Film Agency’s Chief Finds Himself in D.A. Spotlight

In just over a decade, Cody Cluff transformed himself from a controller at an Orange County solenoid factory to Los Angeles’ film czar.

An accountant by trade, Cluff was assigned by city and county elected officials to woo Hollywood players -- to keep them shooting films and TV shows here, rather than in other states and countries busy rolling out red carpets of their own.

Cluff, head of Los Angeles’ Entertainment Industry Development Corp. since its creation in 1995, has helped streamline a vital part of the Hollywood production process by making it easier to obtain filming permits while keeping relative peace in affected neighborhoods.

But the way he spent the agency’s money has also led to trouble. With carte blanche access to his agency’s multimillion-dollar treasury, the ambitious entrepreneur treated himself and those he courted so well that he and the nonprofit agency are now under investigation by the district attorney’s office for possible misuse of agency funds.

The probe has cast an embarrassing spotlight, not only on Cluff, but on the elected officials who created the EIDC as an experiment in privatizing government functions. They appointed themselves as its overseers, then all but ignored it, except as a source of campaign contributions.

Without close scrutiny, Cluff expanded the scope of the $5-million-a-year enterprise while running it out of his hip pocket. For example:

* Hundreds of thousands of dollars a year in corporate expenses were paid for with Cluff’s personal credit cards because the EIDC never used a corporate line of credit. Cluff and EIDC employees say they charged everything from office equipment to travel and entertainment expenses, with bills of about $30,000 a month.

* Cluff set his own $200,000-a-year salary package, including an $1,800-per-month housing allowance.

* Under Cluff’s stewardship, the EIDC spent $3 million on an online film permit system that never worked.

* Cluff directed one quarter of the EIDC’s fiscal 2001 charitable donations to youth and public school programs in Covina, where he grew up and his children have gone to school.

* Cluff negotiated a $340,000 contract to develop a Web site and database for the online system with a firm controlled by a longtime EIDC board member and production company president, Frank Scherma.

* And Cluff directed $185,000 in political contributions to candidates and elected officials, including 19 members of the EIDC’s board, the only entity with power to rein in the agency.

The degree of disengagement by public officials in a position to regulate the EIDC’s activities has been extreme. All members of the county Board of Supervisors and Los Angeles City Council automatically serve on the EIDC board, but few attended meetings, which were often canceled for lack of interest. Those who did show up were satisfied with a six-line annual budget. The city’s chief administrative officer, William Fujioka, was required to audit the EIDC every two years. But he did not, saying his office was too busy.

“Typically, when money and a public policy is involved, you see a little more vigorous oversight on the part of elected officials,” said Steve Frates, senior fellow at the Rose Institute of state and local government at Claremont McKenna College. “In 25 years of looking at local government, I can’t recall another example of this kind of thing.”

In an interview, Cluff contended that using his personal credit cards to pay for the EIDC’s day-to-day operations was not unusual. It happens all the time in private business, he said. He conceded, however, that he is “not the best administrator.” When asked recently at a public meeting how much his agency had in cash reserves, Cluff said he didn’t know.

Cluff said he has been taken aback by the district attorney’s investigation because, until it began, he had received good reviews from elected officials. In fact, in 1998, the City Council and the Board of Supervisors each voted unanimously to extend the life of Cluff’s agency for 10 years.

The EIDC was set up as a private nonprofit corporation -- an effort to show that private enterprise could do a better job than government. But the district attorney says that because the EIDC performs government functions -- handling film permits -- and collects public funds such as use fees for fire department supervision of film sets, it qualifies as a local government agency under state law.

Confusion over the EIDC’s status is unlikely to be resolved soon.

If prosecutors file criminal charges, Dist. Atty. Steve Cooley predicted, appellate courts will probably decide whether the EIDC is a public or private entity. “Both sides are going to fight this one to the death, because it’s so important in terms of defining what government is and what government isn’t,” he said.

Cluff’s questionable expenses, according to legal documents, included 100% tips and a $350 bottle of wine.

