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UPDATED: Demand for a Criminal Investigation of the CRA Deal for 1601 N. Vine St.

UPDATE: LA Weekly’s Jill Stewart picked up on this item and wrote that to call for an investigation, the “mini-Politburo — 15 Los Angeles City Council members … would have to vote to sic (City Attorney) Trutanich on themselves. God, would that be a comic delight.

Editor’s Note: On Friday, the City Council will once again consider approval of the Community Redevelopment Agency’s plan to sell the property at 1601 N. Vine St. tn Hollywood to Hal Katersky’s Pacifica Ventures for $4.65 million less than it paid him for it four years ago. The deal has sparked such heated controversy that the Council has repeatedly delayed action. In this open letter, to the Council attorney and community activist Richard MacNaughton reports that a critical document showing the property was worth far less than the CRA paid for it in 2006 and calls for a criminal investigation.

Dear Councilmembers:

In its April 1, 2010 transmittal and in its July 15, 2010 report to the City Council, the CRA/LA expressly represented that it had purchased The Property in 2006 based upon the CB Richard Ellis 5-13-2006 appraisal of $5,450,000.00.

The April 1, 2010 and July 15, 2010 representations are the same representations which the CRA/LA has been making to the council since October 2006.  According to the CRA/LA, the Richard Ellis appraisal was obtained by the “Developer.”

The CRA/LA and CD #13 have concealed from this council, the May 23, 2006 Pacific Real Estate Consultants’ appraisal which the CRA/LA had obtained on May 23, 2006, showing an appraisal value of only $4,070,000.00, which is $1.38 M less than the Ellis Appraisal.

The withholding of this lower appraisal from the City Council has the prima facie elements of fraud:

1. A $1.38 M discrepancy in two appraisals of the same property conducted in the same month is material.

2. When the CRA/LA’s own appraisal is materially less than the Developer’s appraisal, the CRA/LA and CD #13 had the duty of full disclosure to the council.  Instead, no mention can be found of the $4.0 M appraisal in the documents submitted to the council in 2006 or at any time thereafter including the most recent CRA/LA report on 7-15-10

3. The withholding of the May 23, 2006 $4.0 M appraisal was a material misrepresentation by omission.  Not only does the CRA/LA owe duties of full disclosure to the City Council, once a party undertakes to make disclosure on a subject, it may not simultaneously conceal other data which the recipient would consider material if he/she knew about it.

4.  Although two separate CPRA Requests have been made to the CRA/LA for the Richard Ellis $5.4 appraisal, it has not been provided.

5. Presumably, all councilmembers, except CD #13, relied on the material representation that there was only one appraisal and it was for $5,450,000.00.

6.   Presumably, no councilmembers, other than CD #13, would have voted to pay $5.4 M for a piece of property which the CRA/LA’s own appraisal said was worth only $4.0 M.

7.  Because criminal behavior tends to break the chain of causation, Councilmembers cannot be charged with foreseeing that a materially lower appraisal also existed. Thus, their reliance was.justified. In a criminal investigation, however, there should be the Nixonian question to each councilmember, “What did you know and when did you know it?”

8. The City and its taxpayers were damaged by paying $1.3 M too much for the Property, and in addition, the City has lost interest on $1.3 M for the last four years.
Thus, there is a prima facie case that the CRA/LA along with CD #13 made materially false representations by wrongfully withholding material data and the Council justifiably and detrimentally on relied false represen-tations, resulting in the City’s being defrauded out of at least $1.3 M.

                            The Need for Criminal Investigations:

The time has arrived for a criminal fraud investigation into the entire  deal(s) with respect to 1601 N Vine.

There are many additional questions with The Property including but not limited to who owned The Property.  While the CRA/LA advises the Council that the seller was the Developer (Hal Katersky, Dana Arnold, Pacifica Ventures), the CRA/LA advised KMA that it purchased the property from Steve Ullman.  As councilmembers know, there had been serious questions about the propriety of the sale/purchase and the appraisal for the Ullman “Capitol Records” parking lot.  Thus, it appears that CRA/LA and CD #13 falsely represented to the Council in 2006 who was the real seller of 1601 N. Vine to CRA/LA.

