NORWALK — The district attorney's office is looking into the possibility that Councilman Luigi Vernola may have violated state conflict-of-interest laws by giving his brother money that was used to acquire an interest in property within a city redevelopment zone.
An investigator has been assigned to find out whether there is reason to initiate a full investigation, said Lt. Duane Trump of the district attorney's investigations unit.
"It's an inquiry at this time . . . to look at it to see if there's anything there of value," Trump said.
The inquiry was prompted by a local newspaper account that detailed Vernola's gift to his brother, Mike, who used the money to enter into a partnership and acquire interest in property in the 11000 block of Firestone Boulevard. The property was occupied by Dial Chevrolet until the owners moved the dealership to neighboring Santa Fe Springs in August.
Vote Could Affect Property Values
Councilmen also serve as directors of the city Redevelopment Agency and cast votes that could affect property values in Norwalk's two redevelopment zones.
The Redevelopment Agency could, for example, use tax dollars to subsidize new business development or to rehabilitate existing businesses in the zones. In addition, redevelopment money is often used to fund public improvements, such as new sidewalks, that increase property values throughout the area.
State law prohibits elected officials from using their offices for personal financial benefit.
In an interview, Vernola said he was helping a family member and will not benefit personally from the acquisition. Vernola declined to reveal the amount of the 1985 gift.
Vernola said he was considering acquiring an interest in the property in 1984 or 1985, when he was a planning commissioner, to expand his family-run business. But he said he decided against an acquisition, in part, because he received legal advice that such a move could constitute a conflict of interest. He said he then gave the money to his brother to help him take advantage of the investment opportunity.
"I got legal advice that that can happen as long as I'm not receiving anything from it, and I'm not," the councilman said. "I was raised to help your family out. There was no intent, nothing illegal about it."
The councilman said he would abstain from voting if any future proposals affecting the property were to come before him.
"I haven't voted on anything for that property and they haven't asked for any (redevelopment) funds," he said. Jeffrey A. Bruyn, deputy city manager of community development, confirmed that the Redevelopment Agency has not assisted the property owners.
Friend of the Family
Norman Stutzke, a friend of the Vernolas and president of Keystone Ford on Imperial Boulevard, is the controlling partner of the site. He said he acquired part of the property in 1986, and that Mike Vernola later became an investor and partner. Stutzke said he could not recall the exact timing of Mike Vernola's investment.
In October, Stutzke acquired the remainder of the 3-acre site. He declined to reveal the purchase price.
Councilman Vernola's son, Tom, also recently became a partner with Stutzke. The councilman said he did not provide any financial assistance for his son's investment.
Stutzke said he considered the Vernolas good investors because they have helped run the councilman's Norwalk businesses, which include a service station, two automotive garages and a towing service. Mike Vernola manages the towing service. Tom Vernola assists in various aspects of the business, Luigi Vernola said.
Stutzke said he may set up service, body shop and used-car operations at the site--which is just a short distance from his dealership. Eventually, Stutzke said, he may move his entire dealership to the site. Portions of the property are likely to be leased to other businesses as well, he said.
The Main Owner
"I'm the main owner of it," Stutzke said. "We don't know how much I need to expand my services."
Councilman Vernola said he has no plans to move his various businesses to the site.
He also said he has hired an attorney to advise him on any legal questions arising from the gift and his brother's interest in the property, among other legal issues that he may face as a councilman.
The News Tribune, a weekly newspaper, reported the councilman's link to the purchase in October.
Mayor Marcial (Rod) Rodriguez said the council has discussed Vernola's potential legal problems in executive session.
"That's what he needs to do (hire a lawyer) to make sure he has total clarification as to where he's at," Rodriguez said. "I don't see where there's been any wrongdoing."