On Wednesday, Herb Wesson’s City Council Committee approved the city’s gift of $4.7 million to developer Hal Katersky and his Pacifica Ventures company to build an office building at 1601 N. Vine St. in Hollywood, ignoring specific allegations of fraud against the people involving $1.45 million and whitewashing all the other problems linked to this troubling project.
This project is the poster child for all that’s wrong with the Community Redevelopment Agency and why it should be abolished. And more than that, it provides a window into the depths of City Hall’s corruption and why the city’s leadership has failed and must be replaced.
Attorney Richard MacNaughton and other Hollywood activists have dug deep into the record of the “Vinegate Scandal” and turned up the smoking gun: A CRA appraisal of the property for $4.08 million — $1.7 million lower than the developer’s own appraisal. CRA staff agreed to pay the developer’s asking price of $5.45 million in 2006 without ever telling the Board of Commissioners or the City Council of the lower appraisal.
The Council has put the project on its agenda more than a dozen times and once again it is on the agenda today but is expected to delay action until next week, allowing time for City Attorney Carmen Trutanich to determine whether the Council itself would become complicit in fraud if it knowingly approves the project without a full and thorough independent investigation of the evidence that has been revealed.
Activists have called on District Attorney Steve Cooley and the FBI to conduct a criminal investigation and MacNaughton drafted after Wesson’s committee approved the deal what amounts to a bill of indictment for submission to the City Council.
With Jan Perry absent and Richard Alarcon ducking out just before the vote, Wesson, Tony Cardenas and Ed Reyes buried the past misdeeds as the fault of former CRA staffers, including the agency’s former head Cecilia Estalano.
They then green-lighted the project based solely on Katersky’s assertion that he is an innocent victim of CRA incompetence and his unequivocal denial of all allegations that have surfaced during the last eight months of controversy.
He insisted he is the still owner and operator of his runaway film production studio in Albuquerque despite bankruptcy proceedings and has no pending lawsuits against him, going so far as to assert there is not a single judgment against him or his firm among 30 lawsuits that have been filed.
Wesson’s Housing, Economic and Community Development Committee took him at his word, choosing instead to only question in the end whether the CRA had improved its policies.
MacNaughton’s 13-page letter (MacNaughton2-23.pdf) to committee members, backed by various documents, begins under the heading “Council May Not Turn a Blind Eye To Fraud,” saying:
“Although this committee and the City Council itself are not the forums to conduct criminal investigations, when presented with proof of the elements of criminal conduct, the council may not turn away and say, “I do not want to deal with that.” By approving the deal, the committee has ratified the wrongdoing.”
“The Committee has not taken the time to review the documentation and the committee has undertaken no investigation. Asking the alleged perpetrators or their successors to provide evidence of their guilt seldom produces incriminating evidence. In this case, however, the citizens have forced the CRA to admit that in 2006 it withheld from the CRA Commission and from City Council the existence of the CRA $4 appraisal. The balance of the CRA’s January 2011 and February 2011 reports are at
best worthless and often misleading.”
He then goes on to examine Katersky’s role in flipping the property from Steve Ullman to the CRA, suggesting the developer’s statements to the committee were “evasive and disingenuous” based on documents at the time of the 2006 sale.
He cites bankruptcy records for the Albuquerque Studios and other court records involving Katersky in past and pending lawsuit to question his veracity.
“Rather than voting to give a multi-million deal to a man who could not be forthright even today, the committee had the duty to call for a criminal investigation,” MacNaughton concluded.
“Rather than obtaining answers, the committee ratified the prior and current wrongdoing. The best that can be said for a Committee member is that he had a conscious ignorance of the facts.”
It has never been explained why this deal for an office building in a glutted office space market in Hollywood was ever worth one dime of the public’s money or how luring a couple of small entertainment companies from Burbank or Santa Monica will do anything to stimulate the regional economy.
It has never been explained why key documents disappeared, why procedures were violated, why former staffers were never interviewed about what really happened.
All we know is that Council President Eric Garcetti wants this project bad enough to risk his reputation on it and that whatever the Council President wants, he gets from other Council members — or else.
This is not a system of laws that serve the public interest but a system of back room deals that serve private interests.