Conspiracy Figure Sues, Says Industry Officials Took Part

INDUSTRY —  A convicted conspirator in the city’s Industry Hills kickback scandal has responded to a civil suit by filing a cross-complaint alleging that city officials, including the mayor, city treasurer and city attorney, participated in the conspiracy that cost the city $1.35 million.

In the complaint, Jack R. Carpenter, the chief executive officer of Valley Planing Mill, a Van Nuys wood milling firm that worked on the Industry Hills Exhibit-Conference Center, said that his aim was to eliminate or reduce his liability in a $33-million civil suit filed by the city against him and seven others.

Carpenter is seeking unspecified monetary damages from those named in the complaint in an attempt to indemnify himself against the liabilities he faces from the city’s civil suit.

The City Council has ordered its attorneys to defend the city against the action. A federal judge will decide next month whether to consider the complaint. Attorneys representing the city said there is no evidence to support Carpenter’s charges and predicted that U.S. District Judge Mariana Pfaelzer, who is presiding over the city’s civil suit, will dismiss the complaint.

In the kickback case, Carpenter, former Industry Hills project manager C. Ronald Rabin, La Habra contractor Roger Haines, Industry businessman Robert K. King, Burbank contractor Frank C. Wood and city founder James M. Stafford pleaded guilty to taking part in the scheme. The six admitted that they conspired to ensure that certain contractors were awarded inflated contracts for which Stafford, Wood and King received kickbacks.

Stafford, who helped found the city in 1957, was the only defendant sentenced to prison and is now serving an eight-year term. Carpenter pleaded guilty to mailing phony invoices that were used to skim money from construction contracts for the conference center. He was sentenced to five years probation and ordered to perform 2,000 hours of community service work.

The city’s civil suit charges that Stafford, who federal prosecutors say orchestrated the scheme, Carpenter and the four others conspired between 1977 and 1984 to rig construction bids and then extort kickbacks for several redevelopment projects, including the $65-million conference center.

However, the complaint, filed by attorney Molly Munger, alleges that:

“Stafford used the city to benefit himself and his friends. He directed its affairs; he installed loyal friends and associates as city employees and officials; he saw to it that his friends and associates personally profited from city contracts and dealings by, among other things, bid-rigging and the diversion of funds, services and city property to their personal use.”

By 1977, the complaint alleges, City Atty. Graham Ritchie, Mayor John Ferrero, City Treasurer Phyllis Tucker, former redevelopment agency director Jerome Winstead, former City Manager John Robert Baker, King, Rabin and former city engineering and financial consultant Warner W. Hodgdon--Rabin’s former employer at Industry’s now bankrupt National Engineering Co.--had agreed to participate in Stafford’s plan.

Daphne Stegman, legal counsel for the city and an attorney with the Los Angeles law firm of Blecher, Collins & Weinstein, said she would “not respond to each individual claim” raised by Carpenter. Carpenter’s complaint is just “one more tactical defense of a man who realizes that he and his company are in serious legal difficulty,” Stegman said.

The complaint also alleges that:

- Ferrero used his position as mayor to obtain a rent-free lease for 600 acres of property owned by a city redevelopment agency.

- Tucker used her position as city treasurer to ensure that a corporation of which she was an officer obtained lucrative redevelopment contracts. Federal prosecutors submitted a memorandum to U.S. Dist. Judge Edward Rafeedie before Stafford’s sentencing listing Tucker, who is Ferrero’s sister, “as a corporate financial officer in a corporation owned by Stafford.” The memorandum did not name the corporation.

- Ritchie, as city attorney, took part in the process used to rig at least one of the major redevelopment contracts.

Munger refused to elaborate on any of the allegations.

Ritchie responded to Carpenter’s complaint by saying that it was filed by a convicted felon and had “no factual merit.” Despite an FBI investigation, no city employee has been charged with taking part in the scheme, he said. Ritchie said the complaint does not specify how he allegedly took part in the scheme.

Ritchie said that under the doctrine of “unclean hands,” a court cannot grant relief from a suit to a person guilty of conduct such as Carpenter’s. Ritchie also maintained that Carpenter, who pleaded guilty to mail fraud, cannot claim to be a victim while acknowledging to have taken part in the kickback scheme.

Tucker, King and Rabin refused to comment on the complaint. Efforts to reach Wood, Ferrero and Baker, who is now serving as a consultant for the city’s principal redevelopment agency, the Industry-Urban-Development Agency (IUDA), were not successful. Winstead, who resigned in January from his post as executive director of the IUDA, citing stress caused by the FBI investigation, did not return telephone calls from The Times. Haines would not comment on the complaint except to say that he had expected it “because the activities of the city officials have been in question for a number of years.”

In his complaint, Carpenter alleges that he unwittingly entered his company into a contract with the city from which money later would be extorted by the kickback conspirators. Carpenter charged that King, who pleaded guilty to mail fraud charges in the kickback scheme, was the conspirator who persuaded him to submit a bid for a large millwork contract. King later told him, Carpenter charged, that he would have to “agree to pay kickbacks to King” to obtain the contract.

Munger argues in the complaint that the conspirators knew Carpenter “would be under financial pressure to deliver the kickbacks they demanded,” and therefore Carpenter paid them to protect his business.

In a related development, the board of directors of the IUDA instructed its attorneys on Tuesday to defend the agency against the complaint and to provide legal defenses for Ritchie and Winstead. Ritchie said it still is not clear whether the city’s insurance will cover any legal expenses incurred in his and Winstead’s defense against the complaint. Last year, the City Council allocated $180,000 to provide legal counsel for Ferrero, Baker and Tucker in response to the FBI’s probe of the city. Ritchie said the attorneys retained for Ferrero, Tucker and Baker can defend them against the complaint.