COUNTY LEASES PROBED DEALS INVOLVE POSSIBLE MISUSE OF FUNDS.

Byline: Troy Anderson Staff Writer

The Los Angeles County auditor is investigating lucrative lease-back deals approved by the county supervisors and handled by the county's real estate unit for potential misuse of state and federal funds, officials say.

The probe comes on top of a district attorney's inquiry of potential improper activity by the head of the agency, officials say.

The latest investigation by Auditor-Controller Tyler McCauley was requested by the federal government in 2003. Federal officials had raised concerns about leases for welfare offices and the possible waste of federal dollars intended to help mostly poor people. Under the lease-back deals, the state and federal governments provide a higher rate of reimbursement to counties that lease space rather than own it outright.

The District Attorney's Office said it is investigating the Chief Administrative Office's Real Estate Division to determine whether its chief, Chuck West, provided inside information to a prominent Westside development company that built three of the office buildings, then leased them back to the county.

Government watchdogs said the investigations raise serious questions about contracting practices at the Hall of Administration.

``If these allegations are proven, then all contracts and all permits should be re-examined to determine whether the developers have been providing financial inducements to county employees,'' said Bob Stern, president of the Center for Governmental Studies in Los Angeles, a nonpartisan, nonprofit group that looks at campaign financing and ethics.

McCauley said he expects to finish his investigation soon, adding that his office also is calculating whether the county might have to reimburse the state and federal governments, and for how much.

``We are working to determine if claiming these costs from the state and federal governments was appropriate,'' McCauley said.

The district attorney's probe led to West, also known as Charles Mazouch, 55, of South Pasadena, being put on paid leave Sept. 14, the day before investigators served search warrants seeking financial records and vacation photos of West and his wife. Warrants seeking similar documents and photos also were served on developers Robert Sonnenblick and Nelson Del Rio and their wives.

Officials from Sonnenblick-Del Rio Development Inc., in which the two men are partners, did not return phone calls for comment.

In a phone interview, West denied that he had any inappropriate dealings with Sonnenblick-Del Rio, including providing them with inside information or allowing them to pay for his vacations to Jamaica, Europe and Breckenridge, Colo.

Sonnenblick-Del Rio owns three of the four buildings that are the subject of McCauley's investigation. The fourth is owned by Chase Glendale Services LLC, whose representatives did not return calls.

The county spends about $14.4 million in annual lease payments on those four buildings and another office building in Exposition Park.

The county owns about 5,100 buildings - many of which are for storage - and leases 358 additional facilities.

``The way we handled these buildings was not specifically provided for in federal regulations,'' Chief Administrative Officer David Janssen said. ``We've had the same kind of situation in health care where we try to figure out the most aggressive ways to draw down federal dollars for health care.''

But in a March 2003 letter to McCauley, David Low, Program Support Division director for the Department of Health and Human Services, questioned the lease-back deal on a Sonnenblick-Del Rio building in West Los Angeles. He noted that the parties established a private, nonprofit corporation and that the city of Los Angeles issued a tax-exempt bond to finance construction.

As part of the deal, the city expects to receive title to the building at the end of the 30-year lease. At the same time, the county entered into a 30-year operating lease with the city for the facility.

``Because of recent corporate financial scandals, these types of leases have been under fire by users of financial statements and regulators,'' Low wrote. ``We suspect that the county entered into this lease because of its belief that it would receive greater reimbursement under federal and state programs from an operating lease than from a capital lease.''

At the end of the 30-year lease, the county will not own the facility and will have to extend the lease or purchase the building. If the county had sought a capital lease, it would own the building - valued at up to $189 million - once the lease was complete.

Instead, the county now will have to pay $29 million to purchase the facility.

The criminal investigation of West follows the prosecution of the Chief Administrative Office's Real Estate Division lease acquisitions manager, Cheryl Fuerth, 57, of Long Beach.

Court records show Fuerth had married Claus Marx, the former director of the CAO Real Estate Division, in 1998 and that the two filed for a confidential marriage license. In her statements of economic interest, Fuerth failed to disclose three properties she and Marx own in Hermosa Beach, Long Beach and Whittier.

Originally charged with seven felony counts of perjury and three misdemeanor counts of failing to disclose economic interests, Fuerth pleaded no contest Sept. 15 to one misdemeanor count and will be sentenced Dec. 13.

Troy Anderson, [phone]

troy.anderson(at)dailynews.com