The D.C. Council passed a bill yesterday to expand the authority of the District's banking office, giving it the power to investigate entities such as Latin Investment Corp., which offered banking services without a charter.

That act prompted Joseph Lopes, deputy general counsel for the banking office, to promise an immediate investigation into the activities of another company, Casa Latinoamericana de Inversiones (Latin American House of Investments).

That company recently suspended its operation at 1520 U St. NW when it ran out of cash for nervous depositors who demanded their money in the wake of the Latin Investment case.

"We want to immediately take a look at those entities that have come to light," Lopes said. "We've now fought for and been granted some administrative authority to investigate and order penalties."

Latin Investment was forced into bankruptcy Dec. 13, imperiling millions of dollars belonging to mostly Central American immigrants who deposited the money in savings accounts that were not federally insured.

The council passed the legislation under an emergency provision, and it will take effect as soon as the mayor signs it.

The bill would give the Office of Banking and Financial Institutions authority to audit firms suspected of operating illegal banks, to issue notices of charges and to conduct hearings into such activities, to issue cease-and-desist orders, to freeze assets and to appoint a receiver of assets.

This authority is retroactive, giving the banking office the power to investigate operations that existed before its creation.

Yesterday's legislation was extracted from part of a broader bill that would amend the District's banking law dramatically. That bill is expected to be considered by the council early next year and should include the provisions of the emergency bill. The emergency bill would be in effect for 90 days.

"The legislation was a necessary step in assuring clear authority to the Office of Banking and Financial Institutions," said council member Charlene Drew Jarvis (D-Ward 4), who introduced the bill.

The legislation that passed fell short of what Jarvis wanted. She also was hoping to give the D.C. corporation counsel more prosecutorial power in illegal banking ventures.

"I really wanted the corporation counsel to prosecute cases of potential violation because the U.S. Attorney's Office often has different priorities for prosecution," Jarvis said after yesterday's vote.

Giving the corporation counsel authority to prosecute would have given the city more control over prosecution.

But council member Wilhelmina J. Rolark (D-Ward 8) said such a move might preclude the U.S. Attorney's Office from prosecuting such cases under laws that might provide for harsher penalties.

"The intent here is to shift the blame" from one agency to another, Rolark said of the proposed legislation.

Jarvis countered by calling the bill "an exercise in home rule authority."

After a 90-minute debate, which was contentious at times, the majority of the council went against Jarvis in a voice vote and approved an amendment to the bill that directs the D.C. banking superintendent to refer violations to the Corporation Counsel or the U.S. Attorney's Office for prosecution.

This effectively leaves intact current legislation that dictates that such cases automatically would go to the U.S. Attorney's Office because of the type of penalty involved in illegal banking ventures.

"What they {the council members} have done here is the best they could have done," Lopes said.

For more than two years, at least six local and federal agencies have known about the activities of Latin Investment and have not taken action.

Currently, the case is being investigated by the Securities and Exchange Commission, the U.S. Attorney's Office and the Internal Revenue Service.

But city officials have been frustrated recently by those agencies' refusal to disclose where the investigation stands.

Latin Investment shut its doors on Nov. 29 because of financial problems, leaving open the possibility that more than 2,000 depositors could lose $6 million to $13 million in savings. Some of those customers, who are in this country illegally, could not use U.S. banks because they did not have the necessary Social Security numbers. Others said they preferred Latin Investment because it catered to Spanish-speaking clients.

Critics have blamed Jarvis for the banking office's lack of investigative authority, pointing to the 1985 legislation she introduced as chairwoman of the Committee on Housing and Economic Development, and saying it was designed more for economic development than enforcement.

Jarvis has blamed the D.C. Department of Consumer and Regulatory Affairs for not investigating violations of Latin Investment's articles of incorporation, and has blamed the mayor for taking two years to produce the banking law provisions that were included in yesterday's bill.

But council member John Ray (D-At Large) said everyone must share the blame for the Latin Investment situation.

"There was a dereliction of duty across the board," Ray said. "We did not complete our task when we wrote the local banking law."

In another significant decision yesterday, the council took an additional step to expand its power by voting itself permanent authority to review all city leases that exceed $1 million.Staff writer Rene Sanchez contributed to this report.