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Greuel may have missed red flags in fight against Home Depot

The controller, while on the City Council in 2007, failed to disclose her 50% ownership in another building supply store while leading the charge against the opening of a new outlet.

February 18, 2013|By Jack Dolan, Los Angeles Times
  • Wendy Greuel says the city attorney's office assured her that there was no conflict for her to oppose a new Home Depot in Sunland while holding part ownership of another hardware store.
Wendy Greuel says the city attorney's office assured her that there… (Luis Sinco, Los Angeles…)

When former Los Angeles City Councilwoman Wendy Greuel led the successful charge to prevent Home Depot from opening a new store in her district, she talked about the potential environmental and traffic drawbacks and accused the chain store of flouting local development rules.

One thing she did not mention during the heated debate in the summer of 2007 was that weeks earlier, she had inherited a 50% interest in a competing business — her family's building supply store about nine miles from the proposed Home Depot in Sunland.

"A scenario like that should have raised red flags," said state Fair Political Practices Commission attorney Zackery Morazzini, noting that state regulations require public officials to disclose potential conflicts and recuse themselves from votes that could have a "reasonably foreseeable" effect on their business.

Frontier Building Supply, which Greuel co-owns with her brother Wes, is nothing glamorous. It's a dusty, wholesale outlet within a stone's throw of two strip clubs in North Hollywood. It sells materials like concrete and dry wall, mostly to building contractors, said Wes Greuel, who runs the business.

Home Depot, a national powerhouse with a reputation for driving out smaller competitors, is geared much more toward individual homeowners. But it also sells building supplies, including concrete and dry wall, to contractors.

Greuel, now city controller and a leading candidate for mayor, declined to be interviewed but released a statement to The Times saying that her efforts were about "standing up against City Hall lobbyists and powerful special interests" on behalf of her constituents.

She noted that there were already five Home Depots closer to her store. "To suggest there was a conflict of interest is ridiculous," she wrote.

The city attorney's office assured her there was no conflict, Greuel said. Asked for a copy of that opinion, Greuel spokeswoman Shannon Murphy said it had been delivered orally.

Greuel did not seek the legal opinion of the Fair Political Practices Commission, which enforces state ethics regulations and can fine elected officials who violate them.

The FPPC attorney, Morazzini, declined to comment on Greuel's fight against Home Depot, saying it would be inappropriate to discuss a case that could come before the commission.

In general when investigating possible conflicts, he said, his organization considers whether an elected official had more than a $2,000 investment in a business that may have benefited from his or her vote.

When Greuel inherited Frontier in 2007, she estimated her share was worth $1.6 million, including the value of buildings that housed branches in North Hollywood and Oxnard.

On her 2010 financial disclosure, Greuel said her share of the firm's revenue was "over $100,000." That money remains in the business, according to Wes Greuel, who said he does not pay his sister a salary.

But the firm paid Greuel $200,000 in 2011, according to the disclosures. The money was part of the proceeds from selling the Oxnard building, according to her spokeswoman. That payout made Frontier the single largest source of Greuel's household income for 2011, more than her $196,000 salary as controller or the $127,000 earned by her husband as a self-employed producer and literary agent.

The FPPC also considers whether a vote could have a "material" effect on the elected official's business, Morazzini said.

If the official owns a big company, the estimated effect on revenue has to be in the hundreds of thousands of dollars. But if the firm is small, with an annual net income of less than $750,000, the estimated effect on revenue can be as little as $20,000.

Greuel and her attorneys refused repeated requests to provide Frontier Building Supply's net income, citing her brother's right to privacy. FPPC investigators can subpoena the records, but there is a five-year statute of limitations on such cases that could prevent them from taking action.

Bob Stern, the FPPC's former chief counsel, said there would have been an obvious conflict had Greuel's store been across the street from the proposed Home Depot. The nine miles between the two locations and the presence of other competitors in the densely developed valley, however, probably would have persuaded commissioners to rule in Greuel's favor, he said.

"But I would have advised her to disclose the fact that she'd inherited [the business] during the debate," Stern said. "It probably increased her awareness of the problems faced by other people who own these types of stores."

At hearings before the City Council on the proposed project shortly after she inherited Frontier, Greuel filed a pair of motions that ultimately reversed a long process that had already been decided in Home Depot's favor.

By 2007, the chain store had spent the better part of three years winning permits from city agencies and the North Valley Area Planning Commission to remodel an empty Kmart building on Foothill Boulevard.

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