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Key Hahn Supporter Is Accused of Scam

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Times Staff Writers

James K. Hahn was having lunch in a Beverly Hills restaurant four years ago when a developer walked up and introduced himself. Mark Alan Abrams said he wanted to help Hahn, then Los Angeles city attorney, become the next mayor.

Soon, the developer was among Hahn’s biggest fundraisers. He helped funnel more than $300,000 to the mayor and his political campaigns through an array of associates and businesses. Some of the cash financed last-minute mailers attacking Hahn’s opponent, Antonio Villaraigosa, in the 2001 mayoral runoff race as an “East Los Angeles liberal-fringe Democrat” soft on gang murderers and sexual predators.

Hahn said Abrams “seemed like a nice man.” He said he saw no reason to check his background.

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Had he done even a routine search of Southland newspaper articles, the mayor would have found red flags: a previous political controversy and allegations of real estate fraud.

As Abrams angled his way into the upper reaches of Hahn’s political operation, the developer was allegedly masterminding a massive mortgage scam in some of the city’s wealthiest neighborhoods, according to federal court records. Most of the political money came from individuals and companies allegedly involved in the scheme.

The campaign cash cemented a political relationship between Abrams and Hahn, with the developer awarded a seat on Hahn’s “executive committee,” a group of fundraisers who brought in $25,000 or more.

At Abrams’ behest, Hahn appointed the developer’s real estate attorney to a coveted seat on the city Planning Commission, which sets zoning and land use policy in Los Angeles.

When Abrams and his partner, Charles Elliott Fitzgerald, wanted to build two multimillion-dollar homes high in the hills near Bel-Air, the mayor’s office pressed city officials to help the developer get a crucial permit, records show. A department head assigned Abrams’ project to a unit for selected developers. The unit helped shepherd it through the bureaucracy.

Whether this special access influenced the outcome of the permitting process is not clear. City engineers stood their ground and made Abrams provide extensive geological studies of the site, but the developer was able to make his case to officials at the highest levels of City Hall, records show.

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While one mayoral aide referred to the planned homes near Bel-Air as a “rather challenged proposed development” early in the process, Abrams ultimately obtained the necessary permit to proceed.

Hahn’s reelection campaign spokeswoman, Julie Wong, said that Abrams’ case was handled in a routine manner and that the developer received no special treatment.

Still, the ease with which Abrams moved into Hahn’s inner circle raises new questions about the influence of campaign cash on an administration already under scrutiny in a “pay to play” criminal probe. That investigation by federal and county prosecutors focuses on alleged links between contributions and contracts at city agencies.

In retrospect, Hahn said in an interview, it was “very disappointing” when he learned last year of his fundraiser’s alleged involvement in a real estate scam.

“I’ve been raising money and running for office for over 20 years,” Hahn said. “This is kind of a unique situation here.”

Abrams’ attorney, Nathan J. Hochman, declined to comment on the political fundraising activities, any pending investigations or his client’s alleged role in the mortgage scam.

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But he said that “the mastermind behind the real estate fraud was Charles Elliott Fitzgerald” -- Abrams’ partner and another principal in the case.

Hochman said Abrams’ previous legal problems should not overshadow years of civic contributions, including serving as one of the youngest elected school board members in the country.

“While Mr. Abrams has made certain mistakes in the past,” Hochman said, “he has successfully developed hundreds of millions of dollars of real estate.”

Fitzgerald, who has fled the country, could not be located for comment. His last attorney of record in the mortgage fraud case said he no longer represented Fitzgerald and could not comment on his behalf. A court filing indicates that Fitzgerald told relatives he was not guilty and left the U.S. to avoid being jailed for his association with Abrams.

Abrams, 43, is a chief target in a criminal investigation by the U.S. attorney and the FBI for his alleged role in the mortgage scam, court records show. Federal prosecutors also have collected information on Fitzgerald, 44, who at a minimum faces contempt charges for failing to comply with civil court orders to turn over money and other valuables gained from the fraud, records show.