The CRA/LA and the City Council have been aware that the public has been scrutinizing the questionable activity surrounding The Property.  There have been a series of articles in CityWatch, with the first mention in the June 25, 2010 article, CRA has LA’s Council in a Mind Warp, and with detailed articles by Jack Humphreville.  See for example,  The Unpleasant Aroma of a CRA Deal, see also Ron Kaye LA, October 6, 2010 blog, The Art of the Deal: CRA, Molly’s Burgers, Hal Katersky – and Your Money.

At each council session where this property is on the agenda, more questions arise, but to date the City Council has stonewalled everyone.  For the Council to continue with this deal is to knowingly ratify fraud.

A $1.3 M swindle is definitely in the felonious range and the Council has the duty to halt this project and to call in an outside authority to con-duct a criminal investigation.  As the FBI is already conducting a criminal investigation of David Rubin and LA Housing, it seems that the FBI is the agency with whom the public would be most comfortable.

Furthermore, The City should initiate legal proceedings to recoup the $1.38 M over payment to whomever the funds were actually paid in 2006. Due to the conflict in interest which the City Attorney’s Office has in pur-suing private parties such as Katersky, Arnold, and Ullman when the litigation is likely to uncover wrongdoing by city officials, an independent law firm, without any ties to the Councilmembers or to any of their family members, needs to be retained.

This matter needs to be resolved in the courts, not in back rooms or even the Council Chamber.

Very truly yours,

Richard MacNaughton

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30 Responses to UPDATED: Demand for a Criminal Investigation of the CRA Deal for 1601 N. Vine St.

  1. Walter Moore says:

    This is exactly the kind of thing Trutanich should be doing, as opposed to giving reefer to Lopez, or filing lawsuits against medical insurance companies.

  2. Anonymous says:

    Where is the City Attorney on this criminal activity? I hear every week of some bullshit corrupt deal the CRA is making. Over in CD14 El Sereno the CRA is planning on giving the Food 4 Less a couple of million to rennovate their store. They want to have a corporate office on top of the building. Guess who will profit from this corrupt deal? None other then Councilman Huizar who will get politicial campaign donations for pushing this deal through without community input. CRA needs to be stopped and where the hell is the media on their transactions and political favors to Council members? If all 91 NC’s sent an email to each council member and had at least 5 of the residents in their districts do the same, City Council corrupt bastards would get the message. Just posting the corruption here informs us but its about time for ACTION!!! WE should all BOYCOTT local media for not reporting all the corruption going on in CITY HALL.

  3. Dhstudio says:

    Most excellent article yet! Where is the outrage??? My suggestion: don’t boycott the media, utilize it! Get the word out to your local stations and papers! The people need to know how dysfunctional this system is, and what they’re doing with our hard-earned tax bucks!!

  4. This issue is Item 1 on the City Council agenda for Friday, October 22. Given all the questions about the finances and ethics of the developer, Hal Katerdsky, how can the City Council even begin to consider approving this deal? We need a full hearing!

  5. Scott Zwartz says:

    The City Attorney cannot investigate city officials. Trutanich explained the limitations of his office at an LA Clean Sweep meeting.
    Angelenos need to change the charter so that we have both a City Attorney, to be the City’s lawyer, and a City Prosecutor, who can prosecute anyone including the Mayor and Councilmembers. Our Charter makes no provision for a City Prosecutor and it prevents the City Attorney from doing any investigation.
    It is up to Angelenos to investigate and present the evidence and to demand criminal investigations. When the crooks prevent any investigations, we need to vote them out of office.

  6. Dhstudio says:

    So, how do we get that ball rolling? How do we change the city charter, so that there can be a City Attorney AND a City Prosecutor? In this day and age, you would think The People would see the importance of a watchdog FOR the city.

  7. Walter Moore says:

    “The City Attorney cannot investigate city officials.”
    BS. Show me anything in the charter, or any law anywhere, that somehow immunizes “city officials” from prosecution by the City Attorney.
    Do you SERIOUSLY believe that if Joe Bureaucrat fabricates a phony “contract” whereby his cousin gets $10,000 for nothing, the City Attorney has to sit around and say, “Shucks. Nothing I can do about it. Hey, Steve, don’t Bogart that joint, my friend.”

