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The CRA Scandal: A Worst-Case Scenario That Demands an Investigation

For the seventh time in two months, the City Council on Tuesday put of public debate on an outrageous giveaway of $4.6 million in public money to developer Hal Katersky, best known for lawsuits, bankruptcies and profiteering from runaway film and TV production.

The deal on a property at 1601 N. Vine St. in Hollywood is so bad and has become so visible that the Council has put it off until Oct. 22. It should be killed outright as Jack Humphreville writes today at City Watch LA.

It’s just one of hundreds of dirty deals put together by the Community Redevelopment Agency that takes fortunes in tax dollars that could be used for libraries, parks, police officers, even to turn tenants into home owners, and gives them to wealthy and well-connected developers whose projects destroy neighborhoods and overwhelm the city’s aging infrastructure.

On the Council agenda for closed session on Wednesday is another CRA deal that is so dark and dishonest the Council had to break the law more than once to sneak its approval through — actions that will add to the cost to taxpayers and have led to a formal complaint being filed with District Attorney Steve Cooley.

The issue at hand is possible settlement of court costs and attorney fees for the South Central Farmers lawsuit over violations of the state’s open meeting law, the Brown Act, that occurred in originally approving a shopping center at Slauson and Central avenues in South LA.

Beyond that issue lies the tortured history of the project symptomatic of how the 
Council and the CRA connive to enrich insiders and political supporters while abusing the power of eminent domain and fail to deliver on its promises to a community badly in need of a grocery story and other retail shops.

Slauson and Central is case study on why the CRA should be abolished and the billions of dollars in property tax revenue it has gotten restored to the city treasury where it can be used for core public services and specific programs that improve the quality of life for residents and a healthy climate for business.

In their request for a DA investigation (Slauson-Central Complaint.pdf), attorneys Robert Silverstein and Dan Wright lay out the convoluted story of Slauson and Central.

They tell how a local community group and a major out-of-state developer in collusion with the CRA put together this deal and despite all that’s wrong with it. The project got Council approval unanimously on Sept. 8 after two previous approvals had to be rescinded because they were done illegally.

Efforts to build the retail project date back to the mid 1990s when the City got a multi-million dollar federal Housing and Urban Development grant and
subsidized loans for the Slauson Central Project.

The city’s grant application said the
project developer would be a partnership between Pacific Retail Trust (later
merged with Regency Realty Inc.of Jacksonville, Fla.
and Concerned Citizens of South Central Los Angeles, a community group founded by Juanita
Tate and run by her daughter, Noreen McClendon, since her death.  

There was just one small problem: The city didn’t own the land for the project, nor did the developer or Concerned Citizens..

The long-time owner of part of the property was Stanley Kramer who ran a scrap metal business there and tried unsuccessfully to work with Concerned Citizens so he turned to a local
shopping center developer who bought the adjacent corner property and nearly a decade ago put a project together a privately-financed deal without public subsidies.

Efforts to work with the CRA went nowhere so in June 2003, when the CRA project  was still stalled, Kramer obtained Planning Department approval
of entitlements to build the shopping center.

With Councilwoman Jan Perry backing Regency/Concerned Citizens, the CRA Board authorized the filing of eminent domain lawsuits against the landowners
to seize the property and invalidate the city entitlements.

CRA won and seized the property but the Kramer team began digging into the public records reviewing public records and its 2008 lawsuit challenging the CRA’s environmental review is pending.

Kramer also sued over the
CRA’s refusal to produce public records, and obtained the right to use a forensic
computer expert to extract thousands of documents that had been withheld.

In August
2008, the Council at Perry’s request approved doubling Regency’s authorized profit to
18 percent — a ridiculous profit margin given the public funding..

Still, nothing moved forward. The Brown Act lawsuit revealed the Council had violated
the law when it “pulled” special meeting agenda items into a regular meeting
without proper notice to the public. It also showed showed the City Cllerk was counting as “present for a
vote” any Councilmember in the back rooms — a practice that now been changed to require counting only members as present who are actually in the Council Chambers.