Both men have been sued by Lehman Bros. Bank and other lenders whose losses could total $50 million. Lehman’s lawsuit says Abrams, Fitzgerald and their associates “perpetrated ... a well-organized conspiracy” to fraudulently obtain $140 million in home mortgages by inflating appraisals to obtain loans that far exceeded the value of more than 80 homes. The lawsuit claims that in one transaction, for example, Abrams and his group obtained a $1.47-million loan on a Beverly Hills home that was worth just $775,000.

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The judge in the case, Dean D. Pregerson, has found that there is “good cause to believe that each of the defendants has engaged in and is likely to engage in acts of fraud and that Lehman is likely to prevail.”

A court-appointed receiver in the Lehman case, David J. Pasternak, said he wanted political contributions returned to help compensate hundreds of claimants.

In addition, three former Abrams associates have told The Times that the developer routinely asked employees and their relatives to contribute to Hahn and then reimbursed them with cash after they wrote checks.

For several months, the city of Los Angeles’ Ethics Commission has been investigating those contributions and Abrams’ role in arranging them, according to federal court records and those contacted by authorities. If the donors were reimbursed for their contributions, it could be a violation of local and state law for hiding the true source of the money.

The mayor, in a recent interview, said he could not recall details of meetings and lunches with Abrams. He also said he didn’t know whether Abrams received assistance from his office as a result of the money the developer brought in.

“I don’t know if he got special treatment,” Hahn said, “because I don’t know what was done or not done on his behalf.”

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The mayor said he was not aware of any money-laundering allegations involving Abrams. He said he would examine any evidence presented to him concerning contributions possibly generated by the loan fraud alleged by Lehman.

The mayor said he knew of no connection between Abrams and Thomas E. Schiff, the developer’s attorney whom Hahn appointed to the Planning Commission. Records from the mayor’s office show that Abrams recommended Schiff and submitted his resume. Gary Lincenberg, Schiff’s attorney, says that his client is a qualified, independent voice on the panel and that Schiff knows of nothing improper surrounding the appointment.

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Fraud Judgments

Abrams moved to the Westside in 2000 as Hahn was gearing up his mayoral campaign.

The developer had relocated from Orange County, where a real estate deal resulted in $2.2 million in fraud judgments against Abrams, court records show.

After meeting Hahn, Abrams began telling employees that backing his campaign would be good for business, recalled bookkeeper Michael Adams.

While Fitzgerald remained in the background and did not interact with the mayor, associates said, he and Abrams consulted on most financial matters, including political donations.

Before teaming up with Abrams in 1999, Fitzgerald had operated for years in the wealthy canyons of Los Angeles building homes above massive and controversial concrete retaining walls.

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Fitzgerald’s name appeared on the paperwork associated with most of the cash directed to Hahn’s causes. But it was Abrams who began routinely asking employees and others to write personal checks to Hahn before reimbursing them with cash, said Matthew Compton, a co-defendant in Lehman Bros.’ lawsuit. He said he also described the practice to an Ethics Commission investigator. Two other associates corroborated the reimbursements in interviews with The Times.

Abrams, who ran several local and state campaigns after being elected at 18 to the Los Alamitos Unified School District board, never donated to Hahn in his own name. That was partly because of his past experience with political controversy, associates said. A state lawmaker from the Coachella Valley had to pay a $14,000 fine in 1998 for illegally accepting and failing to report gifts Abrams paid for with a company credit card, state records show.

The Hahn campaign logged the first six $1,000 checks from Abrams’ group in December 2000. Around that time, Hahn paid a visit to Abrams’ Beverly Hills suite, said a source who worked in the office. The mayor said he could not recall when he first dropped by the office or whether he personally accepted campaign checks from Abrams.

As the April 2001 primary neared, at least $17,000 more from individuals and companies connected to Abrams went to Hahn’s campaign. Two of the largest checks, for $6,000 each, were reported by the campaign March 19, a few days after Hahn visited Abrams’ office a second time, on the day of a scheduled mayoral debate. “We wanted a place to hang out before the debate,” Hahn said.

