LOS ANGELES -- A California watchdog commission has concluded an investigation into possible conflicts of interest over several local bond issues by declining to take enforcement action against Stanislaus County officials.

The California Fair Political Practices Commission instead sent two warning letters to former county Chief Administrative Officer Lamar Bartholomew and current county Supervisor Nick Blom for allegedly violating the state's Political Reform Act.

The letters say violations occurred but did not warrant enforcement action, partly because of a "lack of knowledge" on the part of both officials.

"A warning letter means we found a violation of the political reform act, but there were enough mitigating circumstances [that] we declined to take full enforcement action. It's kind of in the middle of what can happen" in terms of punishment, said Carol Thorpe, commission spokeswoman.

The commission's investigation stemmed from three local grand jury reports released in 1990-91. The reports charge that from 1987 to 1990 county officials received more than $27,000 in hotel rooms, lavish meals, leather briefcases, Oakland Athletics baseball tickets, and other paid expenses and gifts from Prudential-Bache Capital Funding.

The firm, now known as Prudential Securities Inc., underwrote several bond issues for the county during that time. The county later reimbursed Prudential for much of the expenses.

Local grand juries in California are routinely instructed to investigate matters relating to county government.

The grand jury charged at least 11 Stanislaus County officials with possible violations of state law by accepting and failing to report more than $250 in Prudential gifts each and then participating in bond-financing decisions.

The controversial reports have sent waves of wariness throughout California's public finance community and have heightened awareness of state conflict-of-interest rules.

Under the political reform act, local and state officials must disclose gifts from investment bankers of more than $50. Officials must disqualify themselves from a governmental decision if, within 12 months of that decision, they receive $250 or more from an interested party.

This includes instances when an underwriter pays for county officials' expenses on trips to visit bond rating agencies. Under current rules, the county must reimburse the underwriter for expenses at least 30 days before officials participate in a bond-financing decision, or it must disclose the expenses and declare reimbursement will occur two days after any related decisions.

The letters cleared Mr. Blom and Mr. Bartholomew of possible violations for several trips and dinners, such as a 1988 New York bond rating trip and a closing dinner, because the county reimbursed Prudential within the 30-day limit.

However, the commission found that full costs of an April 1990 rating trip to New York were not reimbursed until May 5 and May 17, after Mr. Bartholomew and Mr. Blom had participated in an April 30 vote to approve a waste-to-energy plant bond issue.

"Based on this analysis, you should not have participated in the decision to approve the waste-to-energy bond," said both letters, dated April 29.

The commission concluded, however, that both Mr. Blom and Mr. Bartholomew made a "logical assumption" that the county had reimbursed the underwriter before they participated in bond decisions. Because both were unaware that reimbursement was delayed, the commission decided against more stringent measures.

Both Mr. Blom and Mr. Bartholomew, who resigned in 1990 citing health reasons, said they felt vindicated by the commission.

But Mr. Blom said the local grand jury caused "more damage than they realize," and cited a recent instance where at least two county supervisors refused to go on a bond rating trip, fearing conflict of interest charges.

Mr. Blom said he and other Stanislaus officials decided to go, and took a less expensive trip to San Francisco.

"I would not go to a play anymore, but I tell everyone, ~You've got to go to those rating meetings and you've got to eat,'" he said.

Mr. Bartholomew, reached at his home, advised public officials to be cautious. "I think if you rely on the [investment bankers] to tell you about the laws, you're in trouble. They probably don't know any more than you do," he said.

Earlier this year California Treasurer Kathleen Brown released a guide designed for local officials, entitled "A User's Guide to Conflict of Interest Rules for Public Finance Transactions."

To make sure rules are followed, the guide says, a public agency can pay directly for the travel costs, or the underwriter can pay travel expenses for the issuing agency rather than individual officials.

"There is no free lunch," the guide says.

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