  8. Scott Zwartz says:

    Yes, that is the only way to do it. Amend the Charter. It is not easy. Two offices: One City Atty to advise the city and be it’s lawyer and another City Prosecutors is standard way to do it.
    When they wrote this into the Charter, they knew that the City Atty who advised the City could never investigate the City or any official. The failure to create a City Prosecutor had to be intentional.
    Step none is getting the people to realize that billions of dollars are being diverted away from the city’s services and we never know about it because there is no City Prosecutor. We need one City Prosecutor who can prosecute the corrupt developers and the corrupt city councilmembers.

  9. Anonymous says:

    Add this BS to the corruption in City Hall. How can we utilize the media if the Mainstream Media wont’ report. Thank goodness for outlets like LA Weekly and the blogs that inform the people. When was the last time you saw any negative piece on local TV news channels of City Council and the corruption especially Channel 7 who is bribed by Mayor? NEVER
    Another CRA corrupt scandal and mainstream media hasn’t touched it. ..
    LA Weekly..Marcxh 2010…Black Lung Lofts
    Many children being raised in L.A.’s hip, new freeway-adjacent housing are damaged for life
    revealed that the City of Los Angeles was allowing developers to build family housing alongside major freeways, despite glaring health risks for children.
    As of this morning, there’s another such smog-magnet in the works.
    The Community Redevelopment Agency of the City of Los Angeles has received a $2.5 million grant from the U.S. Department of Housing and Urban Development, which they plan to put toward a redevelopment of 2,200 acres in the Glendale Narrows portion of the Los Angeles River.

  10. Anonymous says:

    BS to City Attorney not investigating city officials. He can certainly refer them to his buddy Cooley.

  11. While on the subject of Charter reform to create a City Prosecutor apart from the City Attorney, I have been advocating splitting the audit responsibilities from the Controller’s office. Auditing is incompatible with the proper role of a controller. It is actually a conflict of interest.

  12. Anonymous says:

    Trutanich needs to stop hiding behind that “can’t do anything they are the client” mantra. He’s called the CITY attorney. If there is crime in the CITY it’s under his jurisdiction. Are you kidding me? He better get his head out of running for the next office and back into the issues he promised us all he was going to take care of during his campaign.

  13. Anonymous says:

    To October 21, 2010 11:16 AM,
    NO, the City Attorney cannot refer his clients to the DA for prosecution if he is representing or protecting them against charges.
    But this does raise an ethical question. How corrupt or how criminal does an action have to be to the point that a Councilman is putting the City at risk?

  14. Anonymous says:

    12:05PM writes “NO, the City Attorney cannot refer his clients to the DA for prosecution if he is representing or protecting them against charges.”
    Somebody referred the City of Bell to the DA, and it wasn’t their City Attorney. The point i that anyone can file a complaint with the DA – heck there’s probably someone in that office reading this right now.

