State Senate Candidate Katz Takes Aim at Alarcon Over Controversy

State Senate candidate Richard Katz came out swinging Tuesday during the first public forum since his opponent, City Councilman Richard Alarcon, became entangled in a conflict-of-interest controversy.

Katz, a former assemblyman, accused Alarcon of taking a “sweetheart deal from a well-connected City Hall developer and lobbyist.”

“Something is wrong here,” he said. “I think it is wrong to take a loan from a developer who does business with the city.”

Alarcon called the allegations “trumped up.”

“I believe people know the difference between unfounded allegations raised three weeks before the election and substantive issues,” he said.

He accused Katz of “going negative” and diverting attention from more important issues, saying he is “deeply disappointed that Richard Katz has taken this line.”

The exchange occurred at a candidates forum hosted by the Studio City Residents Assn. at Osaka Sangyo University.

The state Fair Political Practices Commission announced last week that it will review the propriety of a loan that Alarcon received from the wife of a developer. Alarcon later joined the rest of the council in voting to give the developer a $1.1-million, interest-free city loan under an earthquake rehabilitation program.

Commission spokesman Gary Huckaby said the review is a preliminary step before FPPC officials decide whether to launch a full investigation.

Alarcon has conceded that he made “a mistake” when he joined the council’s unanimous approval of the city loan to Valleyheart West Condominium Assn., but said he acted out of ignorance.

One of the partners in Valleyheart is Mark Handel, whose wife, Sarah Luluff, loaned Alarcon $38,000 in the form of a second mortgage for yard improvements and a pool at his Sylmar home.

Alarcon said he got a bank loan to buy the $268,000 home in September 1993 from developer Handel. The councilman said he asked Handel if a pool could be added. Handel offered to find an investor to provide a second loan, Alarcon said.

Alarcon said he received the second loan from Luluff at 8% interest. Alarcon pays $547 a month and has a $20,600 balance on the loan. The pool has since been built.

The conflict-of-interest allegations involve a December 1995 vote by the council to provide the loan to the Valleyheart group, a limited partnership of Handel, Mark Adler and Mark Armbruster.

State law prohibits public officials from participating in a vote on any matter in which they have a financial interest of $250 or more. Loans are considered a financial interest, and the law covers spouses because of community-property statutes.

But Alarcon said he did not know that Handel, Adler and Armbruster were members of the limited partnership involved in the Valleyheart project.

Katz and Alarcon are vying for the seat being vacated by Sen. Herschel Rosenthal (D-Los Angeles), who cannot run due to term limits.

The district stretches from Pacoima to Studio City to Northridge.

The primary is June 2.