Hahn finished second in the primary and faced Villaraigosa in a June runoff. Soon, $9,000 in new contributions arrived from Abrams’ associates, records show.

In late May, Fitzgerald spent $70,000 for the “independent” mass mailings attacking Villaraigosa and thus benefiting Hahn, records show.

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The mailers targeted conservative voters who helped give Hahn his final margin of victory.

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High-Level Attention

Hahn was sworn in July 2, 2001. Five weeks later, Abrams wrote the mayor’s office seeking help and pointing out the campaign backing he and Fitzgerald had provided.

“We are glad that we could be of help to Jim,” Abrams wrote to Troy Edwards, a newly appointed deputy mayor who had served as Hahn’s campaign finance director. The letter went on to outline “an important matter to us,” a road permit that would give Abrams and Fitzgerald access to side-by-side lots on Summitridge Drive near Bel-Air.

The partners planned to build two estates with a tennis court, pool and large deck on a crest offering commanding views. But without approval of the 150-foot private street above a steep hillside, the project could not go forward.

Abrams explained in his letter to Edwards that he wanted to revive an expired street permit that had been granted years earlier. “We would like the director of planning to reissue an approval,” he wrote, saying he wanted action in one week.

Edwards, who left the mayor’s office earlier this year amid the pay-to-play probe, said he passed the matter along and probably followed up. “I wouldn’t be surprised if I said, ‘What’s going on? Let’s get this thing moving,’ ” he said in an interview.

He acknowledged holding a City Hall meeting with Abrams and his team at which the developer outlined the group’s projects.

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Emily Gabel-Luddy, a Planning Department executive who oversees private roads, recalled her first meeting with an Abrams associate. “It was just, ‘Can you wave a magic wand ... so we can get permits?’ ”

After the session, she said, Hahn aide John Sheppard came to her office. Gabel-Luddy said the initial thrust of Sheppard’s comments was: “Isn’t there an easier, softer way here? ... Can’t we just help them out?” Sheppard declined to comment, but records show he reported back to Edwards when obstacles to the project arose in Gabel-Luddy’s department.

She and her planning staff concluded that for legal and safety reasons Abrams’ group needed to apply for a new private-street permit, a time-consuming process involving technical reviews by three city agencies.

Afterward, Gabel-Luddy said she was summoned to a meeting in the office of her boss, Planning Director Con Howe. Howe said he did not recall the meeting.

A Nov. 30, 2001, memo to Howe from Sheppard shows that the mayor’s office sought a meeting between Abrams and the department head. The city planning staff had done “a great job dealing with this issue, but the property owner has raised the bar and I hope you can resolve this problem.... Mr. Abrams would like to meet with you next week,” wrote Sheppard, who passed along Abrams’ phone number.

At Gabel-Luddy’s meeting with Howe, Abrams’ group again pressed for a quick permit approval so construction could begin, Gabel-Luddy said. When the meeting ended, the department stood by her decision.

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But she said the message was clear:

“Somebody has access to the mayor’s office.”

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Anti-Secession Drive

By summer of 2002, Hahn had formed a new political committee, L.A. United, and vowed to raise $5 million to fight San Fernando Valley and Hollywood secession measures headed for the fall ballot.

The first surge of donations came in June. Among the largest was $50,000 from Beverly Hills Construction Management, one of the firms allegedly involved in the real estate fraud. Hahn said he knew the firm “as a company Mark Abrams was involved with.”

As the secession debate heated up, the mayor was looking for a new member of his Planning Commission. By then, Abrams had recommended real estate attorney Schiff to Edwards, who was overseeing commission appointments.

Hahn told The Times he didn’t recall how Schiff came to his attention. In an August 2002 nomination letter, the mayor described Schiff as “especially qualified” and certified that “I make this appointment solely in the interest of the city.”

The City Council confirmed Schiff’s appointment the next month.

Lincenberg, Schiff’s attorney, said his client was not involved with any donations to Hahn before his appointment. “He certainly never made any deal to get appointed,” the attorney said. The commissioner, a Harvard Law School graduate with experience in development, is “a guy who spent his career studying and working with land use issues,” Lincenberg said.

