Thread: Montebello under federal scrutiny

Troubled Montebello comes under federal scrutiny
The FBI and U.S. attorney are looking into potential misuse of $1.3 million in federal funds the city paid to a developer in 2008 to build affordable apartments on Whittier Boulevard. The project was never built.

The FBI is leading an investigation into how Montebello has used federal… (Anne Cusack / Los Angeles Times)July 01, 2011|By Jessica Garrison, Abby Sewell and Richard Winton, Los Angeles TimesFederal prosecutors and the FBI have launched an investigation into potential misuse of funds and fraud involving federal housing money in the troubled city of Montebello, adding to the growing list of agencies looking into the city's stewardship of public dollars.

Sources told The Times that the FBI is leading an investigation into how the city used federal funds over the last few years. The probe comes after the federal Housing and Urban Development agency in April took the highly unusual step of suspending all funding to the city.

officials suggested that Montebello misspent some of the money and demanded that $4 million be repaid.

Acting City Administrator Larry Kosmont confirmed that the city received a subpoena from the U.S. attorney's office for records pertaining to HUD money. City Councilwoman Christina Cortez said she talked with FBI investigators, who showed up unannounced to a meeting she called with HUD officials. The FBI agents asked her questions about the city's financial decisions, she said.

The federal inquiry comes as the Los Angeles County district attorney's office looks into mysterious "off the books" city bank accounts discovered earlier this year. State Controller John Chiang has also launched a wide-ranging audit of the city and its redevelopment agency.

Montebello, a bedroom community about 10 miles east of downtown L.A., faces a major financial crisis, with officials saying they face possible insolvency later this year. Kosmont is part of a new team of city administrators and council members who are grappling with how to clean up the city's finances.

A central issue in the federal probe is what happened with $1.3 million in HUD funds that the city paid to a developer in 2008 to build affordable apartments on Whittier Boulevard.

The project was never built, but city officials recorded it as completed in a HUD database.

On Thursday, the city filed a lawsuit against the developer of that project, Danny Ku, alleging that he defrauded the city by artificially inflating the cost he allegedly paid for the land and getting a kickback through a real estate company he controlled.

Ku could not be reached for comment Thursday.

Federal officials have been troubled by the housing deal for some time. In an audit released last July, HUD's office of inspector general declared that the city had disbursed the $1.3 million to Ku in June 2008 without having any valid written agreement.

In 2009, the city gave HUD a copy of an agreement with Ku that had signatures and dates that appeared to have been "inappropriately cut and pasted" from another document, according to the inspector general's report.

"Upon further inquiry," the report noted, "the City confirmed there actually was no approved" agreement.

It is not legal for the city to disburse those funds without council approval and a valid agreement. Kosmont said he did not know who in the city authorized issuing the check.

Eight months after disbursing the money to Ku, according to the audit, the city finally signed a loan agreement with him, but still without council approval. The City Council never formally authorized then-city Administrator Richard Torres to sign off on the loan, according to the city's lawsuit.
Torres said he was unaware of the lawsuit and had not been contacted by federal authorities. "I am not sure I'd recognize Mr. Ku if I saw him," Torres said. Asked whether he signed the contract with Ku's company without council approval, Torres said, "I don't know anything about [that]. As a city administrator I signed a lot of documents…the deal was negotiated by the redevelopment staff and the City Council had contact with Ku."

Kosmont said he hoped the city would soon be able to clean up its issues with HUD and resume receiving federal housing funds.

"There is no doubt that Montebello's administrative processes, when it comes to property, have to be managed more precisely," he said. "Montebello needs to maintain and manage programs cleanly and efficiently, and from this point on, that's what we are going to do."

jessica.garrison@latimes.com

abby.sewell@latimes.com

richard.winton@latimes.com

http://articles.latimes.com/2011/jul/01 ... i-20110701

1.3 Million $$$ is chump change compared to the money that New Jersey taxpayers get ripped off for. In Newark taxpayers paid over 12 Million $$$ to turn a large lot into a park. Nothing was ever done, the lot is still there, and the Newark Downtown Core Redevelopment Corporation — was quietly disbanded in April. Nice huh?

http://www.nj.com/news/index.ssf/2011/0 ... ewark.html

NEWARK — Triangle Park was envisioned as the lush capstone on a plan to rebuild Newark’s once desolate downtown core.

The final stage in a project under way for a decade, the park would provide a pedestrian link between Newark’s Ironbound, Penn Station and the Prudential Center arena. Moreover, it would be the centerpiece for new retail, housing and office space that would boost the city’s struggling tax base.

But after five years, and close to $12 million spent, today Triangle Park remains a parking lot, encircling a long abandoned factory in the heart of the state’s largest city. No plans have been completed. No statues, benches, fountains or sculptures have been commissioned. No official plans exist to refurbish the abandoned factory that sits in the park’s footprint.

