Councilman’s Kin Sells Lots to Azusa : Price Triples Since 1981, but Cruz Denies Making ‘One Dime’ on Deal

The city Redevelopment Agency has bought two small lots from a son-in-law of Councilman Lucio Cruz for $55,000, nearly three times the amount paid by another family member for the land six years ago.

State law prohibits council members from buying and selling land in redevelopment areas, but Cruz said he never personally owned the property and “did not make one dime” on its sale to the city agency.

Cruz, 63, a member of the City Council for 13 years, said the vacant lots purchased by the Redevelopment Agency in June never belonged to him. County records show that the property was owned in succession by his son-in-law, his wife and then another son-in-law.

But Cruz did make monthly payments on the property for 1 1/2 years while it was in the name of other family members and arranged to keep it in the family when ownership was threated by foreclosure.

County records show that the land was transferred within the Cruz family as a gift.

Mayor Eugene Moses, who has been politically at odds with Cruz, accused the councilman in an interview of hiding his connection to the property. Moses said that although Cruz abstained when the council voted to buy the land last December, Cruz never told his colleagues that the property was owned by members of his family.

In addition, Moses said, the city may have paid too much for the property even though the price was based on an independent appraisal.

The mayor raised the issue at a City Council meeting July 7, asking the city attorney whether a council member or his family can legally buy land in a redevelopment area and sell it to the city Redevelopment Agency.

City Atty. Peter Thorson said a council member cannot buy redevelopment property but relatives may if they are not financially dependent on the council member.

In an interview, Thorson added that the key question is whether the officeholder gained financially. He said there is no violation of the law if relatives deal in redevelopment property, if the transaction does not benefit the council member and he has no hidden interest in the property.

The Redevelopment Agency bought the two lots at the southeast corner of San Gabriel and Santa Fe avenues for a commercial project that is in the planning stages. The lots, vacant except for a billboard, are part of the central business district redevelopment area created in 1978. The lots total 6,462 square feet.

William and Lillian K. Grund, the former owners, said they sold the lots to Victor Gonzalez, a son-in-law of Cruz, for $19,500 in 1981. Later, they said, Cruz told them that he had provided the $10,000 down payment. They also said that they dealt directly with Cruz after the son-in-law defaulted on a trust deed note on the property and that Cruz made monthly payments on the note for 1 1/2 years.

In an interview, Cruz denied that he had provided the down payment or ever had a personal interest in the property, but said he had made several monthly payments on the land to help his son-in-law.

“Victor had problems at times. . . . He needed assistance,” Cruz said.

County records show that Gonzalez transferred the property to his mother-in-law, the councilman’s wife, as a gift in April, 1984, and that she gave the land as a gift two days later to another son-in-law, Robert Montano.

Cruz’ wife used her maiden name, Caroline Valenica, on the deed transfers even though she is listed as Caroline Cruz on deeds involving other family property.

The recorded deeds contradict a claim by Montano that he bought the land from Gonzalez.

Montano told The Times that he bought the property from Gonzalez for $33,000 in 1984. A city appraisal report quotes Montano as saying that he paid $33,360, but does not identify the seller.

Neither Cruz nor Montano would explain why the property transfers were recorded as gifts if Montano paid money for the property and Gonzalez received money. Montano said he paid off a note owed by Gonzales and also paid him cash.

Cruz said his wife should never have been listed as the owner on the deeds because the transaction was between Gonzalez and Montano. It was by mistake, he said, that the land was deeded to her.

Montano offered a different explanation. He said Gonzalez transferred the property to his mother-in-law because he was in danger of losing it over financial difficulties. Montano said the family then realized that her ownership could create political problems for Cruz. Montano said he stepped in, cleared up the debt and compensated Gonzalez. Efforts to reach Gonzalez for comment were unsuccessful.

Montano conceded that the circumstances might lead some people to believe that Cruz had used family members to buy and sell redevelopment land to circumvent legal restrictions. But such a conclusion would be false, Montano said.

