‘Amazing Grace’ Hits Rough Waters : Social services: The executive director of the Westminster Neighborhood Assn. faces questions about spending habits and possible conflict of interest.

At an age when most people look to retire, 54-year-old E. Grace Payne quit her job as manager of an import company to run a struggling poverty program in Watts.

The Westminster Neighborhood Assn. was so short of funds, Payne said, that she used $4,000 of her own money to meet her first payroll. That was in 1972.

Today, Payne, a Bradley Administration appointee to the Los Angeles Harbor Commission, has built Westminster into one of the largest poverty agencies in Los Angeles. With a $1.6-million annual operating budget and 70 employees, her organization serves troubled schoolchildren, unwed teen-age mothers, unemployed youths and the homeless. Other Westminster projects include the Tom Bradley Teen Center, now under construction and made possible by a $1-million gift from junk-bond king and convicted felon Michael Milken.

“They call her ‘Amazing Grace,’ ” attorney Johnnie B. Cochran Jr. said.

Recently, however, Payne has encountered a series of setbacks:

* Last fall, the harbor commissioner was chastised by City Council members for taking a lead role in approving a $2.4-million deal that benefited a businessman who served as a fund-raiser for Westminster.

* In August, United Way placed Westminster on probation and ordered an audit of its books. Concerns about Payne’s spending of poverty funds, including her purchase of a new Lincoln Continental, prompted the actions.

* United Way officials have questioned the propriety of Payne providing about $60,000 in Westminster funds to architect Carl Kinsey, a longtime member of the agency’s board of directors. Kinsey also received up to $50,000 in fees through a city-financed Westminster project, even though his past work “revealed a number of serious problems,” according to a city memo. The state attorney general’s office said it plans to look into Kinsey’s contracts for possible conflict of interest.

Records also show that Payne utilized Westminster personnel and resources to help the campaigns of Bradley and Councilwoman Joan Milke Flores, although political activity is prohibited at nonprofit agencies.

Payne said in an interview that she has done nothing improper. The $52,000-a-year executive director criticized United Way for overreacting to allegations by two “disgruntled” former employees.

“I know that I haven’t done anything wrong . . . but the implication is there,” she said. “I’m 72 years old. I’ve given my life to this. For me to be defending myself after 15 years of volunteering for United Way annoys the hell out of me.”

An energetic, bubbly administrator, Payne makes fund-raising trips nearly every Sunday to Presbyterian churches around the country. In 1975, Payne said, she solicited more than $500,000 to build Westminster’s headquarters on Century Boulevard.

The agency has received $1.6 million in private donations, $1.4 million in city grants and $475,513 in United Way contributions since 1988.

In March, the agency unveiled Westminster Park Plaza, the largest complex of low-income housing built in Watts since the 1965 riots. The 130-unit project was financed by $10 million in city and private loans.

None of the agency’s social and housing programs would be possible without Payne, said city and Westminster officials.

“Grace Payne is a dynamic, dedicated and respected community leader,” Bradley said in a statement when contacted by The Times. She “proves day in and day out her commitment to the people of Los Angeles.”

Said Westminster chairman Clinton Minnis: “Our existance is based on the goodwill and good reputation of the agency. We have been successful on the basis of the cleanliness of Dr. Payne politically, religiously and socially.”

Ella Grace Payne grew up in the small Texas town of Gilmer, according to resumes at Westminster and the mayor’s office, before earning impressive credentials--a BA in education from Texas College, an MBA from UCLA and an LL.D. (doctor of laws) from Pepperdine University. She never practiced law, but for years has used the title “Dr. Payne,” and “LL.D.” has appeared next to her name on city stationery.

But academic records show that Payne received none of these degrees.

Officials at Texas College said that Payne attended school there in 1938 and 1939 but did not graduate. UCLA and Pepperdine have no record that Payne was ever enrolled, although Pepperdine in 1983 awarded her a “distinguished diploma of honor” for community service in Watts.

Payne acknowledged in an interview that she did not attend UCLA’s business school and erred by referring to the Pepperdine community service award as a doctorate. She said she earned her BA but could not provide proof.

She denied exaggerating her academic record to benefit herself. “I raised money long before I was a doctor and it had nothing to do with my being appointed a commissioner.”

Payne listed her “MBA” on a resume submitted to Bradley, who appointed her to the Harbor Commission in 1984. The mayor last week declined to discuss Payne’s resume.

Payne was reappointed to a second four-year term last fall, despite extraordinary criticism from council members during her confirmation hearing. They lambasted Payne for her “conflict” in awarding a contract to Kaiser International Corp., whose president, Richard Holdaway, served as a Westminster director.

“What bothers me is that you helped orchestrate a vote that cost the Harbor Department . . . more than they needed to spend,” Councilman Zev Yaroslavsky told Payne.

Holdaway had appeared before Payne and other Harbor commissioners on June 28, 1989, to support a plan to pay Kaiser up to $6 million--at a 10% profit--for coal-exporting equipment. Kaiser purchased the equipment from the Port of Portland to resell it to the city. Critics claimed it would have been cheaper for the Harbor Commission to purchase the equipment directly and bypass Kaiser.

When Holdaway addressed the commission, Payne said, she became “uncomfortable” and left the hearing room. That same day, Holdaway resigned from Westminster.

Holdaway’s resignation, Payne said, freed her to participate in the Kaiser matter. On July 12 last year, she voted in favor of the contract, although the motion failed on a 2-2 vote. A month later Payne requested another vote and the contract was approved, 3-2.

