Prosecutors Asked to Probe Failed Fund Raising : Government: County supervisors say health officials may be criminally liable for wasting $726,019. Audit criticizes handling of financial records.

The Los Angeles County Board of Supervisors asked the district attorney’s office Tuesday to investigate whether criminal charges should be lodged against county health officials whose bungled fund-raising efforts wasted $726,019 in public money.

The now-defunct Foundation for Health Services was created as part of an effort to raise money for hospital construction by seeking contributions in private philanthropic circles.

But the Board of Supervisors dissolved the foundation in March after disclosures that it spent $149,052 on its only fund-raising event--a gala dinner at the Universal City Hilton--but sustained a net loss of $16,640. In its three years of existence, the organization spent $726,019 in county funds and did not raise a cent for hospital construction.

An audit completed this week found that the health officials running the foundation failed to keep payroll records or an accounting system for their expenditures. Although there appeared to be little direct evidence to suggest criminal conduct, supervisors said sloppy management practices may have masked other, more serious problems.

“Where did all this money go and who is responsible?” asked Supervisor Deane Dana. “There was no accounting system and it’s obvious that there was no oversight here. There needs to be a widespread disciplinary action taken.”

Dana’s uncharacteristically strong remarks landed him in the same camp with outspoken liberal Supervisor Gloria Molina, who stood and applauded his brief oration. Dana, a Republican, is involved in a hard-fought reelection bid against Rolling Hills Mayor Gordana Swanson.

The board voted 3 to 0 to request the district attorney’s review. Supervisors Ed Edelman and Kenneth Hahn were not present.

Two top officials of the Department of Health Services also came under attack from Dana and Molina, who suggested that Director Robert Gates and chief financial officer Irving Cohen have badly mismanaged the department and its $2.2-billion budget.

Gates sought to deflect criticism in a written statement, blaming the foundation’s failed fund-raising effort on two high-ranking health officials who were recently demoted: Carl Williams, who was removed from his position as director of hospitals, and Terrell Ford, the former director of the Foundation for Health Services, now on the staff of Rancho Los Amigos Medical Center in Downey.

“Sir, don’t tell us your underlings were responsible for this,” Molina told Gates. “You were as responsible as anyone else. . . . We on the Board of Supervisors have been bamboozled.”

In previous interviews, Ford said the losses were due in part to the inexperience of his foundation staff--no members had professional fund-raising experience. He was on vacation Tuesday and could not be reached for comment.

The Board of Supervisors created the foundation in 1988. Although it was incorporated as a nonprofit organization, all of its employees were members of the county health department who were paid with county funds.

Several high-ranking health officials served on its board of directors, including Cohen and Williams. Cohen was also the organization’s treasurer. On Tuesday, Cohen denied responsibility for the fund-raising fiasco.

Cohen said he had absolutely no involvement in the foundation’s daily operations. “There’s nothing to hide,” he said. “I have probably one of the finest reputations of any county manager.”

Gates also attempted to distance himself from the controversy. “I felt I had acted appropriately,” he said. “It is a huge department. I don’t think you can take this as an example of the overall management of the department.”