Music Center Head Sought Payment for Political Gifts : Arts: Esther Wachtell denies getting reimbursed for contributions. Internal probe cannot confirm allegations.

Music Center President Esther Wachtell, who recently reached a $200,000 resignation agreement, repeatedly asked the nonprofit performing arts center to reimburse her for political contributions, according to records and interviews.

Wachtell’s former vice president said he reimbursed her with center funds, but Wachtell denied the allegation.

From 1988 to 1991, Wachtell wrote memos seeking repayment of $4,000 in donations to politicians including Gov. Pete Wilson, Mayor Tom Bradley and Los Angeles County Supervisors Mike Antonovich and Ed Edelman. She sometimes submitted copies of personal checks and invitations to political fund-raisers to support her reimbursement requests.

In a request for repayment of a $1,000 donation to Bradley, Wachtell wrote: “He increased the city (arts) budget to 1 million dollars so our resident companies received their full requests (for funding).”

Wachtell, 58, said she was not reimbursed for political contributions, which could violate state campaign rules and federal tax laws governing nonprofit agencies. “I don’t get reimbursed for political contributions,” she said. “I think it’s something you are not supposed to do, so I wouldn’t have done it.”

The issue illustrates the problems faced by large tax-exempt organizations that do not establish clear-cut spending guidelines. Failure to comply with government regulations can cost charities their tax-exempt status.

Wachtell, who has headed the Music Center since 1988, said in a later interview that she was unaware of laws governing political contributions and tax-exempt agencies when she wrote the memos.

She said she depended upon the center’s fiscal employees and the Board of Governors finance committee to determine whether expenses she submitted could be properly reimbursed.

“My entire life was the Music Center,” Wachtell said. “They were totally and completely intertwined. Everything that I did . . . related in some way to making the Music Center more successful.”

Wachtell’s former vice president, James B. Black, said he reimbursed Wachtell for political contributions with Music Center funds, using a special bookkeeping procedure to keep track of the payments.

“The facts are, regardless of what she says, she was reimbursed,” Black said, adding that he was unaware that such reimbursement could violate the law.

Although Music Center officials have known of Black’s allegations for 1 1/2 years, they were not pursued until reporters made inquiries several months ago.

Subsequently, a committee of the Music Center board reported in December that no direct reimbursement to Wachtell was uncovered and there was insufficient documentation to conclude that she received indirect payment. The board did not talk to Black about his allegations, although officials said they later tried to reach him through his lawyer.

“We have spent a ton of money calling in experts to look at this,” said board Chairman James A. Thomas, a downtown commercial developer whose one-year Music Center term ends in June. “The accounting people . . . found nothing wrong.”

Last month, the center board approved a settlement providing Wachtell with $200,000 in severance pay and consulting fees. The center earlier announced that Wachtell, who steps down July 15, will remain on the 80-member board through 1996.

A cornerstone of Southern California cultural life, the Music Center has been beset by financial difficulties and internal turmoil. Wachtell’s administration has come under fire for lavish spending.

Wachtell and Black were key figures in one of the most embarrassing episodes in the center’s three decades. Almost two years ago, officials erroneously announced that they had reached their annual fund-raising goal of $17.6 million when, in fact, the center was $1.3 million short of the goal and $1 million over budget.

Black was relieved of his duties and, as part of a $150,000 settlement, was paid his salary for a year. He later alleged that he was made a “scapegoat” for financial problems that he said were in part Wachtell’s responsibility.

The allegations about Wachtell’s political contributions surfaced in a 25-page letter that attorneys for Black sent to Music Center officials in September, 1991. The letter, obtained by The Times, said that in the 1990-91 fiscal year, “Black paid more than $5K ($5,000) in expenses to Wachtell so she could write her own checks for political contributions, charitable events, etc.”

Documentation accompanying the letters stated that Wachtell over a four-year period sought reimbursement for $8,000 in charitable contributions, plus $4,000 in political contributions. She donated $1,500 to Bradley, $1,000 each to Wilson and Supervisor Ed Edelman, $250 to Supervisor Mike Antonovich and $100 each to Councilmen Mike Woo and John Ferraro.

Memos written by Wachtell indicate that soon after she became president in June, 1988, she began asking Black for reimbursement of political and charitable donations.

But, Black said, “she didn’t ever want to have an expense account with any political contributions on it” because she enjoyed the prestige of appearing to be a contributor to political and charitable causes.

Unbeknown to the Music Center board, Black said, he and Wachtell devised a means of reimbursing her indirectly by paying bills she submitted for other types of expenses.

