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Real estate firm to pay $165,000 to end money-laundering probe

The Los Angeles Ethics Commission had investigated the campaign fundraising practices of a company that received taxpayer funds to build housing projects.

December 08, 2012|By David Zahniser and Jessica Garrison, Los Angeles Times

A real estate development company that regularly received funds from Los Angeles leaders to build affordable housing projects has agreed to pay $165,000 to end an ethics investigation into allegations of campaign money-laundering.

Investigators with the city Ethics Commission concluded Advanced Development and Investment Inc. and its affiliated construction company, Pacific Housing Diversified, made 33 contributions totaling $23,850 under assumed names between 1999 and 2009. Advanced Development executives used cash and checks from company accounts to improperly reimburse employees who had made the contributions, the agency found.

Reimbursement was typically provided "the same day the employee made a contribution in his or her name," the commission report states. The panel did not find wrongdoing by the politicians who received the donations, a group that included Mayor Antonio Villaraigosa and a handful of candidates and council members.

Ethics officials said they launched their probe into ADI in 2011, after reports in The Times on the company's campaign fundraising practices. The FBI, the Internal Revenue Service and the U.S. attorney's office also have been looking at allegations that the company engaged in financial wrongdoing.

The Times found that ADI and its retinue of subcontractors had steered more than $400,000 to the political campaigns of candidates up and down the state, many of them in Los Angeles. Some of those subcontractors told The Times they had been warned by ADI managers that they would lose out on future construction contracts if they failed to make the donations.

The Ethics Commission is scheduled to approve the fine Thursday. The agreement was signed by David Pasternak, the court-appointed receiver who was assigned to oversee ADI in 2010 in the wake of a nasty divorce between two top officials at the company. That year, Pasternak reported that the federal investigators had been notified of "potential fraud and criminal activity" in the company's taxpayer-funded projects, including systemic padding of construction invoices.

Los Angeles has provided the company with roughly $29 million in subsidies to build multistory apartments in Lincoln Heights, Chinatown and other neighborhoods near downtown. ADI's taxpayer-assisted projects have developed a series of maintenance problems, including exposed wiring, cracked stucco and leaky roofs, windows and pipes.

david.zahniser@latimes.com

jessica.garrison@latimes.com

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