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L.A. council OKs investigation of developer ADI over possible fraud

Federal authorities are already investigating allegations by a court-appointed receiver that the company might have made improper gifts to public officials and built substandard housing.

March 03, 2011|By Jessica Garrison, Los Angeles Times

Los Angeles City Council members voted Wednesday to pursue a city investigation into whether a prominent housing developer may have bilked the city out "substantial public funds" when it built dozens of apartments for low-income families in neighborhoods such as Chinatown and South Los Angeles.

Advanced Development and Investment Inc. is already the subject of a federal investigation that began after a court-appointed receiver alleged the company had falsified the invoices it had given to Glendale officials, made potentially improper gifts to public officials and built potentially substandard housing.

Council President Eric Garcetti said he wants the city to launch its own "aggressive investigation because this sort of fraud is an offense against every Los Angeles taxpayer." His office announced that the city, under his authority, has so far issued 108 subpoenas to ADI and its subcontractors. The full council affirmed those actions in its vote Wednesday after a closed briefing from the city's lawyers. The city would probably use any information gathered from the investigation to pursue civil damages from the company.

The receiver, David Pasternak, who is now overseeing the company, said he had no comment.

The concerns about ADI came to light last fall. Pasternak alleged widespread problems with the company's business practices after being appointed in a divorce proceeding involving the company's former president, Salim Karimi, and the daughter of its founder. A subsequent Los Angeles Times investigation found that ADI and its subcontractors had given more than $400,000 in campaign money to state and local officials, including at least $165,000 to candidates for office in Los Angeles. Four of those subcontractors told The Times that they were pressured to make the campaign contributions and felt they would lose future jobs with the company if they refused.

During the same period, ADI received $29 million in subsidies from the city for 15 projects. Dozens of others were built in the city using millions of dollars in state tax credits. Several Los Angeles officials have said the campaign contributions from ADI had no effect on their decisions to vote to give the developer subsidies.

jessica.garrison@latimes.com

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