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L.A. County to review real estate leases involving former employee who admitted accepting bribes

The Los Angeles County Board of Supervisors ordered a review Tuesday of all leases negotiated by a former county employee who cooperated with the FBI after admitting to taking bribes.

According to a federal complaint filed earlier this month, the unnamed employee accepted bribes from a Beverly Hills real estate developer, Arman Gabaee, who was arrested last week.

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The employee accepted "numerous bribes" not just from Gabaee but also others not named in the complaint, the document said. So far Gabaee is the only county landlord to have been arrested and charged with a crime.

Over a six-year period, Gabaee gave the employee about $1,000 a month in exchange for a lease worth $45 million, nonpublic information and other benefits, according to the criminal complaint.

The supervisors have called for an inquiry of all leases negotiated by the county employee as well as leases with Gabaee's companies.

With more than 100,000 employees deployed across the region, Los Angeles County is the largest local government in the country. Its need for space is likewise enormous — taxpayers pay out $208 million annually for about 400 county leases, according to a review conducted by the county last year.

Jason Hughes, chairman and chief executive of the commercial leasing firm Hughes Marino, said that it's possible the county paid "just crazy, crazy excess money" as a result of the deals with Gabaee.

"You really need someone to come in and audit every single lease, almost a forensic audit," Hughes said.

Gabaee gave the employee bribes while seeking the lease in Hawthorne to house employees of the Department of Public Social Services, and he pushed for more favorable deal terms, according to the complaint. He wanted the county to pay more rent upfront and to take on jantorial and utility costs, the complaint said. He also wanted to lock the county in for a 10-year lease rather than the two-year period government officials had suggested.

The county has had seven leases with Gabaee since 2010 to house five county departments, amounting to more than 525,000 square feet in commercial office space in Pasadena, El Monte and Los Angeles, according to a list of leases provided by a county spokesman.

The leases cost millions of dollars per year, board records show. A 2016 lease to house the Department of Children and Family Services in Pasadena approved by the board will cost the county more than $10 million over its five-year term, board documents indicate. Another lease for Public Social Services in El Monte will cost more than $4.6 million over the same number of years.

The motion, co-sponsored by Supervisors Janice Hahn and Kathryn Barger, directs officials to report back to the board in 90 days with "options to reevaluate the fair market value of such leases, to renegotiate the leases identified" and to provide "contractual and legal remedies available to the county."

Hughes said it's going to be difficult to conduct such a review. County officials will have to go back in time to understand the market conditions as they existed when the leases were signed and also the leverage the county had in negotiating the deals, he said.

Federal prosecutors said Gabaee's friendship with the county real estate official turned into a corrupt relationship around 2010 or 2011, when Gabaee began paying the employee $1,000 a month in cash, meeting the official in a car, restaurants and even a bathroom to make the payments.

In late 2016, the employee agreed to cooperate with FBI agents in an investigation of the bribes. Federal agents secretly recorded at least nine phone calls and eight in-person meetings between Gabaee and the employee, according to the complaint. Gabaee also offered to purchase a Santa Rosa home worth more than $1 million for the official, the document said.

Federal prosecutors found that the employee who admitted to accepting bribes — referred to as "Cooperating Witness 1" in the complaint — had "significant autonomy to contractually bind the county" and also had the senior authority to "draft lease agreements" and "negotiate lease terms," or direct other employees to do so.

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A review completed in November by the auditor-controller's office also found oversight weaknesses in how the county manages its leases, which increase the risk of exceeding budgets on tenant improvements and possibly "paying for goods and services that are not received." County officials have been implementing oversight reforms since then to reduce those risks, according to the study.

County officials say they were proactive in rooting out corruption in its leasing operations. The county released a statement last week saying that, before officials knew of the federal investigation, the county had launched its own reviews of leasing — including one by a "strike team" of independent experts — that "resulted in a series of personnel and administrative actions, including new policies now in place to fortify checks and balances."

The county has not provided specifics on its former employee-turned-FBI informant.

In a statement, officials said: "At the request of the U.S. Attorney's Office, the County initially held off on taking personnel actions so as not to interfere with the federal investigation. Eventually, based on the County's own investigation, the county moved to terminate one employee, who resigned in lieu of termination in August, 2017."

Times staff writer David Zahniser contributed to this report.

Twitter: @adamelmahrek

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