To the district attorney’s office, such spending is evidence that Cluff lived high on the EIDC’s funds. “It stinks,” said Deputy Dist. Atty. David Demerjian, head of the public integrity division.

Cluff said that the EIDC is a private agency and that he spent money properly, wooing production people in Hollywood who help decide where films are shot.

“They don’t want to go hang out with Joe Schmo bureaucrat,” said Cluff, 43, who shaves his head and dresses Hollywood casual. “They want to hang out with somebody who’s cool, who gets it.”

Cluff said Hollywood people are accustomed to being “treated like royalty” by film commissioners in other states soliciting film and TV shoots. In fact, some regularly provide free air travel, hotels and parties.

Cluff said that when he walks into a bar or restaurant with clients, he wants to be waved right in. “The feeling needs to be that I’m known, respected in the environment, and that everything going on around us has to be top shelf,” he said. “Otherwise, we can’t compete.”

Cluff said he regards his expensive but fruitless attempt to issue permits online as his biggest failure. He also acknowledges that the disproportionate charitable contributions he directed to his hometown of Covina -- $12,700 during fiscal 2001 -- might have been a misjudgment. He defends the political contributions as appropriate, intended to cultivate powerful supporters to whom he could turn when filmmakers ran into jams.

The district attorney’s office said it has not decided whether to file any charges. Seventy boxes of documents seized from the EIDC’s offices last month are still being cataloged. Authorities have since raided the accounting firm that audits the EIDC’s books and the home office of the property manager to whom the EIDC sends Cluff’s residential rent checks.

Prosecutors said they had taken the unusual step of seizing the EIDC’s records only after being stonewalled.

Nine times in as many months, Los Angeles county officials asked for unfettered access to the EIDC’s financial records. Nine times, the EIDC refused, arguing that some of its data are proprietary.

A Way Around Red Tape

The EIDC was created after years of lobbying by TV and film producers. Delays cost money, and the notoriously fast-moving industry was frustrated by lethargic bureaucrats in separate city and county film offices. Filmmakers had to navigate public works, fire, police and other departments whose services were needed for film shoots.

It was a real pain, said Jim McCabe, a location manager for more than 20 years who last worked on “Spider-Man.” “It was up to the production companies to bird-dog it, and you had to know how to get around the system. EIDC created a shortcut and became the great facilitator.”

As threats mounted in the late 1980s and early 1990s that productions would leave Los Angeles, politicians began taking the complaints seriously.

Los Angeles County was the first to act, contracting with the nonprofit Los Angeles County Economic Development Corp.

Enter Cluff.

The scion of an extended family of Arizona farmers and ranchers, Cluff moved to Covina in the fifth grade. After graduating from Cal State L.A., Cluff worked as an auditor for PriceWaterhouse, then as controller for the solenoid manufacturer.

Cluff, at age 30, was hired as a consultant at the Economic Development Corp. and was asked to run its new film office. He said he was intrigued by the chance to create jobs, particularly for blue-collar production workers.

“I’m not star-struck,” he said. “I was not planning a career in entertainment.”

Cluff’s success in speeding up the county’s permit operation eventually caught the attention of the transition team of newly elected Mayor Richard Riordan. Elected in 1993 on a platform that called for privatizing government services when possible, Riordan made Cluff an assistant deputy mayor for the entertainment industry.

Cluff’s assignment was to privatize the city’s film permit office. Two years later, the EIDC was born.

With the help of film industry and labor representatives and a $100,000 municipal start-up loan, Cluff filed the legal papers that established the EIDC as a tax-exempt, public benefit corporation.

Cluff said his main job was to make it easier for filmmakers to shoot in Los Angeles. He made EIDC staffers available to producers 24 hours a day. He also had a grander vision: He saw the EIDC as a demonstration of “what kinds of things can happen if you let the private sector partner up with government.”

The EIDC quickly repaid the city and began raking in millions of dollars from $450 fees for permit applications, its primary income source. The EIDC also collected millions more in use fees to pass on to city and county governments.

Running for reelection in 1997, Riordan called the EIDC “one of the big success stories of my administration.”

From the start, public officials gave the EIDC a great deal of power normally associated with government, including de facto authority to grant film permits and to impose temporary moratoriums on filming at locations deemed overused.