  15. Jim O'Sullivan says:

    If anyone cares the powers and duties of the City Attorney are listed on the City’s web site under the Charter. They can criminally prosecute but it requires a violation finding of the provisions of the Charter or City Ordinances and also all misdemeanor offenses arising from violation of the laws of the state occurring in the City.
    Sec. 270. Qualifications.
    The City Attorney must be qualified to practice in all the courts of the state, and must have been so qualified for at least five years immediately preceding his or her election. The City Attorney shall devote his or her entire time to the duties of the office.
    Sec. 271. Powers and Duties.
    The powers and duties of the City Attorney shall be as follows:
    (a) The City Attorney shall represent the City in all legal proceedings against the City. The City Attorney shall initiate appropriate legal proceedings on behalf of the City.
    (b) The City Attorney shall be the legal advisor to the City, and to all City boards, departments, officers and entities. The City Attorney shall give advice or opinion in writing when requested to do so by any City officer or board.
    (c) The City Attorney shall prosecute on behalf of the people all criminal cases and related proceedings arising from violation of the provisions of the Charter and City ordinances, and all misdemeanor offenses arising from violation of the laws of the state occurring in the City.
    (d) The City Attorney shall approve in writing the form of all surety or other bonds required by the Charter, or by ordinance, before the bonds are submitted to the proper body, board or officer for final approval, and no such bond shall be approved without approval as to form by the City Attorney. Except as otherwise provided in the Charter, the City Attorney shall approve in writing the form of all contracts before the contracts are entered into by or on behalf of the City.
    (e) The City Attorney shall keep records of all actions and proceedings in which the City or any officer or board is an interested party, and copies of all written opinions given by the City Attorney’s office. The City Attorney shall comply with all requests for information from the Mayor or Council, and shall report on a regular basis to the Mayor and Council on all matters of litigation, in a form and at times specified by ordinance. In all litigation involving potential financial liability of the City, the City Attorney shall keep the Mayor and Council informed as to the status and progress of litigation.
    Sec. 272. Control of Litigation.
    The civil client of the City Attorney is the municipal corporation, the City of Los Angeles. The City Attorney shall defend the City in litigation, as well as its officers and employees as provided by ordinance. The City Attorney may initiate civil litigation on behalf of the City or the People of the State of California, and shall initiate civil litigation on behalf of the City when requested to do so by the authority having control over the litigation as set forth below. The City Attorney shall manage all litigation of the City, subject to client direction in accordance with this section, and subject to the City Attorney’s duty to act in the best interests of the City and to conform to professional and ethical obligations. In the course of litigation, client decisions, including a decision to initiate litigation, shall be made by the Mayor, the Council, or boards of commissioners in accordance with this section. However, the decision to settle litigation shall be made in accordance with Section 273.

  16. Anonymous says:

    The Mayor, a Council member or a department manager is not the City of Los Angeles.

  17. Anonymous says:

    HERE IT IS….The City of Bell’s City Attorney was part of that whole corruption scandal. Its guilt by association and if Trutanich doesn’t want that label, he better get going and moving on criminal charges cause there are tons of them
    ) The City Attorney shall prosecute on behalf of the people all criminal cases and related proceedings arising from violation of the provisions of the Charter and City ordinances, and all misdemeanor offenses arising from violation of the laws of the state occurring in the City.

  18. He Thinks We Are Ignorant Suckers says:

    (b) The City Attorney shall be the legal advisor to the City, and to all City boards, departments, officers and entities.
    Trutanich should be advising the City that certain elected officials are in violation of local, state and federal law.
    He is not each councilmember’s private attorney. If a councilman is doing something illegal that will have negative repressions on the City’s treasury, as in massive lawsuits, then he needs to stop campaigning for office for a minute and squash the illicit and illegal activities.
    There is currently an open court case that details much of what goes on under Trutanich’s nose while he goes after what he feel will help in the press to replace Cooley.

  19. Anonymous says:

    Talk about corruption you will begin to see organizations giving out honors and awards left and right to assholes who have done nothing for communities throughout Los Angeles. Will someone please tell me what has Wendy done for Boyle Heights? She’s never been there and probably needs a map to find it but the White Memorial who had bad publicity because babies were dying is giving her an award as a “Community Leader” and Woman of the Year. For what*)(*^%&% She’s an idiot and lacks the intelligence to be a City Controller…. What CRAP!!!
    White Memorial Medical Center will also honor individuals who have provided years of volunteer support, both for the hospital and for organizations throughout the community. Honorees include: Volunteer of the Year – The Honorable Juan Marcos Gutiérrez González, Consul General of Mexico; Woman of the Year – The Honorable Wendy Greuel, Los Angeles City Controller and Community Leader of the Year – The Honorable John A. Perez, Speaker, California State Assembly.

  20. Stzlyee says:

    Comments HERE and THERE:
    An independent law firm, must be retained to file a lawsuit. Thats the bottom line. We can’t continue to frustrate ourselves and one another anymore.
    Eric Sly Garcetti’s District: The City should initiate legal proceedings to recoup the $1.38 M over payment to “whomever” the funds were actually paid in 2006.
    The time has arrived for a criminal fraud investigation into the entire deal(s) with respect to 1601 N Vine.
    Steve, don’t Bogart that joint.
    For the Council to continue with this deal is to knowingly ratify fraud.
    This issue is Item 1 on the City Council agenda for Friday, October 22.
    Given all the questions about the finances and ethics of the developer, Hal Katerdsky. Full Hearing NOW!
    Transparency, Record Request, File Lawsuit, Make them Shake in their Boots.
    Thank you: LA Weekly, Zumadogg, Ron, Walter, and Jack Humphreville (aka Humperville)as well as other concerned Citizens.

