Industry Takes $4.5-Million Settlement in Kickback Suit

The city and its redevelopment agencies have agreed to accept $4.5 million to settle their lawsuit against seven men involved in a kickback and bid-rigging scheme during construction of the city’s convention center.

City Atty. Graham Ritchie said the agreement, settling a $33-million lawsuit filed by the city in federal court in 1984, was worked out by attorneys in conferences supervised by U. S. District Judge Pamela Rymer.

All parties agreed to the settlement, Ritchie said, but it is not final until approved by U. S. District Judge Mariana Pfaelzer, who had referred the case to Rymer for settlement discussions.

The agreement calls for $2.5 million to be paid by James Marty Stafford, the 70-year-old founder of the city, who is serving an eight-year term in federal prison in connection with the scheme. Stafford pleaded guilty in 1984 to fraud, attempted bribery, conspiracy and obstruction of justice.

Settlement Called Fair

Ritchie said that although the settlement is far below the amount sought when the suit was filed, it is fair, given the ability of the defendants to pay and the difficulty of determining and proving the losses incurred by the city.

The bid-rigging and kickbacks involved contracts for work on the Industry Hills and Sheraton Resort, which was built at a cost of $65 million between 1977 and 1982.

The settlement calls for payment of $550,000 by Frank C. Wood, a Burbank contractor; $500,000 by Robert King, an Industry businessman who supplied hardwood for the project; $345,000 by Jack R. Carpenter, head of a Van Nuys wood milling firm, and $200,000 by Roger Haines, a subcontractor.

C. Ronald Rabin, who was in charge of construction of the convention center as an employee of National Engineering Co. and arranged contracts, has agreed to pay $145,000, Ritchie said.

Pleaded Guilty

Rabin, Wood, King, Carpenter and Haines pleaded guilty to various criminal charges in connection with the case. In addition, George Jacques, a bookkeeper, who was never charged in the criminal case but was named in the civil suit, has agreed to pay $230,000.

Ritchie said Jacques and Rabin agreed to terms before the other defendants did. He said their part of the settlement received final court approval June 8. Judge Pfaelzer has not set a date to consider the remainder of the case.

The total of $4.5 million to be shared by the city and redevelopment agencies includes about $1.4 million that has already been paid in restitution as part of the criminal cases.

In 1984, U. S. District Judge Edward Rafeedie fined Stafford $25,000 and ordered him to pay the city $1.3 million for “pillaging the public treasury.” Prosecutors said Stafford, a former member of the county Regional Planning Commission who was instrumental in creating the City of Industry, was the architect of the bid-rigging and kickback arrangements.

City Has Option

Ritchie said Stafford has paid the amount required in the criminal case. Terms of the settlement in the civil suit give the city the option of requiring Stafford to pay the remaining $1.2 million in cash or taking an office building owned by Stafford as partial payment. Ritchie said the city is having the two-story building, in the city’s financial center, appraised.

The agreement gives some of the defendants as long as five years to pay but requires interest payments on any amount that is deferred.

Ritchie said the city spent $600,000 for legal fees, expert witnesses, research and other costs connected with the case. The settlement calls for plaintiffs and defendants to pay their own legal expenses.