Wachtell put in so many requests for reimbursement, Black said, that a few years ago, he started keeping a ledger to track the expenses used to offset the contributions. “She was always accusing me of not getting everything reimbursed,” he said, “so I had to develop some sort of system to try to keep track.”

Pages from Black’s ledger indicate that Wachtell submitted a $1,568 carpet cleaning bill after a Music Center reception at her home to help offset a series of charitable and political donations in 1991, including a $100 payment to Ferraro.

Several charitable contributions and political contributions to Woo and Antonovich were offset by payment of Regency Club bills incurred at the private club by Wachtell and her husband, Tom, according to Black’s ledger.

Black said he reimbursed himself for a political contribution--$500 to Antonovich--by putting in for car mileage. He said he would not customarily put in for mileage, though he was entitled to it.

Wachtell, who earns $200,000 a year, denied being reimbursed for political contributions. She said she spent about $20,000 more on Music Center-related expenses each year than she got back. Her personal expenses, including political contributions, totaled about $135,000 over seven years, she said. “I absorb all of those (political costs) myself.”

Wachtell described an informal expense account system without clear guidelines governing political contributions and some other expenses.

If she believed that she was entitled to reimbursement, Wachtell said she gave the receipts and supporting documents to her secretary or to Black. Frequently, she said, she did not review or sign her expense reports:

“I would put it in. I would get my reimbursement check back. I would hand it to Tom (her husband). I would pay no attention to what I was getting.”

Shown copies of her memos regarding political contributions, Wachtell said she only submitted the requests for review by the center’s financial officials and allowed them to decide whether reimbursement was appropriate.

In the memos, Wachtell usually wrote: “Can you reimburse me . . .?” or “Please reimburse.”

“If I thought it was an appropriate reimbursement, I would ask for it,” she said in an interview. “If I thought it wasn’t an appropriate reimbursement, I wouldn’t.”

Wachtell said she did not know about the existence of Black’s ledger or his “offset” system. “That’s nuts,” she said. “I was spending more money than I was getting back. It makes no sense” to contrive a system to conceal reimbursements.

She also questioned the “veracity” of Black’s ledger, saying that it was not an official Music Center document. “How do you know that Jim Black didn’t . . . invent the whole story?” she asked.

Reimbursement could violate federal tax law, experts said, if the intent was to compensate an employee of a tax-exempt agency for political contributions. “It’s a specifically prohibited act,” said Rob Giannangeli, spokesman for the Internal Revenue Service. “The organization jeopardizes their exempt status if they do this.”

California political reporting laws require the true source of campaign donations to be reported. If an individual is reimbursed for a contribution, the source of the reimbursement must be listed as the donor. Penalties for violation of the law can range from a warning letter to felony prosecution by the district attorney’s office.

Music Center officials declined to discuss any details of the political contributions and would not comment on whether it was proper for Wachtell to repeatedly request reimbursement.

Center officials, including then-board Chairman Ronald J. Arnault, did not look into Black’s allegations for more than a year after they were first raised. Arnault did not return calls.

After inquiries from reporters, Arnault’s successor, Thomas, initiated an extensive search of Music Center records in October, 1992. Though there was no evidence of direct reimbursement, the inquiry was inconclusive, according to board members who were told of the results.

Thomas said he contacted an attorney for Black and was told that “to the best of Mr. Black’s knowledge . . . there was no reimbursement for political contributions.”

The lawyer, Paula Peters, declined to discuss the matter, citing attorney-client privilege. In interviews before and after Thomas’ statement, Black insisted that Wachtell was reimbursed.

Thomas said the Music Center has instituted a code of conduct that sets out conflicts of interest and prohibits reimbursement for political donations.

Wachtell said she has begun paying closer attention to her expense account reporting. “I obviously sign my own requests now, and I look at them now,” she said.

The Paper Trail

Esther Wachtell, outgoing president of the Music Center, has sought reimbursement from the nonprofit institution for at least $4,000 in political contributions, according to documents and interviews. Her former vice president, James B. Black, said he reimbursed Wachtell through a complicated bookkeeping procedure. Wachtell has denied that she was reimbursed, and Music Center officials said they found no evidence of direct reimbursement.

Donation to Bradley: The donations included $1,000 to Los Angeles Mayor Tom Bradley in 1988. In a note to Black, Wachtell sought reimbursement for the Bradley donation and two charitable contributions.

Donations to Wilson, Edelman: In a 1989 memo to Black, Wachtell said she contributed $1,000 each to gubernatorial candidate Pete Wilson and county Supervisor Ed Edelman.