  21. Anonymous says:

    How much is it going to cost the city now that they lost the federal case at Venice Beach and the lottery and sound ban have been overturned?

  22. James McCuen says:

    If arrorgance prevails and this is voted on, LA City Council members cannot claim ignorance (Like Bill Rosendahl last year regarding the budget problems).
    Another crime has been committed with their vote on Friday if carried through.

  23. Anonymous says:

    To October 21, 2010 5:57 PM,
    Actually, the City may be able to have money returned to it per this blog article.
    The City should be able to seek a return of the appraisal difference.
    Then at the appropriate time the City should sell this land at the maximum price or issue an OPEN Request for Proposal (RFP) and have competition for the best value to the taxpayers.
    Another office building may not be the answer.
    The CRA and City failed to update their 2006 report to 2010 financial conditions – There is a surplus of office space in the City of LA, so getting a 60% occupancy would be impossible in a reasonable amount of time.

  24. Sal says:

    From Jill Stewart’s post:
    “When contacted by the Weekly shortly after noon today, Garcetti’s press aide said he hadn’t heard about MacNaughton’s allegations against Garcetti.
    Well, they’d been posted online by Kaye for seven hours at that point, and had set off a flurry of emails between activists, bloggers, politicians and journalists around L.A.”
    So the Garcetti and his colleagues are going to act like Sergeant Schultz “I know nothing–NOTHING!”

  25. Sal says:

    Garcetti’s Official Position on this issue:

  26. anonymous says:

    If the CA can’t do anything, how about the DA?

  27. Anonymous says:

    It took the LA Weekly as many have stated before to break this in the media. Why? The LA Slimes might as well just fold up now. If at least 10 of us emailed this story to the news channels maybe ONE of them would run. Maybe John Schwada Fox 11 who is the only other one besides LA Weekly who gives a shit about reporting on the corruption of city hall. Let’s see which jerk city council members show up to Krekorian’s Town Hall now that they’re campaigning.

  28. Azar Nejad says:

    City Attorney, Currently, Trutanich is part of the dysfunctional system engineered with one sided & short of component of “Check&Balance”!
    The Bell case – just so happened because of political agenda – they went outside of their City System – to Cooley who just so happened that because the case was serving his political agenda – partial responsibility of “Check&Balance” which very rarely gets practiced – this one time was practiced!
    As long as NC’s & Labor do not have representation on the SYSTEMATIC DYSFUNTIONAL Commissions & Boards which currently – are mostly APPOINTMENTS of agendized Politicians – Only the Exec Branch [ Mayor] -
    All we do is noise – that subsides after a while of being ignored.
    Sec. 271d
    “Except as otherwise provided in the Charter, the City Attorney shall approve in writing the form of all contracts before the contracts are entered into by or on behalf of the City.”

  29. Kate Baner says:

    I am not concerned about who (or what entity) investigates this issue. I am concerned that no one will investigate this issue and America’s second largest City will become more corrupt than Chicago, the City of Bell, or Washington D.C.
    If the City Attorney fails to represent the Citizen’s of Los Angeles or the Municipal Corporation that is also known as the City of Los Angeles, then the LA County DA, the California AG, or the Feds need to investigate this deal, all CRA deals, DWP, the Mayor, the City Council, and in fact the entire City of LA.

  30. William says:

    The real questions are will the “report” documents surrounding this matter change on Nov.9?
    Will this matter be killed or is there so much money involved, will the City Council steamroller this through? Does the City Council, the CRA (Essel), the Mayor feel like Teflon? Are they protected from prosecution from the LA County DA, the State Attorney General, the Feds? Who has the most to gain financially from this project? Who has a hidden conflict? Do any of the Commissioners have an indirect or direct interest in this project? What about the Council Office? The Mayor?
    This is called investigative reporting. And like “White Collar Crime” law enforcement, it is sadly missing in this City.
    Apparently this City is focused on attacking the “Blue Collar Working Class.” You know, trickle down punishment. The Fall Guy. You won’t see those at the top be punished. They are too well connected.

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