More importantly in terms of the future of this project was the Silverstein law firm’s discovery that in June 2003
Concerned Citizens, Infinity Redevelopment and a previously unknown non-profit, “Slauson Central Community Center,” formed a new partnership called Slauson Redevelopment LP.

Juanita Tate signed for Concerned Citizens and Curtis Fralin signed for Infinity. At the same time, Tate and
Fralin signed a “Purchase and Sale Agreement” promising to buy the Slauson
Central Retail Project within one year after the center was built but they did so as partners of
something else called “Slauson Central Partners LP.”.

The mystery of what was really going on was growing deeper with Slauson Redevelopment LP stating it intended to own and operate the shopping center, but other documents stating Slauson Central Partners LP was in fact the buyer. The lawyers found Slauson Central Partners LP was not registered with
the Secretary of State.

The discrepancy about who actually was the buyer of this project escaped the notice of CRA staff or was ignored and never was brought to the Council’s attention, leaving serious questions about whether any of the safeguards to protect the $7 million in HUD and CRA subsidies are enforceable.

Not to worry, the CRA says. “What
the community is going to get here is a wonderful reuse of an
industrial site,” said Jenny Scanlin, project manager for the Community
Redevelopment Agency.

It’s almost funny to read that quote since this project has been in the works for 15 years and is still nowhere near to being built and the principal partner, the flimsy excuse used to justify the use of eminent domain, is Concerned Citizens which has been hit with a $5 million judgment by the city and is being sued by the state for breaching an agreement to build a soccer field and youth center at Slauson and Main.  

An investigation by District Attorney Steve Cooley would go a long way to clearing up the mystery of this deal but the real problem is that it isn’t an isolated case, just an extreme one.          

The CRA is as big a problem as the DWP. Both operate in the darkness and do their best to avoid public scrutiny.

They are now key instruments of First Deputy Mayor Austin Beutner’s “jobs creation” schemes to use the public money to subsidize more projects faster and with even less public scrutiny.

It will take dramatic changes at City Hall to bring out in the open what they are up and that’s not going to happen without a change in leadership.        

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17 Responses to The CRA Scandal: A Worst-Case Scenario That Demands an Investigation

  1. Anonymous says:

    “It will take dramatic changes at City Hall to bring out in the open what they are up and that’s not going to happen without a change in leadership”.
    Change in leadership is a slow and long-term goal, where it’ll take several years to replace the current crop. The dramatic change can happen, if the Mayor, Perry and a few more were led out of City Hall -Rizzo- style. What’s holding it up?

  2. Anonymous says:

    How can Los Angeles Council do anything right when council members can NOT obey their own council rules? As noted in your August 3rd Post, “How Do You Spell Hypocrisy? Los Angeles City Council”
    Los Angeles Council members violate their own Council Rules with NO repercussion.
    On September 21, 2010 Los Angeles Council Is Awaiting A Quorum Again as Council members from District 2 Paul Krekorian,
    District 4 Tom LaBonge,
    District 7 Richard Alarcon,
    District 11 Bill Rosendahl,
    District 12 Grieg Smith, and
    District 15 Janice Hahn were late…
    Yet, Los Angeles Council Need to Set Precedent Garcetti is quick to cut off constituents when they exceed several seconds of their two minutes allowed during public comment.
    Los Angeles City Council Rules
    18. Regular meetings of the Council shall be held in City Hall on Tuesday, Wednesday, and Friday of each week, recess dates established by resolution and holidays excepted, at the hour of 10:00 a.m.
    19. All members shall be in their respective seats at said hour of each regular Council meeting and at the time set for the session of any adjourned or special meeting.
    24. Each member shall attend all regular and special meetings (except for illness) unless a leave of absence has been granted by a majority vote at a regular meeting at which a quorum is present. No leave of absence shall be granted if such will result in a quorum not being present for that meeting.
    *25. Ten members of the Council shall constitute a quorum for the transaction of business, but a smaller number may adjourn from time to time until a quorum is present and may compel the attendance of the absentees. Except as otherwise required by the Charter or other law, or by these Rules where not inconsistent therewith, action by the Council shall be taken by a majority vote of the entire membership of the Council.
    26. Whenever a member questions the presence of a quorum, the Presiding Officer shall direct the Clerk to call the roll and announce the result.
    There shall be no debate. Every member present must respond when his or her name is called.
    27. No member shall be considered present unless
    the member is within the Council Chamber.
    28. No member shall leave a Council meeting without permission from the Presiding Officer of the meeting.
    29. Upon a call of the Council, if supported by a majority of the members present, whether quorum or not, the Presiding Officer shall have the power to send the Sergeant-at-Arms with a written order to bring the absent Councilmember forthwith before the Council.
    Rules of The Los Angeles City Council

