RIORDAN SEEKS TO USE TOBACCO FUND TO COVER RAMPART SUITS

Liability: Expected $300 million would be diverted to settlements arising
from scandal. Other programs might suffer, critics warn.

Los Angeles Mayor Richard Riordan, confronted with the financial fallout
from the worst police corruption scandal in city history, said Thursday that
he favors diverting $300 million in expected tobacco settlement money to pay
the cost of resolving lawsuits that arise from the LAPD's Rampart Division
investigation.

At a news conference Thursday morning, Riordan insisted that the scandal
would not bankrupt Los Angeles. He vowed to protect city programs and
taxpayers, while still making amends to people who have been abused by Los
Angeles police officers implicated in the still-growing list of misdeeds,
which include improper shootings, framing of suspects, thefts, beatings,
perjury and cover-ups.

"We will get by this," said Riordan, who appeared relaxed as he addressed a
crowded room full of reporters and cameras.

Still, the mayor agreed that even the staggering sums that he proposes to
set aside may not cover the full cost of the lawsuits. Others, meanwhile,
warned that the mayor's approach--which essentially entails swapping $300
million over 25 years for $100 million now--is a clever but problematic way
to come up with a huge amount of money quickly. Riordan's proposal will
require City Council approval.

Councilman Mike Feuer and Chief Legislative Analyst Ron Deaton, two key
officials in that approval process, said they were impressed by certain
aspects of Riordan's recommendation, but expressed worry that it might take
money away from a program that is aimed at helping handicapped people and
that is required by the federal government.

Councilman Mark Ridley-Thomas was less evenhanded. The mayor, he said, was a
"headline grabber" whose news conference had angered a number of council
members--none of whom were consulted in advance. Under Riordan's proposal,
the city essentially would turn over to a private entity all its anticipated
tobacco revenue, which Los Angeles and other governments are scheduled to
receive to settle government lawsuits against the nation's leading tobacco
companies. That money is expected to come in over a 25-year period. The
private entity would use that steady revenue stream to back an immediate
$100-million bond.

The result is that money would be set aside to pay off plaintiffs who sue
the city for their mistreatment by police. Any risk would be borne by the
private entity, not the city.

That means Los Angeles would not get the education, health and other
programs that the tobacco money would have paid for, but also would not face
as crushing a financial burden from the police scandal.

How much of a down payment the funds would represent is unclear, however. No
one at this point, including Riordan, can accurately predict the full scope
of the scandal or its financial impact.

"This will allow us to cover our liability for the first several years, I
believe, and hopefully, the total liability," Riordan said. "Though we have
no way of knowing the dollar amount, we must expect and prepare for tens of
millions of dollars of liability,"

Asked whether he had confidence that the tobacco money would be enough,
Riordan responded: "I have no confidence one way or another."

The city attorney's office has estimated that the first 99 cases alone could
cost the city $125 million to resolve, and both prosecutors and police
anticipate that the final number of tainted convictions will go much higher
than that. Some City Council members and others have proposed cutting new
city programs or trimming existing ones to begin bracing for the inevitable
legal and financial fallout.

On Thursday, Feuer, who heads the council's Budget Committee, called
Riordan's proposal "promising," but he and others expressed some skepticism,
both about the amount and about the programs that would have otherwise been
paid for by the tobacco money, most notably a $10-million-a-year campaign to
make sidewalks more readily accessible to the handicapped.

"At first blush, I think there is some promise to the mayor's proposal,"
said the councilman, who is a candidate for city attorney. "It's worth
pursuing. All of us want to find responsible ways to deal with the Rampart
crisis and preserve and enhance our core programs. We need to be exploring
innovative ideas."

But Feuer added that the city "cannot lose sight of its legal mandate" to
ensure that its streets are wheelchair-accessible, as required by federal
law.

Under orders from the U.S. Department of Justice, the city has agreed to
make "curb cuts" at intersections in heavily traveled pedestrian areas.

"It's not only a legal requirement, but it's also an ethical requirement,"
Feuer said. "None of us should be backsliding from that mandate."

Officials estimate that about 40,000 curbs must be retrofitted over the next
five years. That program is expected to cost $50 million. On Thursday,
officials from the city attorney's office were reviewing Riordan's proposal
to examine its impact on the curb cuts program, which is required under the
Americans With Disabilities Act. Deaton echoed the worry that cutting back
on the curb program after promising the federal government otherwise might
invite trouble. Deaton, always conservative in fiscal matters, has urged the
council to abandon any new programs until officials have a better sense of
the Rampart scandal's reach.

"One should not put revenue into new programs until we are assured we have
enough money put aside for Rampart," Deaton said. "This is not a
revolutionary concept. It seems only prudent."

Riordan's approach, though novel, is not unprecedented. The mayor was joined
Thursday by a financial analyst from the investment firm of Morgan Stanley,
who said similar diversions had been used in New York and elsewhere as
municipalities faced financial crises.

Also, the city attorney's office often issues so-called "judgment obligation
bonds," which help the city cover the cost of large court judgments by
increasing the city's debt--as opposed to drawing on a specific revenue
source, as is the case in the Riordan tobacco proposal. That more
traditional approach is being used to help pay for a $40-million police
overtime case.

Although the city government is feeling the brunt of the Rampart scandal,
other jurisdictions are being drawn into it as well.

Los Angeles County Supervisor Zev Yaroslavsky, who has spoken more
passionately about the crisis than any other local leader, said he will
propose that the Board of Supervisors ask its special counsel, nationally
recognized police expert Merrick Bobb, to examine how the county agencies
involved in the criminal justice system "could have done better."

Yaroslavsky said he hoped that Bobb would look at how the district attorney
and public defender's offices, as well as the Probation Department, could
have scrutinized the allegedly false information they were given by LAPD
officers that led to innocent people pleading guilty and serving time in
jail.

"It's not an easy thing for them to do," Yaroslavsky said. "You can't
question every single piece of evidence in every single investigation or
you're going to have a system fueled by paranoia."

Yaroslavsky said he did not see the review as a drawn-out process and added
that the focus of the scandal should remain with the LAPD. Some city
officials have criticized Yaroslavsky, who has been increasingly vocal about
the need for action in the scandal, for grandstanding over the issue without
substantively addressing the county's role in it.
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Times staff writer Nicholas Riccardi contributed to this story.