Inside LA’s biggest real estate corruption scandal in recent history

How downtown developers were shook down as City Council member Jose Huizar and a suspected criminal enterprise netted $1.5M in bribes

TRD NATIONAL TRD ISSUE /
Jul.July 09, 2020 07:30 AM
A breakdown of the biggest bribes and what’s next in the historic scandal of LA City Council member Jose Huizar (Getty, DiMarzio | Kato Architecture, Department of City Planning, iStock)

A breakdown of the biggest bribes and what’s next in the historic scandal of LA City Council member Jose Huizar (Getty, DiMarzio | Kato Architecture, Department of City Planning, iStock)

The clock was ticking for a developer’s big downtown Los Angeles debut.

Carmel Partners was looking to get its planned mixed-use tower in LA’s growing Arts District across the finish line.

But with local residents and unions alarmed by the planned 35-story tower going up in an area consisting mostly of warehouses and two-story retail buildings, the project’s day before the City Council kept getting pushed back.

An executive at the San Francisco-based development firm had already bribed downtown Council member Jose Huizar with three $25,000 payments, while cultivating a relationship with the Planning and Land Use Management Committee chair over the past two years, according to a federal affidavit made public in June.

The executive — who has still not been identified by federal prosecutors or otherwise named — then doubled down and allegedly agreed to pay off Huizar with $50,000 more in September 2018. In an effort to seal the deal, the executive went one step further and offered to finance opposition research against ex-Huizar staffers who accused the lawmaker of sexual harassment, per the affidavit.

“There’s been plenty of corruption in LA development since the city’s beginning. But the previous cases I know of pale in comparison.”

Casey Maddren, United Neighborhoods for Los Angeles

Soon after, Huizar shepherded the Mateo Street project’s approval through the land use committee and the entire City Council.

The Carmel allegation is just one of several explosive charges after federal agents arrested Huizar on suspicion of racketeering. Huizar, prosecutors claim, used his perch as planning committee chair and the Council member of a booming downtown to operate a “criminal enterprise” that netted $1.5 million in bribes from real estate developers.

A rendering of 520 Mateo (Credit: Department of City Planning)

A rendering of 520 Mateo (Credit: Department of City Planning)

The charges are both startling in their scope and tawdry in their details.

Huizar tapped developers to address multiple sexual harassment claimants, the feds say, while also getting developers to pay for a steady stream of prostitutes, who Huizar purportedly referred to as “dessert.”

“There’s been plenty of corruption in LA development since the city’s beginning,” said Casey Maddren, president of the community group United Neighborhoods for Los Angeles. “But the previous cases I know of pale in comparison.”

Jonathan Mehta Stein, executive director of California Common Cause, echoed that sentiment.

“This is likely the largest corruption scandal in recent LA history,” he said.

A tangled web

The 116-page federal affidavit portrays Huizar as a figure confident in his power as a real estate kingmaker, asking that he be called “boss” and bragging that as planning committee chair his power over real estate exceeded Mayor Eric Garcetti.

The councilman also ran a district that was “undergoing a historic real estate development boom,” the prosecutor’s brief notes.

The suspected enterprise relied on the cooperation of former Department of Buildings official Ray Chan, LA City Hall lobbyists, and several liaisons to the development world. Real estate appraiser Justin Jangwoo Kim, development consultant George Chiang, and former Huizar staffer George Esparza have all reached plea deals with prosecutors regarding their involvement.

Huizar and the others named in the prosecutor’s brief either declined requests for comment or have not been reached by this publication since being implicated.

The enterprise began at least six years ago, according to the affidavit. That was when Huizar was running for reelection, while at the same facing a sexual harassment lawsuit from former aide Francine Godoy. Huizar had publicly acknowledged an extramarital affair with Godoy, but denied that he retaliated against her when she refused to provide him sexual favors.

The lawsuit settled before the election, which Huizar won in March 2015. The lawmaker had found the money to finance the settlement just in time, meaning that unlike a deal using taxpayer dollars, the terms did not have to be publicly disclosed.

According to federal investigators, a China-based development executive who matches the description of Shenzhen New World Group Chairman Wei Huang gave Huizar the $600,000 to settle Godoy’s lawsuit. In exchange, Huizar allegedly guaranteed that he could gain full approval for a 77-story downtown skyscraper the Chinese developer was planning.

