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Contracts Steered to Their Own Firms : Irwindale City Business: Officials Profit

September 24, 1987|MARK ARAX | Times Staff Writer

Irwindale officials are steering millions of dollars in city contracts to private businesses that they either own or have a substantial interest in, a Times investigation has found.

In a wide-ranging practice that raises serious questions of conflict of interest, the Irwindale city engineer and city financial adviser have used their official positions to enrich businesses in which they are owners or executives.

In addition, city redevelopment agency consultant Fred Lyte, who helped negotiate the Los Angeles Raiders stadium deal, appears to have violated a provision in his contract designed to overcome conflicts of interest.

The provision--written into Lyte's contract after a 1983 opinion from the state attorney general's office--forbids the consultant from recommending to the City Council a project in which he has a financial interest.

City Atty. and City Manager Charles Martin said in an interview that Lyte violated the terms of his contract when he went before the City Council on two occasions last month and urged approval of an agreement with the Raiders.

Martin said Lyte may have to forfeit the $2 million in consulting fees he stands to receive upon the construction of the 65,000-seat stadium.

Lyte concedes that he urged the council to approve the Raiders deal but said that was only a technical violation of his contract.

Top Irwindale officials, pointing to the city's redevelopment track record, have no apologies for the way they do business.

"It's novel and it's unconventional, but it works," Martin said.

During the last two years alone, according to city records, City Engineer Carlos Alvarado has recommended awarding nearly $300,000 in city work to a private engineering consulting firm that he founded and owns. In each instance, the City Council backed his recommendations.

City records and interviews also show that Financial Adviser Abraham DeDios was part of a small team of city officials who in 1985 recommended awarding a $3-million contract to the Benchmark Group--a construction company owned by DeDios' brother, Manuel--to build a senior citizens center and Chamber of Commerce offices. The City Council readily approved the contract.

At the time, Abraham DeDios, 42, was a salaried employee of Benchmark. DeDios, who also serves as the Irwindale city treasurer, is still listed with the state contractors license board as vice president of Benchmark. The firm was recently awarded a $511,000 contract to construct 20 homes subsidized by the Irwindale Redevelopment Agency.

The state political reform act prohibits a public official from using an official position to "influence a governmental decision in which he knows or has reason to know that he has a financial interest." The act defines a public official as "an employee or consultant of a state or local government agency."

Martin conceded the "questionable nature" of well-paid city officials moonlighting as consultants and directing city business their way. But he denied that the practice constituted a conflict of interest or is illegal.

Compared to Company Town

He compared Irwindale--an industrial city of 1,040 residents in the east San Gabriel Valley--to a company town unencumbered by the rules that govern most municipalities.

"It's a new theory that I've developed--government by consultants," Martin said. "It's exotic and different and, of course, the world can't stand for anyone to be different."

Interviews with city officials and a review of payroll records and consulting contracts show a pattern of questionable practices and apparent conflicts of interests over the last three years that extend to Irwindale's recent deal with the Los Angeles Raiders to build a stadium and team headquarters.

DeDios, whose job as financial adviser gives him oversight in all bond matters, counseled the city to use the bond underwriting firm of Miller & Schroeder Inc. to market $90 million in industrial development revenue bonds for the Raiders stadium and $102 million in Capital Improvement Revenue Bonds for other public projects.

DeDios did not remove himself from the selection process that ultimately chose Miller & Schroeder even though his brother, Manuel, is a director of public finance for the Minneapolis-headquartered bond underwriting firm.

Miller & Schroeder representatives say their relationship with Irwindale began long before Manuel DeDios took a job with the company last year. They said DeDios, a 48-year-old native of Hawaii, was hired to open an island office for Miller & Schroeder and that he distanced himself from negotiations to finance the stadium. But city officials say DeDios was present for two meetings with the Raiders to discuss bond financing for the stadium.

Not only did Abraham DeDios oversee the selection of his brother's firm but he made $200,000 in consulting fees from the city for his advice. That fee is considerably higher than the fees charged by other bond advisers for comparable work, according to industry experts.

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