Companies tied to Industry ex-mayor racked up fortune

Family firms linked to Dave Perez made $326 million, an audit finds

A 20-year jackpot of City of Industry contracts that included $4.9 million for lawn mower rentals and street cleaning fees billed at six times a competitor's rate has enriched a handful of companies owned by the tiny town's former mayor and his family by more than $326 million, an audit has found.

The review of the city's finances showed that Dave Perez and his relatives held sway over the City of Industry — population 400 — much as they would a mom-and-pop shop, except that the returns to the family's bottom lines were corporate-sized, averaging about $16 million a year for the last two decades.

Completed this month, the audit comes 5 1/2 years after a Times investigation laid out the lucrative relationship between the Perez clan and City Hall. An inquiry by the district attorney's office that began in 2009 was closed in 2011 without the filing of any charges.

A district attorney's spokeswoman said there is no current inquiry underway.

Ordered by city officials sometime after Perez stepped down as mayor in 2012, the audit by the firm KPMG concluded that the outlays to the family companies were accompanied by invoices that lacked detailed descriptions, raising the question of whether the municipality was consistently overcharged for basic services.

The audit said "it is nearly impossible to determine with absolute certainty" that the billings were "reasonable, accurate and commensurate with the work performed."

The money flowed from the annual revenue the city took in mostly from the 2,500 businesses that give the place its name. Among the audit's findings:

The city paid one company, Zerep Management, $28 million for vehicle and equipment rentals over 11 years. That was enough to buy an entire fleet of the same vehicles "many times over," the audit said. The rental of lawn mowers cost the city nearly $450,000 a year. And in at least one instance, Zerep (Perez spelled backward) charged the city a rental fee for a tractor the city owned, according to the audit. Speaking for the company, Perez's nephew, also named David, said that never happened.

He said it "sounds like the audit misrepresents my billing. I would have welcomed the opportunity to cooperate with this audit to explain and or dispute any discrepancies."

Zerep charged an average of $133,000 a month for street cleaning in the 12-square-mile city. After the city replaced Zerep with a competing company, the monthly cost dropped to about $20,000. Zerep sometimes would bill the city multiple times for the same day of cleaning. The nephew, David Perez, said all the charges were proper.

The city paid Zerep $41 million in labor costs for general maintenance over the 11 years — the hourly rate equivalent of fielding 50 full-time workers each week. Based on the available documents, the audit said, it "cannot be accurately determined" that such a number of workers was employed. Zerep also billed the city for some work that was performed without authorization.

A lawsuit filed by a former city clerk against Perez, two of his relatives and Mark Radecki, who is now running for City Council, cost the city about $1 million in a settlement. The suit alleged sexual harassment, sexual assault and battery. It accused Perez of referring to women employees as "the herd." The defendants denied the allegations.

The former mayor and the four sitting council members did not respond to requests for comment Monday. The current mayor, Tim Spohn, who is up for reelection in June, said he had no opinion on the audit, which was first reported by the San Gabriel Valley Tribune.

"It's a very small town here," he said. "Just about everyone knows everyone, and that's the way it is. The Perezes have been here since the beginning."

City Manager Kevin Radecki, Mark's brother, said Monday that the audit was commissioned after employees began to notice discrepancies in invoices from Perez companies. He said officials did not take action until after Perez left office — he cited health reasons — because they feared the reaction of the mayor, who was in office for more than a decade, including as a councilman.

"He was in control," Radecki said of Perez. "There was a lot of influence by that individual, and once he stepped down we were able to move forward without retribution."

Last year, the City of Industry terminated its contract with Zerep and removed Perez's brother, Manuel, from the Planning Commission.

Radecki said the city is reevaluating an even bigger family contract, a trash hauling arrangement with Valley Vista Services Inc.

The district attorney's earlier inquiry determined that there were no illegal conflicts because the city issued the contracts before Perez took office and he abstained from votes on subsequent deals with the family companies, office spokeswoman Jane Robison said.

Industry has 187 registered voters, 50 of whom live in a single city-owned nursing home. The city also owns the homes of all five council members and Radecki. The Perez family's influence extends back to the 1970s but waned after the elder David left office.

The Perezes are backing a slate of candidates that could regain a majority of the council seats in the June election, Radecki said. One is Radecki's brother.

Created to support industrial uses, cities such as City of Industry are often beset by conflicts of interests involving small numbers of power brokers, said Victor Valle, author of a 2009 book about the origins of the City of Industry, which was incorporated in 1957.

"It's the systems that create the opportunity," Valle said. "It if it wasn't the Perezes, it would be someone else. The really fateful decisions were made decades ago. Now we're living in the aftermath, and the question becomes, how do we reinject democratic principles to this form of government?"

frank.shyong@latimes.com

ruben.vives@latimes.com

Copyright © 2016, Los Angeles Times
62°