  3. Anonymous says:

    Great story Jack writes for City Watch on this issue. You gotta luv Cooley going after Bell and getting them. Now its time he digs deep into the corruption of CRA and goes after our city council. I don’t think Wendy has audited CRA and if not why hasn’t she? They are buying up real estate all over Los Angeles and are as corrupt as can be. C’mon you lazy ass reporters do your job and start investigating and report the stories we all know exist.

  4. Anonymous says:

    The CRA is renewing and expanding it North Hollywood Project area (established 1979) with a new Laural Canyon project area.
    They are also re-establishing and EXTENDING their powers of Eminent Domain (for Private Developers, not Public use such as a Fire Station or Government office).
    This matter is covered under Agenda Item 5 on the Housing, Economic, and Economic Development Dept agenda for Tuesday, 09/21/2010:
    Here is a link to the support including the statement that Eminent Domain power timeline will be EXTENDED which means any property in the Project Area is declared blighted for the life of the project and can be a candidate for Eminent Domain if a private developer has an eye on the property:
    By the way, Council members Krekorian (CD-2) and La Bonge (CD-4) both support it.
    Both of their seats are up for re-election. Ask those candidates at the Clean Sweep’s candidate forum where they stand on the use of Eminent Domain for private use and get them to pledge to always oppose the use of Eminent Domain for private use when it comes up in Council or Committee.

  5. Anonymous says:

    The Slauson and Central case involving Krammer Metals, South Central Farmers, the CRA and another sweetheart deal for Concerned Citizens shows how corrupt the City of LA can be and also shows why the Constituency in CD-2 and CD-4 should oppose and extension of the North Hollywood CRA Project Area.
    Anyone that tells you that the CRA and Redevelopment Law in California is good should speak with the lawyers for Krammer Metals or Krammer directly. Krammer followed all the rules that he was supposed to allow the owner of a property to participate when the CRA has its eye on a property for a project.
    Guess what, Krammer followed the rules, but saw his property condemned. Sadly, according to the LA Times article, Krammer spent millions fighting the CRA funded by Krammer’s own taxpayer dollars.
    On an interesting note, just look at the quote sent out by attorney Dan Wright of the Silverstein Law firm where CRA Commissioner Madeline Janis, called Mr. Krammer’s metal recycling company a blight – Well hello! This is a green industry and good for the environment (you know the rules 1. Reuse; 2. Recycle)
    Anyone in a Redevelopment project area can be threatened: Property Owner, Business owner with a lease-hold interest, Employees who are tossed out with the condemned business or property.

  6. Anonymous says:

    Will it take an act of God to shut down CRA, a piggy bank for wealthy developers who are friends of the Mayor, Garcetti, Perry and the other Councilmembers. CRA has not done one project that has helped the community in any way. Look at the former CRA-funded Blossom Plaza in CD 1, where Jerry Neuman, a lobbyist, who can be found tooling around in City Hall corridors, promised obscene returns on the project until the story broke out. Once the developers knew they could not rip-off the city, the project died. Typical of all CRA projects. The developers are there for the easy money, funded by taxpayers and rarely scrutinized.

  7. There are too many moving parts. But who is financing all of this? Who is getting paid what?

  8. Anonymous says:

    I am curious about what happened to all those houses Noreen Mclendon and Concerned Citizens built on Santa Ana east of Wilmington.
    Are they sold? Did CRA or the city recoup any money? Were they foreclosed on by CRA if they should have been?
    Financed with CRA money? And what was Janice Hahn’s part in the deal?
    To me they look like and junk and very cheaply constructed.