The group responsible for the park’s development — the Newark Downtown Core Redevelopment Corporation — was quietly disbanded in April. The Newark Housing Authority has now taken control of the project, but not before the group spent millions on salaries and well-connected consultants, according to a Star-Ledger review of corporation records.

"It’s clear the land’s not cheap, but the organization appeared to be top-heavy especially in light of the work that remained ... and the lack of really any timetable for park completion," said housing authority director Keith Kinard who was one of several city leaders seeking the dissolution of NDCRC. "I think that their intentions were in the right place, but at the end of the day we’ve got to get the project moving forward."

Tasked with expediting downtown development, the group oversaw arena construction, street alterations and the development of "Championship Plaza" at the arena’s Market street entrance. The projects were marked with costly delays, but all were eventually completed. The park has been languishing for years amid Byzantine land deals that are still not finalized.

William Crawley, the former executive director of NDCRC, said the bulk of time and money spent has gone to acquiring property that could not be bought directly, but had to be swapped with surrounding lots. Major Newark property owners Jose Lopez and Edison Properties were the principal players in the swaps needed to clear the parcel for the park. Neither returned calls for comment.

MILLIONS SPENT

Out of the $19 million bonded by the city to fund park construction, $9.4 million went to land acquisition for the 1.7-acre parcel, roughly the total size needed for the park, Crawley said. Close to $3 million has been spent on salaries, contracts and related fees since the group’s inception in late 2005, according to records — the bulk of that money expended in 2010.

Crawley commanded $165,000 a year. Jermaine James, Mayor Cory Booker’s former campaign treasurer and once a fixture in the mayor’s political circle, was pulling in $135,000 annually to be the group’s director of community development. The non-profit corporation also had an 11-member staff, including seven project managers, several directors and an administrative assistant. There also was a slew of interns.


Frances Micklow/The Star-LedgerThe area by the Prudential Center between Mulberry Street and Edison Place in Newark.
Crawley commissioned financial analyses and marketing plans through consultant contracts, several of them handed out to well-connected firms and individuals:

• Wilentz, Goldman and Spitzer, a major state law firm that has donated hundreds of thousands of dollars to state Democrats over the years, was retained to consult on land acquisition. Their point man, Everett Johnson, personally gave $2,950 to the Booker slate of candidates in 2008 and 2009.

• Michael Rowe, a well-respected sports consultant, earned more than $97,000 to analyze the lease agreement between arena owners the New Jersey Devils and the city. His other firm, Marketplace Development Boston LLC, earned $16,000 in a separate contract to provide all-purpose legal, financial and strategic advice.

• Sasha Sharif, the daughter of Councilman Darrin Sharif, and granddaughter of Booker adviser Carl Sharif, was paid $8,000 to research the history of Newark parks.

• David Brown, a former city hall employee, received $17,500 to research a "special improvement district," analyzing how to attract local business.

Prior to getting his contract, Brown was earning $125,000 a year on the NDCRC payroll. Consultants Rupa Tata and Luis Macaluso also received $17,500 contracts and were later hired as staffers, records show. Tata earned $65,000 as a project manager and Macaluso earned $115,000 as director of project management.

"I totally agree with dissolving the organization in view of the fact that it was growing top-heavy with no results," said East Ward Councilman Augusto Amador, a former trustee of the group, who’s ward will serve as home to the park.

COSTS DEFENDED

But Crawley defended the salaries and the contracts, saying a thorough examination of the park and its potential to spur development was necessary for the city’s long-term growth. His stated hope was to attract Newark-owned businesses around the park to increase ratables for city coffers.

"We shouldn’t just build a park without considering the possibility of creating wealth opportunities for Newarkers," Crawley said. "It was about growing the city, and to that end we decided to do a market feasibility of the park."

But with no foreseeable completion date, city leaders grew weary of the money being spent with so little to show for the expense.

Al Koeppe, a prominent voice in Newark’s business community, said the city is one of the more difficult environments for conducting land deals, especially in a down economy. But he added, "I’m surprised that it’s taken this much time to reconcile all of the issues and to move forward. I would have thought we would be enjoying this park today."

With $8 million left for the Triangle Park project, the Housing Authority will now look to construct a state-of-the-art park that will draw retail and office space. The housing authority will try to squeeze another $4 million from the city by refinancing the existing debt on the project. Kinard is auditioning architects and will settle on a firm within the next two weeks, he said. At that point a final timeline will be established for park completion.

Despite criticism of its excesses, city leaders characterized the redevelopment group as one that simply outgrew its usefulness. The agency was created to expedite development at a time when the Housing Authority was beset with financial problems as well as allegations of malfeasance. Five years later, the NHA has improved its federal rating to roughly 80 percent and shed its designation as a "troubled agency."

"I have total confidence in the leadership of Mr. Kinard to be able to deliver the project," Amador said. Of the NDCRC he added, "It served its purpose in the very beginning and the role that it served in terms of constructing the arena. But the time came for that role to be ended."