perception was, there weren’t any problems so it wasn’t on my radar screen, until as city controller I turned back and looked and saw a situation that had just been allowed to continue without any scrutiny.”

Others, however, said they were too busy to pay attention or didn’t feel a need to get involved. Former Councilman Nick Pacheco said even after learning he was on the board of directors, he didn’t attend meetings or send a staff member. “I just wasn’t interested,” Pacheco said. Former Councilwoman Ruth Galanter told grand jurors that she “had other things to do.”

Riordan said he never attended a board meeting or reviewed the agency’s financial records. Riordan worked through his staff when he was mayor “because I had, you know, thousands of things that I had under my responsibilities,” he said.

Riordan testified that when he learned about the political donations to board members, he called Cluff into the office and told him, “I don’t care whether it’s legal or illegal, that it doesn’t pass the smell test, and it’s just wrong, and he should stop it.”

According to the grand jury transcripts and exhibits, Cluff donated $36,000 in EIDC funds to Covina High School, which his three children have attended. He also spent $15,000 on a membership at the Via Verde Country Club.

Receipts from Arizona show that Cluff spent $8,000 at strip clubs, including $700 on tips called “Christie’s Golden Dollars.”

Frank Scherma, a partner in a production company and an EIDC board member, testified that taking people to strip clubs was just one form of entertainment that was used to help keep filming in Los Angeles.

Large sums of money were also spent in connection with Dawn Keezer, who testified that she had a romantic relationship with Cluff. Keezer headed both the Pittsburgh film office and a lobbying organization called Film US aimed at keeping film production in America. Cluff paid $10,000 to the Pittsburgh agency and $140,000 to a company to lobby on behalf of Film US, according to the transcripts.

Though Assemblywoman and former Councilwoman Jackie Goldberg said the lobbying might have been defensible because it could have benefited Los Angeles, Supervisor Zev Yaroslavsky testified, “We don’t pay that kind of money at the county of Los Angeles for Washington lobbyists.”

In seeking to make the case that the EIDC is a public agency, prosecutors cited two documents by Cluff, including one in which he described the EIDC as a government agency and another in which he wrote that EIDC had the primary responsibility for enforcing the city code governing filming activities.

The legal status of the EIDC is considered crucial to the Cluff prosecution. Lawyers have disagreed on the question. Grand jurors heard from several elected officials who said they understood it to be a public agency.

Riordan said the agency had the “same responsibilities as a governmental agency.” County Chief Administrative Officer David Janssen also testified that the EIDC was receiving public money and performing a public function.