A Financial Fiasco Is in the Making

0 Comments | Insight on the News, July 30, 2001 | by Kelly Patricia O'Meara

An alleged slush fund for the Los Angeles Superior Court Judges Association may be the tip of an iceberg of misappropriation of government money in Los Angeles County.

"Put your concerns in writing and mail them to me." Click; the line goes dead. The voice on the phone was that of Los Angeles Superior Court Presiding Judge James Basque as Insight pressed him to explain whether the Los Angeles Superior Court Judges Association (LASCJA), of which he is the chairman, has made any attempt to pay 30 years of back taxes to county, state and federal authorities.

It has been more than two years since Insight broke the story of the Los Angeles Superior Court judges earning money off the books by providing minimum continuing legal education (MCLE) classes to attorneys in the courtrooms. The fees collected were deposited into a private bank account that has come to be known as the $100,000 "coffee and flowers" fund (see "Is Justice for Sale in L.A.?," May 3, 1999).

The problem with this arrangement is that, apparently to cover for the fact that the judges weren't paying taxes on this income, whether earned or extorted, the LASCJA illegally used the employer-identification number (EIN) of the County of Los Angeles. In time the county politely asked the learned jurists to stop using that number. But no criminal charges were filed against the judges and no one raised the issue of making good on back taxes. So when Basque abruptly ended that telephone conversation, Insight decided to take another look at the status of that private bank account and to revisit the Los Angeles County Superior Court Finance Office.

Insight put its "concerns" about those back taxes in writing, as requested by the presiding judge, and hand-delivered the formal request to his chambers. Basque neither responded to the questions nor agreed to a meeting, instead deferring to the county's counsel, Frederick Bennett.

Although Bennett says that he "has some background information concerning the [judges] association," not once in his three-page response did he discuss whether the judges have made any attempt to pay what could amount to 30 years of back taxes and penalties. Instead, he obfuscates, rambling on that he is "informed and believes the association has used its own taxpayer's identification number since approximately 1997, when the county auditor [J. Tyler McCauley] indicated that would be the better practice."

For the LASCJA to use its own identification number, as required by law, is a "better practice?" What about it being illegal for the judges to have enjoyed their private income for so many years under the county's EIN? Not a word. But Bennett continues to defend the judges by explaining that "the association does not pay taxes," as he is "informed and believes that it is an organization exempt from taxes."

Bennett provided a copy of the LASCJA's year 2000 federal IRS 990 Form indicating the organization's tax-exempt status but advised that the information he was providing should be verified with the LASCJA's attorney, John J. Collins of the Pasadena law firm of Collins, Muir and Traver.

Collins had less information than Bennett. It appears that Collins can only speak about the LASCJA back to the winter of 1997, when he first began representing the association. Asked if he is aware of any efforts by the judges to pay taxes on these large sums of money earned during the 30-year period, Collins tells Insight: "I can't speak about that because I don't know they made any money."

That assuredly is a lawyerly response, given that Collins admitted to having read Insight's earlier article about the LASCJA which contained details about checks being deposited into the judges' private Bank of America account. It at that time contained a little more than $100,000.

Neither Collins nor the judges have addressed the issue that, based on the bank records, large sums of money may be owed in back taxes. Furthermore, based on correspondence from Collins, it is clear that the association's counsel is much more informed about the status of the account than he lets on.

Since Insight began looking into the "slush fund" of the Superior Court judges and their finance office, requests for information have been submitted by private citizens, including Marvin Bryer, a retired computer analyst in La Crescenta, Calif. He became involved in the Superior Court's financial matters because of problems his daughter was having in a child-custody case. In February 1998, Bryer made a statutory request through Collins to inspect the LASCJA's records. Collins refused, saying LASCJA "is not a public entity nor an exempt organization as defined under this statute." He stated that "the Los Angeles Superior Court Judges Association is a private organization and its documents, including financial records and tax information, are confidential and not subject to disclosure."

While Collins says the LASCJA is a "private" organization, according to California Secretary of State Bill Jones, the association filed for tax-exempt status in December 1997 well within the time frame of Bryer's request for inspection of the records. When Insight reminded Collins about this correspondence, the lawyer once more stonewalled, saying: "I'm not giving you any opinion on that. That's not part of my function. I'm not telling you what their legal status is. Everything that's out there is a matter of public record. You've got the filings, the informational returns and that's enough for you to come to your conclusions."