L.A. Cuts Off Funds for Poverty Program : Investigation: City says it has begun a conflict-of-interest inquiry into dual role played by Bishop H. H. Brookins in South Los Angeles organization.

Citing conflict-of-interest concerns, city officials said Monday that they have cut off funding to a poverty program formerly headed by Bishop H. H. Brookins and housed in an office complex he secretly owned and renovated with city funds.

The action was taken following inquiries from The Times about the 10-year-old South Los Angeles Development Corp., which has received more than $500,000 in federal funds through the city.

The program has a long history of problems, ranging from poor bookkeeping and failure to pay taxes to theft of public funds, according to a state audit and city investigative reports.

Two former employees of the agency were convicted of operating a payroll kickback scheme in 1986. One of the employees earlier was operating his own tax preparation business out of the same office as the city-funded program, city records show. Brookins was not implicated in any illegality.

City officials said Monday they have launched a conflict-of-interest investigation involving Brookins’ dual role as an officer of the poverty program and as its landlord. Tens of thousands of dollars in rent since 1983 may have gone to the bishop, according to Susan Cleere Flores, who oversees the program. Such interlocking arrangements are strictly prohibited by city contracts, officials said.

Brookins said he was unaware that he had a possible conflict. “If that is the case, I will find a way to pay the city back,” he said.

During questioning by members of a City Council committee, Community Development Department officials also announced Monday that they are conducting a full review of the controversial, $336,000 city-funded renovation of Brookins’ office complex on Crenshaw Boulevard in Southwest Los Angeles. The Community and Economic Development Committee set a Feb. 28 meeting to receive more information.

“There are a number of areas we need to further investigate,” said Parker Anderson, general manager of the department. Among those, Anderson said, is when--and if--Brookins returned nearly $30,000 in city construction loan funds that district attorney’s investigators say he used for “personal obligations.”

Brookins said in an interview that he does not recall using the $30,000 for personal matters and said he has not “taken a dime” from the city.

The Times reported last week that Brookins, a respected leader of the African Episcopal Methodist Church and longtime political mentor of Mayor Tom Bradley, obtained the $336,000 loan of federal funds through the city to improve the Crenshaw facility.

The loan documents signed by Brookins indicated that the property was owned by an AME church corporation, but, according to the secretary of state’s office, the corporation never existed. The refurbished building was later transferred to Brookins and leased out for $10,000 per month, while the struggling city program was shifted to a dilapidated office next door.

Brookins now holds title to the complex, which loan records show is worth about $1 million. City administrators say they never would have financed the renovation had they known Brookins owned the building; they said they would not use public funds to benefit a private property holder.

City administrators told The Times that Bradley special assistant William Elkins intervened on Brookins’ behalf. Elkins denied the allegation.

Bradley has denied any role in the Brookins matter. On Monday, the mayor indicated that he did not intend to look further into Elkins’ involvement. “I’m not going to be trying to play God,” he said, referring to the conflicting accounts.

The loans were investigated by the Los Angeles County district attorney’s office, but the case was dropped last year because the statute of limitations for fraud and embezzlement had expired, prosecutors said. Officials at the U.S. Department of Housing and Urban Development now are reviewing the loans.

Brookins launched the nonprofit South Los Angeles Development Corp. (SLADC) in 1979 with $225,000 in state seed money provided by then-Gov. Edmund G. Brown Jr., a political ally. The corporation later received about $2 million in federal, state and city funds.

The goal was to create a model urban center for job training, small business development and for education and housing programs.

Brookins was prominently featured in early promotional materials for the program and served as president or chairman until several months ago. But Brookins insisted in a telephone interview with The Times that he had “nothing to do with the running of SLADC.”

“It caused all kinds of headaches,” he said. “It was so frustrating I don’t want to get into it. . . . I was trying to do good things for the community. . . . I thought people were getting jobs.

“Now comes out that it is a sordid program,” Brookins said. “People abused me and misused me.”

From the start, SLADC was plagued by allegations of poor management. A state audit in 1980 found record-keeping deficiencies and financial irregularities that “clearly indicates mismanagement,” according to an internal Brown Administration memo obtained by The Times.

But the memo, from officials in the Department of Economic and Business Development to the Brown-appointed head of the department, Melinda Luedtke, said corrective measures must “fly politically” and noted, “We are aware that the governor wanted the bishop’s help for various reasons.”

Through a spokesman, Brown said that the program was funded because the bishop was “doing some good things” and it was properly monitored.

Percy Pinkney, a former special assistant to Brown who served as an adviser to Brookins’ program, said the governor’s office did not give any special treatment to Brookins’ project and that problems with it were no worse than those of many community-based programs.

However, three early directors of Brookins’ program--Ernie Sprinkles, Philip Fleming and Carol Best--all told The Times they were concerned about poor financial controls. “There were . . . no procedures (or) guidelines that I knew of for any of their fiscal management,” Best said.

Some of the most serious problems involved a $300,000 city job training grant in 1983. Four people, including two former SLADC employees, were convicted in 1986 in a payroll kickback scheme. More than $50,000 had been paid to phantom workers, friends and relatives who had been “placed” in jobs at non-existent companies, city investigators concluded. Investigators said they found no evidence that Brookins was involved.

Walter E. Wells, a former SLADC employee who served five months in jail for his part in the payroll scheme, also was involved in another controversy a year earlier.

In 1985, city monitors discovered that Wells was running his private tax preparation service out of Brookins’ office complex while working for a city-funded program intended to help poor high school students get into college, records show. Wells acknowledged to city monitors that some of his tax clients were being charged, and he was ordered to move his tax preparation business.

In a recent interview, Wells denied receiving kickbacks or doing anything improper and said that he offered his tax service free to poor clients of the city program.

The SLADC program was scaled back sharply in the mid-1980s, after the criminal investigation and poverty program cutbacks. In recent years, only the city’s current $83,000-a-year student assistance program has remained.

That program was put on probation in 1987 and 1988 for serious management problems. Among other things, monitors found that files for 222 clients were missing. Those problems eventually were resolved, but funding has been temporarily cut off in recent years, city records show, for failure to pay federal payroll taxes and discovery that the program failed to maintain its nonprofit corporate status with the state.

Defenders of the program say that, despite problems, it has provided a variety of needed services. Program brochures claim that hundreds of clients received jobs, and records submitted to the city indicate that since 1983 several thousand needy students have received assistance in applying for college. City monitors said Monday that they will attempt to verify the services were provided.

This article was reported by Times staff writers Glenn F. Bunting, Rich Connell and Tracy Wood. It was written by Connell.