Abrams invited Schiff to a photo session with Hahn, according to Lincenberg. That was when his client first met the mayor, he said. Hahn acknowledged attending a photo session, but could not recall details.

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Abrams hung a photo of himself and the mayor on the wall of his Beverly Hills office. Asked about the photo, Hahn said he posed for pictures with many supporters, although he acknowledged that his warm, handwritten inscription on the photo was in recognition of the money Abrams had raised for his causes. It said:

“To Mark, Thanks for always being there supporting our beloved city. You’re the greatest!”

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2 Rejections for Plan

In May 2002, a city Building and Safety Department engineer denied approval of the private-street permit for the Summitridge project, saying he needed more data on the stability of the proposed road, records show. On Sept. 30, 2002, geologists in the Public Works Department issued a separate denial, citing insufficient soil studies. The same day, Beverly Hills Construction Management reported a $100,000 contribution to Hahn’s anti-secession committee.

The following week, Andrew Adelman, general manager of the building department, met with Abrams and his construction team. It was “probably” at the request of the mayor’s office, Adelman recalled.

The day before the meeting, records show, Beverly Hills Construction Management reported an additional $25,000 contribution to Hahn’s anti-secession fund.

After the meeting, the general manager headed down seven floors to personally assign the matter to the Case Management Unit, a small group that works on selected projects, often referred by elected officials or department managers. The purpose, officials say, is to help people navigate the city bureaucracy.

Adelman says Abrams got no special treatment. He says he refers many issues to the unit.

But only a tiny percentage of the department’s 140,000 annual permit applications make it to the little-known unit, officials acknowledge.

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“If it were publicized, we’d be absolutely inundated and overwhelmed, undoubtedly,” said David Keim, a department executive.

Adelman’s handoff produced quick action, records and interviews show.

That day, a supervisor in the unit, Art Wong, opened a file and later held a meeting involving seven city officials from four offices. The solution suggested at the session was that Abrams and his team build deep concrete pilings to support the proposed access road, satisfying city engineers’ concerns about landslide issues. Wong wrote an upbeat assessment, predicting approvals.

Four days later, Beverly Hills Construction Management reported adding $25,000 more to the mayor’s committee. A week after that, just days before the election, the company forwarded a final $25,000 contribution, for a total of $225,000 to Hahn’s fund.

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Road Project Approved

After Abrams’ group agreed to the engineers’ request for additional geological studies and construction of the pilings, the building department wrote an approval letter for the road Feb. 19, 2003. That day a company later named in the Lehman lawsuit executed a deal to borrow $2.5 million against the value of one of the Summitridge lots, records show.

By late April 2003, Lehman Bros. had filed its fraud suit and Judge Pregerson was overseeing an investigation into the whereabouts of millions of dollars in property and other assets.

In June, Hahn, apparently unaware of the lawsuit, performed a final favor for his fundraiser. He gave a speech at a small Westside private school attended by Abrams’ son. The mayor also met with the boy, according to the principal, who said the developer arranged the visit. The mayor described the visit as routine, one of many he regularly makes to schools. Asked whether he met privately with Abrams’ son, Hahn said he could not recall.

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Abrams was elated by the mayor’s gesture, a former associate said.

Abrams invoked his relationship with the mayor once again as he pleaded last year for leniency from Pregerson, who ultimately jailed the developer 30 days for destroying records and hiding assets in the Lehman Bros. case. Abrams, now cooperating with the judge, noted in a declaration that he served on boards that helped battered women and troubled children, as well as “Mayor James Hahn’s Executive Committee.”

The panel, Hahn said, is an “incentive kind of thing” for his fundraisers who bring in at least $25,000.

Despite his experience with Abrams, the mayor said he saw no need to develop new standards for screening major financial backers. Given the demands of running a big campaign with thousands of contributors, Hahn said, it is extremely difficult to identify those who might cause embarrassment down the line.

“There’s really no way to predict that,” he said.

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Times researchers Scott Wilson and Vicki Gallay contributed to this report.

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