This photo taken by an undercover FBI agent allegedly shows Raoul Joseph… (U.S. Attorney's Office )
Los Angeles officials have significantly expanded their internal investigation into corruption allegations at the city's building department, driven by fears of a much wider pattern of wrongdoing.
In the month since two inspectors were arrested on suspicion of accepting bribes, the Department of Building and Safety has received three subpoenas from a federal grand jury, including one seeking personnel records for at least 11 current and former employees.
Two department employees have been placed on leave over the last week, pending an investigation, officials confirm. Department managers would not say whether that move was connected to the probe. In addition, the city's lawyers revealed that the department is the target of a lawsuit filed by a USC fraternity that claims it faced retaliation after refusing to pay bribes.
"Our investigation has expanded citywide," said William Carter, chief deputy for City Atty. Carmen Trutanich. "We're looking at all aspects of the inspection program."
Carter said city officials originally thought the matter was limited to the two men arrested last month: inspectors Raoul Germain, 60, of Altadena and Hugo Gonzalez, 49, of Eagle Rock. Germain pleaded guilty on Thursday to accepting $6,000 in bribes between November and January.
Both men were put on leave in February after the department received an anonymous tip and were fired this week, city officials said.
Between August and January, Germain and Gonzalez were secretly recorded during an FBI sting operation that involved an undercover agent who posed as a contractor working in South Los Angeles.
A confidential informant told the FBI that bribes are a "systemic" problem at the department, and described giving not just cash but free labor, materials, and in one case, a vacation, according to court affidavits. Meanwhile, Gonzalez offered his own suggestion that other employees were involved, the affidavit said.
In one recorded exchange, Gonzalez told the undercover agent that he normally demanded $2,000 to sign off on a building permit. But because the construction project under discussion was on 97th Street, and outside of his territory, Gonzalez said he would need $2,500 so he could pay a "tribute" to the building inspector responsible for that address.
"We have been working like that for a long time," the affidavit quotes Gonzalez as saying.
Gonzalez has pleaded not guilty but is considering changing that plea to guilty, said Jack Alex, his attorney. Gonzalez remains in custody and is considered by the presiding judge to be a flight risk because he owns a home and land in Mexico, Alex said.
Germain's attorney, Steven M. Cron, said he did not expect that his client would help with the investigation of other suspects. Since the arrests, two Building and Safety officials — general manager Robert "Bud" Ovrom and department spokesman David Lara — have been called to testify before the grand jury. Federal prosecutors instructed Ovrom to turn over records on any disciplinary action or internal investigation involving Gonzalez, Germain and at least eight other current or former department employees
In his monthly newsletter to the public, Ovrom apologized to residents, the City Council and Mayor Antonio Villaraigosa for what he described as "alleged outrageous violations of the public trust." And in an interview, Ovrom said his internal investigation has gone beyond South Los Angeles, where Germain and Gonzalez worked.
"I have been asked if [corruption] is systemic in the organization. I don't believe it is," he said. "But I do believe it is more than two employees. We definitely have more people under investigation." The city employs roughly 315 inspectors.
Neither Carter nor Ovrom would provide the names of individuals mentioned in the subpoena, other than Germain and Gonzalez. They also would not identify the two employees placed on leave. Prosecutors with the U.S. attorney's office declined to comment on the scale of their investigation.
The ongoing probe leaves open the possibility of lawsuits over the inspections handled by Germain and Gonzalez, who are accused of signing off on electrical work, foundations and fire systems — sometimes without showing up at the job sites. If more inspectors are implicated, more structures become vulnerable to challenge.
One lawsuit has already been filed by the Alpha Nu Assn. of Theta Xi, a USC fraternity on 28th Street. In documents filed in March, the group alleged that inspector Martin Hurtado held up approvals "any way he could" after his request for a "bribe" was rebuffed.
According to the suit, the Greek organization failed its plumbing inspection 20 times, each time with the same inspector.
"He requested unnecessary blueprints. He required the plumber to redo work that had been done correctly the first time. He would instruct the plumber to perform…tasks, then instruct the plumber to return the premises to the state they were before the task," the lawsuit states.
Hurtado could not be reached for comment. He has not been identified in affidavits or mentioned as a target of any federal investigation. Lara said his agency had not reached any conclusions about the lawsuit.
"We're rolling that into the ongoing investigation," he said.