Film permits amount to temporary zoning variances that allow filming off studio lots. Technically, as a private corporation, the EIDC is not entitled to issue them. That is the province of government. But the EIDC’s written agreement with the Los Angeles Police Department gives police only four hours to object before the EIDC hands out the permit. EIDC staff members say police seldom even review requests.

Cluff says that before a permit request goes to the LAPD, the EIDC clears it with other government departments. Road closures, for example, are approved by public works.

The EIDC also has authority to mediate disputes between residents and filmmakers. In heavily filmed neighborhoods, mediations have resulted in rules about parking and work hours.

As a referee, the EIDC has irritated many people and developed a reputation for arrogance as it has juggled the competing interests of filmmakers, who want to do whatever it takes to make a scene work, with those of residents, who see filming as a nuisance. Since the 1997-1998 fiscal year, the number of citizen complaints has risen 30% even as the number of film production days has marginally declined, according to the EIDC’s latest annual report. More recent figures indicate that filming is again on the rise.

Only Game in Town

Over the years, Cluff managed to significantly expand both the exclusivity and the scope of the EIDC’s operations.

The agency has behaved like a monopoly, elbowing aside some of the smaller, for-profit firms that provided similar permit services for film companies. Some of these firms have gone out of business. Others have survived by continuing to charge clients for film permits, which they obtain through the EIDC.

In a 1996 letter to one such competitor, Cluff wrote: “EIDC is the only entity authorized by the city and county through which filming permits can be issued.”

The City Council learned in 1997 that the city Department of Airports was dealing directly with filmmakers. So the council instructed the department to work through the EIDC, saying that the lack of centralization resulted in “unnecessary confusion and costly delays.”

The agency took over film coordination from other government entities, including the Department of Water and Power, the Los Angeles Unified School District and the Angeles National Forest.

The EIDC also moved into lucrative sidelines. It charged filmmakers to notify residents and merchants where filming would occur and received government grants worth hundreds of thousands of dollars for job training and collecting data on entertainment industry job trends.

The EIDC staff went from eight to 45, plus 30 part-timers, among them monitors assigned to heavily filmed neighborhoods to see that filmmakers obeyed permit conditions.

Diversification was so successful that, earlier this year, Cluff announced that only 55% of the EIDC’s revenue was coming from permit applications.

Cluff was also working toward a national presence. He was instrumental in founding FILM US, an organization to promote filming in the United States. The organization’s phone rang in the EIDC’s offices. Cluff also directed $10,000 in EIDC funds to a rival film office in Pittsburgh, whose top executive was the head of FILM US.

Ongoing Investigation

Cluff’s autonomy came to an end in early September when district attorney’s investigators armed with a search warrant and guns burst into his Hollywood Boulevard offices as he was eating a takeout dinner.

Stunned, the staff of the EIDC watched as the investigators frisked their boss. Cluff has since lost 22 pounds and is thinking about calling it quits.

Politicians are considering revamping the EIDC and have called for audits and suggested that elected officials no longer serve on the agency’s board.

Many in the Hollywood production community worry that film permits could again get bogged in bureaucracy. “So far, the operation of the office has continued without interruption,” said Nick Counter, president of the Alliance of Motion Picture and Television Producers. “We all hope that continues.”

The sudden interest by politicians in the EIDC represents a major turnaround for a group that had been content to cash campaign checks.

At a board meeting last year, then-City Councilman Michael Feuer, who had not received any contributions, moved unsuccessfully to ban the practice.

It was the first time in six years that contributions had been discussed by the EIDC board. Only four other elected officials were present at that meeting, all of whom had received EIDC campaign contributions. They were Supervisors Yvonne Burke and Michael Antonovich and City Councilmen Hal Bernson and Mike Hernandez.

Feuer’s motion died for lack of a second.

Since the district attorney’s raid, Burke has returned her contributions, Antonovich has said he would return his and Bernson has said he is considering doing so. Hernandez has left office.

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Times researcher Maloy Moore and staff writer Richard Marosi contributed to this report.