Payne said she supported a recommendation by the Harbor Department staff, which concluded that the contract would save money.

But even Joan Milke Flores, a strong Payne supporter on the City Council, criticized the arrangement. “It was a deal put together to benefit Kaiser. Here (Payne) has this guy on her board and she’s voting for him. And they did it without going to bid. I don’t know how they got away with it,” Flores said in an interview.

Payne’s troubles with United Way followed complaints by two former Westminster administrators--deputy director R. Kato Cooks and accountant Kenneth C. Glaspie--who alleged misappropriation of poverty funds.

Cooks and Glaspie said that Payne controlled a pair of “hidden” checking accounts used for questionable expenditures.

Glaspie, now accounting manager of the California Restaurant Assn., said he resigned in January after less than a year at Westminster when he uncovered a variety of financial problems, including improper documentation of cash donations to Westminster.

“I never had control of the accounting department,” Glaspie said. “I never knew what was going in and going out.”

Several board members said they were unaware of the two checking accounts.

More than $1 million was in one account, according to checkbook registers provided to United Way for 1988 and 1989. This account was used to pay expenses such as $12,800 to board member Carl Kinsey for architectural work and $29,925 in “loans” to other Westminster programs.

The other account paid for various expenses that included a $7,192 down payment and $621 monthly payments for the Lincoln Continental; $3,594 in American Express card charges; and food for a Jesse Jackson dinner.

United Way officials found that “fiscal controls and accountability have been vested in (Payne’s office) with little oversight by the board of directors,” according to a notice sent to Westminster. While acknowledging the agency’s “continuing effective services and programs,” officials at United Way say they may assume control of the books if Westminster fails to make progress.

Payne said all the expenses in the two checking accounts were proper.

One account, she said, contained $1 million donated by the Foundations of Milken Families for the youth center. Payne said the other account included private donations, but no government or United Way funds.

Both accounts were used to bail out other Westminster programs that were temporarily short on cash, Payne said. “We have always borrowed money (from) wherever we could get money and put it right back.”

United Way officials have questioned the car purchase and the payments to architect Kinsey.

The car was approved by the Westminster board in February, 1989, Payne said. She produced board minutes showing that directors Effie Claybrook and Claudia Sims proposed the purchase.

Claybrook told The Times that she thought the car was for staff use, not a personal car for Payne. Sims and three other board members said they were unaware the agency paid for the $32,000 car.

“This is a poverty program,” said former board member Cooks. “We figured she bought (the car) herself.”

The $12,800 in fees paid to Kinsey were part of a $52,000 contract that Payne awarded the architect to oversee construction of the teen center, now several months behind schedule. He was paid to design Westminster’s headquarters in the 1970s and to help convert a bank building into an infant care center, but agency records do not show the amounts.

Kinsey also was hired as a consultant for the Park Plaza project. Last year, the city’s Community Redevelopment Agency opposed his involvement because his “past performance as an architect on several agency-assisted projects was unsatisfactory,” according to a city memo.

Payne said Kinsey lined up a longtime business associate, Christopher Jones of Irvine, as the lead architect for the $250,000 contract.

Kinsey then “expressed an interest in participating” in the project, Jones said. He was paid $35,000 to $50,000, said a source familiar with the arrangement.

Kinsey and his attorney, William J. Currer, declined comment.

Westminster awarded contracts to Kinsey, Payne said, because he had done previous volunteer work for the agency. “Since I was getting it done so much cheaper, I didn’t even worry about (a conflict),” she said.

In California, it is unlawful for directors of nonprofit agencies to engage in “self-dealing” unless other board members approve the arrangement as “the best possible deal” and prohibit the interested director from participating in the vote. Deputy Atty. Gen. Jim Cordi said his office plans to look into the Kinsey matter.

Westminster records do not show whether Kinsey participated in any votes or discussions involving his own contracts.

Prompted by the Kinsey case, United Way officials have directed Westminster to develop “a written conflict-of-interest policy.”

In April, Michael Stewart, an aide to Councilwoman Flores, was forced to resign from the Westminster board over other conflict-of-interest concerns. As a council deputy, Stewart had successfully lobbied on behalf of Westminster for redevelopment funds, records show.

Payne has made a special effort to court two politicians at City Hall--Bradley and Flores, whose district includes Watts.

In 1986, Payne opened a bank account to raise money for Bradley’s gubernatorial campaign, records show. The account was established under the name “The Bradley Bunch” and used Westminster’s address and telephone. Invitations to a fund raiser at Payne’s house instructed anyone interested in the event to contact Payne’s assistant at the agency. Westminster’s restaurant staff catered the fund raiser.

The “Bradley Bunch”--a group of Payne friends--contributed at least $2,160 to the mayor’s campaign, as shown by a check obtained by The Times.

Payne said the use of Westminster resources would violate the agency’s city contracts, which prohibit any political activity. But, she said, “I don’t really think we had anybody call in.”

Records at Westminster also show that Payne helped gather signatures on petitions for Flores’ reelection to the City Council last year. Flores’ office asked the agency to collect the signatures, Payne said, and she assigned a Westminster administrator to collect them on his own time.

Westminster officials say they are concerned that their funding sources and political contacts will dry up when Payne retires. But Payne said she is putting off plans to leave any time soon.

“Until I reach a stage where Westminster will not fall apart when I walk out the door, I will stay here,” she said.