Real estate’s role in LA corruption scandals

Developers like Shenzhen New World Group and Charles Co.’s Arman Gabay are among some of the real estate players that have become key figures in investigations into disgraced city officials

Aug.August 28, 2019 02:00 PM
From left: Jose Huizar, Huang Wei, Mohamed Hadid, Robert Herscu, Raymond Chan, and Arman Gabay, with Los Angeles City Hall (Credit: iStock and Getty Images)
From left: Jose Huizar, Huang Wei, Mohamed Hadid, Robert Herscu, Raymond Chan, and Arman Gabay, with Los Angeles City Hall (Credit: iStock and Getty Images)

In order to get a project off the ground in Los Angeles, the developer needs a wealth of expertise. While some of that involves tapping the right land-use attorneys, or finding out which district needs what, it also often requires having the right connections.

Just how deep should those connections reach?

Recent investigations into wrongdoing at City Hall has revealed the entrenched relationships certain real estate developers hold with elected officials. Though they range in scope, each of the scandals has brought to light how city employees — even those at the bottom of the totem pole — can impact a project. It should be noted that many of the real estate players mentioned in the investigations have not been charged.

Here’s a recap of the recent probes and how they tie to real estate:

Jose Huizar | Shenzhen New World Group, Shenzhen Hazens Real Estate Group

Perhaps the most far-reaching, an FBI investigation into City Council member Jose Huizar has roped in more than a dozen individuals, two real estate development firms and large development projects in Downtown Los Angeles. Huizar, who led the powerful Planning and Land Use Committee, is under investigation for possible bribery, extortion, money laundering and conspiracy.

An FBI search warrant — made public in January — also named Wei Huang and Ricky Zheng, executives at Shenzhen New World Group. Shenzhen New World owns the Los Angeles Marriott Downtown and the Sheraton Universal hotel. It filed plans to expand both properties in a two-day span in June 2018, a few months before the FBI raided Huizar’s office.

Also named was Fuer Yuan, founder of Shenzhen Hazens Real Estate Group Company, and Mason Situ, a general manager at the firm. The company owns the Luxe City Center hotel, where it was planning a contentious redevelopment project. City Council approved the project in 2017.

Michael LoGrande | HQ Development, Soho House, Vella Group, VE Equities

Earlier this month, Michael LoGrande was handed the largest fine ever levied against a city employee for illegally lobbying the city shortly after his departure. At the same time, the former planning department chief was also being paid $18,000 per month in consulting fees by the city. A report by the Ethics Commission found that LoGrande helped expedite a project proposed by Robert Herscu’s HQ Development during his consulting contract. He also held a tight relationship with New York-based Vella Group, VE Equities and Soho House & Co. — all of which had major projects in the pipeline during the time he was running the planning department.

Raymond Chan | Greenland USA, Oceanwide, Shenzen Hazens

The same FBI raid that targeted Huizar last summer also targeted the email account of former Deputy Mayor Raymond Chan. In those emails, it was revealed that Chan, a longtime city employee who formerly led the Department of Building and Safety, raised tens of thousands of dollars for a charity event from developers seeking city approvals for major projects. Among the developers he reached out to were three who were included in the FBI search warrant — Greenland USA, Oceanwide, and Shenzen Hazens.

Thomas Shepos | Arman Gabay

Thomas Shepos, a former public official in L.A. County’s Real Estate Division, pled guilty to accepting cash bribes from one of West Hollywood’s most prominent developers late last year. He also pled guilty to making false statements to the FBI about the bribe and kickback deal with Arman Gabay, co-founder of West Hollywood-based Charles Co. The payments — about $434,000 in bribes over seven years — were used to help Gabay secure a lease with county departments at the Charles Co.-owned Hawthorne Plaza Mall.

Gabay also managed to engangle City Council President Herb Wesson, in another unrelated project in South L.A. Though there has been no indictment or official inquiry, a Los Angeles Times investigation revealed Wesson was a big proponent of the Charles Co.’s District Square project and approved more than $26 million in federal grants for it to get built, though it never did. Campaign contribution records show Gabay had donated to Wesson’s campaigns.

Anthony Anderson | Mohamed Hadid

The case surrounding spec home developer Mohamed Hadid and his half-built mansion on Strada Vecchia Road in Bel-Air has had its share of characters, including litigious neighbors, construction managers and about a dozen attorneys. Anthony Anderson, a former inspector for the L.A. Department of Building and Safety, has also become a key figure. In a legal declaration filed in June, a former construction manager at the project said Hadid ordered one of his carpenters to build wooden cabinets at Anderson’s home. There was no record of Anderson ever paying Hadid, according to the declaration. Though Hadid has denied claims that he’s ever paid off a city inspector, the property remains the subject of an FBI investigation.

Department of Water and Power

Though it’s not exactly tied to real estate, it’s worth noting that FBI agents stormed the Department of Water and Power headquarters in July as part of an investigation into a botched customer billing system. Investigators were reportedly seeking evidence of bribery, kickbacks, extortion, mail fraud and money laundering, according to the warrant. The agency has been in hot water since it launched a new billing system six years ago, where thousands of customers received inflated bills.

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