The project did indeed pass through the City Council.

Jose and Richelle Huizar (Getty)

Besides Carmel and Shenzhen New World, the affidavit suggests that Huizar shook down several other developers to contribute toward a Political Action Committee geared to elect Huizar’s wife, Richelle Huizar, as his replacement on the City Council.

No other developers are explicitly named in the federal affidavit but the identities of two in addition to Carmel and Shenzhen New World can be induced.

One is Shenzhen Hazens Real Estate, which like Shenzhen New World is headquartered in the southeast Chinese metropolis — one of the first cities in China to open itself to global capital and a present day hub of commerce.

Shenzhen Hazens allegedly fronted Huizar and members of his staff $66,000 in consulting fees, casino chips, flights on private jets, luxury hotel stays, trips to Hong Kong and China, and prostitutes and escort services. In return, Huizar greenlighted an 80,000-square-foot project that included a 300-room hotel and hundreds of condo units.

The other developer implicated is 940 Hill LLC, a company formed by investors Dae Yong Lee, Jeok Suk Kim and Hyuk Lim to develop a 20-story tower on 940 South Hill Street in downtown LA. The LLC allegedly gave Huizar a $500,000 bribe in order for the project to pass Council chambers, overcoming the opposition from a local labor group.

“Councilman Huizar violated the public trust to a staggering degree,” said U.S. Attorney Nick Hanna at a press conference last month announcing Huizar’s arrest.

What lies ahead?

Vicki Podberesky

Vicki Podberesky

Huizar’s lawyer, Vicki Podberesky, has indicated in a statement to reporters that the council member will defend himself in court, as opposed to the media.

Huizar — who has been released from police custody on a $100,000 bond — remains on the City Council, though the City Controller’s office has suspended payments on his $214,000 annual salary with Controller Ron Galperin saying, “It is unacceptable for any Council member charged with public corruption to continue to be able to exercise the powers of his or her office.”

Controller Ron Galperin (Wikipedia Commons)

Controller Ron Galperin (Wikipedia Commons)

City officials, though, have stopped short of voting to kick Huizar out, content to let the clock run out as his November term in office expires. Those close to city hall say the Council is reluctant to vote on kicking out a longtime member who is not yet convicted of a crime.

Messages left with the ensnared developers went unreturned until June 30 when Carmel released a two-page statement.

The statement said that the unnamed executive who worked with Huizar was placed on administrative leave, as “there are a number of concerning allegations outlined in the complaint that require investigation.”

Carmel also claimed the affidavit is riddled with “numerous false and/or misleading conclusions, suppositions, innuendos, and opinions.”

The firm admits to handing over the first $75,000 in Political Action Committee money to Huizar, for example, but says it was a legal political donation “in support of two ballot measures addressing the Los Angeles County homelessness crisis.”

Carmel’s statement also makes it clear that the development firm intends to press on with the Mateo Street project, claiming a number of Arts District community groups support the complex.

Carmel and other developers had suspected some degree of foul play on the Planning Committee, but were still alarmed by the federal allegations, according to company representatives.

In a news release, U.S. Attorney Hanna maintained that Huizar “used the power of his office to approve or stall large building projects,” and called the alleged scheme a “money-making criminal enterprise that shaped the development landscape in Los Angeles.”

A rendering of 333 S. Figueroa Street

A rendering of 333 S. Figueroa Street

Shenzhen New World’s 77-story tower on Figueroa Street will be the tallest building west of the Mississippi River. And the 35-story Carmel project “egregiously” runs afoul of the city’s general plan for the low-rise Arts District, the project’s opponents have noted in City Council hearings.

Many hope Huizar’s arrest will foster a more open and fair system for the city to approve developers’ projects.

But few are holding their breath.

“The Huizar case is so far out of bounds I’m sure most Council members will take the position it’s an anomaly,” Maddren of United Neighborhoods said.

“Even if there’s no outright bribery, the existing system where developers, lobbyists and elected officials work behind closed doors to make planning decisions will certainly stay in place,” he argued. “Most Council members feel like the system is working fine.”


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