L.A. might cancel real estate projects tied to City Hall corruption

Los Angeles could revoke city permits and approvals for real estate projects if the City Council finds that developers or their representatives engaged in corruption, under a new ordinance proposed by City Atty. Mike Feuer.

In a letter to council members, Feuer said the city needs an effective tool to address development decisions “tainted by corruption and fraud” and to help restore public faith in City Hall. He urged the council to pass the ordinance swiftly and “put it to use” on projects implicated in the ongoing probe.

“The city must take decisive action to address the specter of corruption and fraud that looms over the city’s land-use decision-making process,” he wrote.

Feuer’s proposal comes weeks after the arrest of Councilman Jose Huizar, who has been accused by federal prosecutors of heading a criminal enterprise fueled by bribes from developers. Huizar pleaded not guilty this week to bribery, money laundering, racketeering and several other charges.

The investigation has netted guilty pleas from former Councilman Mitchell Englander, former Huizar aide George Esparza, real estate consultant George Chiang and political fundraiser Justin Jangwoo Kim. Several real estate projects have been mentioned in the criminal indictment, but so far no developers have been arrested or publicly charged.

Although prosecutors have not named the projects in the criminal case, details in the Huizar indictment make clear that they have concluded the alleged bribery schemes involve:

• A 20-story residential tower planned at the corner of Hill Street and Olympic Boulevard.
• A 35-story tower being built in the Arts District.
• A 77-story skyscraper proposed for property occupied by the L.A. Grand Hotel Downtown on Figueroa Street.
• Plans to replace the Luxe City Center Hotel across from the L.A. Live entertainment complex with new hotel and residential towers.

An attorney for Shenzhen Hazens, the developer of the Luxe project, said he is unaware of any legal authority that would allow the city to take “unilateral action” to stop the company from receiving its building permits.

“Instead, this action appears to violate the law and could subject the city to significant liability,” said the lawyer, Ben Reznik. “It is also worth noting that the project will be an enormous benefit to the citizens of Los Angeles, as it is expected to generate hundreds of construction jobs and, once completed, hundreds of permanent jobs.”

Feuer already moved in June to rescind approvals for the sale of alcoholic beverages and live entertainment at the planned Luxe project. The city attorney said that at his direction, the building department also had placed holds on permits for projects connected to the case.

Land-use attorneys told The Times that whether the city can block such projects could hinge, in part, on whether developers have obtained “vested rights,” which ensure they can complete a project even after government officials change the rules about what can be built.

Feuer’s proposed ordinance states that developers have no vested rights if their permits or approvals were “procured by corruption or fraud.” Under the draft law, the council could vote to revoke approvals or terminate applications for building projects in which developers, owners or their representatives have violated corruption laws or falsified facts.

Revoking city approvals for such a project would require a two-thirds vote of the council. Any city employee or official who is implicated in the alleged wrongdoing would be barred from being involved in the process, according to the ordinance.

The law would also allow real estate developers and others to be barred from pursuing future developments in Los Angeles for a set period of time, or ban them permanently.

Jill Stewart, an editor and activist involved with the group Livable California, said that Feuer “seems to be coming from the right place.” But she argued the proposed ordinance “doesn’t touch the other half of L.A.’s corruption problem — the elected officials themselves.”

“Who will watch the elected leaders as they watch the developers?” Stewart asked, complaining that the council had drastically pared back a package of proposed campaign finance reforms backed by the city Ethics Commission. “The electeds have to bend to intensive reform to win back the public, and they know this.”

Among the four projects, the 77-story skyscraper on Figueroa Street has not yet been approved. The other three projects have been approved and either have not begun construction or are under way.

Representatives of Carmel Partners, which is building the 35-story tower, and Dae Yong Lee, developer of the project at Olympic and Hill, did not provide comment on the proposed ordinance.

Stuart Waldman, president of Valley Industry and Commerce Assn., said the proposed ordinance would put the city on a “slippery slope,” allowing officials to go after projects that “they just don’t like.” Waldman also questioned whether the city can go after developers who haven’t admitted guilt or had charges brought against them.

“If the city were to stop the project, that would cost these developers a significant amount of money, and those developers would turn around and sue the city,” he said.

Determining whether a project is tainted by corruption could be contested terrain. Carmel Partners has previously stated that the Huizar criminal complaint contains false or misleading statements, but did not elaborate. The firm said members of its executive and management committees did not knowingly participate in a pay-to-play scheme.

Attorney Ariel Neuman, who is representing Lee, has said previously that Lee is cooperating in the federal investigation and looks forward to “a swift resolution clearing his name.”

In recent weeks, several council members have called for the city to look at repealing approvals for projects mentioned in the criminal case. AIDS Healthcare Foundation, a nonprofit group that has been a vocal player in local debates over development, sued the city earlier this week to stop some projects vetted by Huizar and Englander.

Feuer is running for mayor in 2022 and will probably have to contend with questions about a separate federal probe. Last year, FBI agents raided the city attorney’s office as part of an investigation into the city’s handling of billing problems at the Department of Water and Power.