Money missing after deal in Bell

The city of Bell bought a piece of land for more than double its assessed value as part of a highly unusual redevelopment deal that required the seller to donate $425,000 back to the city -- a sum that now cannot be accounted for, according to records and interviews.

The property houses a carwash. But in 2006, when the suspect transaction took place, then-City Administrator Robert Rizzo and former General Services Director Eric Eggena wanted the land as part of a revitalization effort in the city's small business district.

The sale price, $1.35 million -- more than double the appraised value of $612,000 -- put the land well beyond the reach of the carwash's operators, who under their lease had the first right to purchase the property.

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As part of the deal, the seller was required to make a $425,000 "charitable contribution" to the city, ostensibly to support "the Boys & Girls Club or to build a park," according to the son of the seller and records reviewed by The Times. But five years after the transaction, city officials do not know what happened to that money, and neither does Bruce Elwood, whose father sold the land to Bell just before he died.

Despite the purchase, no redevelopment project occurred on the site, where the carwash still operates today, paying rent to the city.

The deal provides a window into the workings of the Bell Community Redevelopment Agency. The agency was criticized in a state audit last year for improperly using money for low-income housing to help subsidize oversized salaries of top city officials and operating without meaningful oversight.

Rizzo and seven other ousted officials have been charged by Los Angeles County prosecutors with corruption, mostly related to efforts to conceal their unusually high salaries. All have pleaded not guilty. Eggena was not charged, but prosecutors last month served search warrants at two homes where he has stayed.

Some business owners have alleged that Eggena and other city officials misused code enforcement to further the financial interests of Bell officials and the city -- and the carwash case offers new evidence of possibly improper activities. In the years before the sale, the city had accused the carwash of numerous building-code violations and closed the business for nearly a year, according to city records and interviews, which show that the city allowed the business to reopen only after the operators threatened to hire an attorney.

Experts who reviewed the land-purchase deal for The Times said it made little sense and was problematic in several key areas: The city paid much more than the site was worth. On top of that, there was no documentation to support the value of the "contribution" the city required as part of the deal.

"This is a real estate deal that ran amok," said Larry Kosmont, a Los Angeles real estate consultant and former city manager and director of community development for Burbank, Santa Monica and Bell Gardens. "Essentially they cooked the books on this."

Loyola Law professor Theodore Seto said the inflated price deprived the carwash owners of the right under their lease to receive the same deal as the city, which paid $925,000 for the property when the $425,000 donation is taken into account.

"It is clearly an attempt to misuse the power of the city," Seto said.

Albert Neesan and his son Eldon have operated Jack's Car Wash on bustling Atlantic Avenue since 1986. They leased the property from Jack Elwood. The site is on a prime stretch that Rizzo was intent on developing. Next door, the redevelopment agency brought in a Kentucky Fried Chicken. A Pizza Hut and a Starbucks opened nearby.

The Neesans' problems began in the summer of 2002, after a customer's car crashed into the waiting room of the carwash. City inspectors told the family to submit plans to fix the damage and other problems, including exposed electrical wiring, records show.

A month later, the family's attorney wrote Bell's director of building and planning, Dennis Tarango, complaining that the Neesans had submitted their paperwork but had not heard from the city. The letter noted that the family was losing customers because the waiting room had been closed by the city. "The delays are hurting their business," the lawyer wrote. "Time is of the essence!"

In an interview, Tarango said there had been no delays and that he had made himself available to help fix what he described as life-threatening code violations.

As the Neesans waited for an answer, the city explored purchasing the property. In a memo from the city attorney, Rizzo was told that the family had a long-term lease on the property and a "right of first refusal," which meant they were entitled to purchase the land at the same price and on the same conditions as a prospective buyer.

Records show that on March 30, 2004, Tarango and inspectors showed up at the carwash with an ultimatum: Tear down the waiting room or face imminent closure. The next morning, a code inspector shut down the business.

A month later, Tarango informed Neesan of additional code violations dating back to 1998 and said that inspectors had discovered health code problems.

Around the same time, Eldon Neesan said, Tarango made an offer on behalf of the city to buy the business for $125,000. The family rejected the offer, calling it "ridiculous" in a letter to the city, records show. Tarango said he never made an offer and was not aware at the time that the city was exploring whether to buy the property.

Around April 2004, the family hired civil engineer and architect John Ott, who concluded that the alleged violations were frivolous or could be easily resolved. "The more I got involved, I was horrified," Ott said in an interview. He said the city was trying to drive the Neesans out of business.

After Ott threatened to bring in an attorney, the family received a permit and reopened its business, he said. But the city pressed forward with plans to buy the property.

In May 2006, Eggena and former Bell Mayor Pete Werrlein went to Palm Desert to visit a gravely ill Jack Elwood, recalled the property owner's son, who was also at the meeting. The men gathered around Jack Elwood's bed while Eggena discussed terms, Bruce Elwood said.

Eggena said Elwood would receive a letter from the city crediting him with a tax-deductible donation, Bruce Elwood said. Eggena did not respond to requests for comment.

Records show that the $425,000 was held by an escrow agency and returned to the city. Jack Elwood died and the deed was signed over by his son, property records show. Bruce Elwood said he repeatedly requested that Eggena provide documentation and never claimed the donation for tax purposes.

"I was always suspicious of the city from the standpoint of 'What did you do with that money?' " Bruce Elwood said.

Copyright © 2015, Los Angeles Times
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