  9. David G. says:

    Gone are the days when CRA was actually successful in eliminating blight. The agency has reached the end of it’s lifecycle and no longer serves any public benefit-so it’s time to shut it down. CRA has become nothing more than a piggy bank for the Mayor to funnel $$ to his friends and supporters. The problem is that there just doesn’t seem to be enough public interest to shut it down. Last week the city council voted unanimously to approve CRA’s extremely generous early retirement program which is going to cost tax payers anywhere from $5 to $10 million (depending on number who retire). Despite efforts to convince the Council to oppose this, there was no discussion on the item. It passed with no Council members voting against. There’s a lot of talk about the problems with the pension system but nobody wants to do anything about it. And with that new CEO, Chris Essel, she’s totally incapable of running the place. She’s got a pretty face with nothing in the head (a complete airhead). She’s absolutely lost. Essel is nothing more than a puppet of the Mayor. Just be thankful she didn’t get elected to City Council. I didn’t think that Essel could do worse that the previous CEO, Estolano-but I’m beginning to have my doubts. One is an absolute airhead while the other had an overly inflated ego with a revengeful personality. THE MAYOR JUST CAN’T SEEM TO PICK THE RIGHT CEO FOR CRA (OR ANY OTHER CITY DEPT) SO THE PUBLIC IS BETTER OFF IF CRA CLOSES IT’S DOORS).

  10. Anonymous says:

    Folks, HUD has shut down federal HUD money going to the CRA in light of an audit that shows CRA is unable to properly document its use of federal money. The Slauson Central Retail Project is getting millions of dollars of HUD money and loans. If the HUD money spigot just got turned off at CRA, this endangers many of the big boondoggles currently on the table. The S*** is about to hit the fan.
    Go to Channel 35 City View and look at the end of the CRA meeting video for September 16, 2010. There is Cal Hollis, Interim CEO, admitting on camera that the feds have shut down the money due to the issues raised in audits of CRA and Community Development Dept of the City.

  11. DavidG says:

    I know for a fact that the corruption at CRA runs deep. This latest incident is just the tip of the iceberg. The corruption starts at the top and flows down. The current COO, Hollis is deceitful and very manipulative. He has known to have ordered the destruction of documents and emails to cover up problems. He actively goes around the city recruiting business for his old firm (KMA) but because he was handpicked by the Mayor, he never seems to be investigated for his misdeeds. Despite numerous letters to Wendy Gruel, the problems are never investigated. Sometimes I wonder whether the Mayor has Wendy in his hip pocket.

  12. Anonymous says:

    Wasn’t the current head of the Building and Safety once the head of CRA. The most corrupt department in LA! Now he is laying off good people and giving a half million dollars of City money to his buddies to help streamline things AGAIN! Waht a crock!

  13. david r2b says:

    David G. @ 2:22 AM, September 21 -
    A portion of your comment regarding CRA pensions:
    “Last week the city council voted unanimously to approve CRA’s extremely generous early retirement program which is going to cost tax payers anywhere from $5 to $10 million (depending on number who retire). Despite efforts to convince the Council to oppose this, there was no discussion on the item. It passed with no Council members voting against.”
    Question: is the CRA “NOT” staffed by City Employees? In yesterday’s and today’s blogs, CalPERS has also been mentioned. I apologize and I’m confused. Are the employees of the CRA: city, county or state?
    (I’m posting this question in both yesterday’s and today’s Blog, hoping that you’ll answer.)
    Thank you.

  14. Anonymous says:

    What is the story for all jobs lost @this place . It used to be a huge carlot there ,no story about $$ that was paid for part of the lot

  15. R Baird says:

    What about Central Village (grocery store + dozens of affordable housing units), Adams/Central (Fresh N’ Easy + dozens of affordable housing units), and Rittenhouse Square (ground floor retail + dozens of affordable housing units)? All on Central Avenue, all good urban design, all for the good of the neighborhood. Weren’t they all CRA subsidized? The CRA may indeed be corrupt, but they are the only entity putting money into these types of projects.

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