Cruz echoed that statement.

“I had no financial interest,” the councilman said. “I was just helping out the family financially. I like to see them get ahead, not get in a hole. . . . I didn’t gain anything by it.”

Mayor Shocked

The City Council, sitting as the Redevelopment Agency, agreed to acquire the property for $55,000 by a 4-0 vote on Dec. 15, 1986, with Cruz abstaining. The purchase was completed in June.

Mayor Moses said he did not look at the property until after the vote was taken. He said he was shocked by what he saw: an irregularly shaped lot of less than than 6,500 square feet.

“For that piece of property, it seemed like an awful lot of money,” Moses said. “I looked at it and said, ‘Holy mackerel.’ ”

Moses said he then discovered Cruz’s connection to the property.

Other council members said that although Cruz made no public disclosure, they were aware before they voted that the property belonged to Cruz’s son-in-law. Cruz said Moses should have known, too, because Moses knew that Montano was his son-in-law and Montano was listed as the owner in the appraisal report prepared for the city.

State law requires council members to file annual statements listing property that they and their spouses own. Although his wife was the legal owner of the property for two days in 1984, Cruz did not list it on his financial disclosure statement.

Robb Steel, city redevelopment analyst, said that if Cruz had declared a financial interest in the property, the Redevelopment Agency could have bought it only by going to court to obtain approval of the purchase price. Instead, the agency hired an appraiser and bought the property at the appraiser’s estimate of its market value.

Staff members of the Redevelopment Agency said that the agency has a policy of acquiring land targeted for redevelopment when it comes on the market and that Montano offered it to the agency. They said Cruz did nothing to accelerate the acquisition of his son-in-law’s property.

City Administrator Julio Fuentes said the Redevelopment Agency is negotiating a disposition and development agreement with a developer for a commercial project on the Montano property and neighboring lots in the block bounded by San Gabriel, Santa Fe and Azusa avenues and Foothill Boulevard.

Fuentes said the city followed standard procedures in acquiring the lot. He said that there was “no wrongdoing” by the city and that “we would stand by our acquisition.”

Cruz, a retired Los Angeles city building and safety employee who owns several apartment buildings in Azusa, said he was not involved when Gonzalez bought the redevelopment property from the Grunds in 1981. William Grund, a retired Azusa businessman who moved to the state of Washington before selling the property, said he conducted the transaction through a real estate firm and never talked to Gonzalez.

Made One Payment

Grund said he sold the lots for $19,500 under terms that called for $10,000 down and $9,500 in a lump sum at the end of three years, with monthly interest payments in the interim. He said Gonzalez made one monthly payment and stopped.

After he began default proceedings, Grund said, he received a telephone call from a sister of Gonzalez who said that the payments would be brought up to date. The back payments were made in July, 1982, but Gonzalez fell behind again, Grund said, and the default proceeedings were started anew.

In early 1983, Cruz called him, Grund said. In that conversation, according to Grund, Cruz said that he had provided the $10,000 down payment made by Gonzalez and that he would pay to bring the property out of default. Grund said Cruz cleared up tax bills and made payments of $95 a month on the property from May, 1983, to November, 1984.

Records kept by the Grunds indicate that Cruz was still making payments months after the April, 1984, transfer of the property to Montano.

Grund said he refused a request from Cruz for an indefinite extension of the note near the end of 1984, but agreed to defer payment of most of the principal for another year. An agreement drawn up by the Grunds after a telephone conversation with Cruz on Nov. 11, 1984, outlined the extension terms.

The agreeement called for Cruz to send the Grunds $2,000 immediately, $75 a month for a year and the balance of $7,500 in December, 1985. The Grunds signed the agreement and mailed it to Cruz for his signature.

But Cruz never signed the agreement. Instead, Grund said, he received a telephone call from Montano, who said he had obtained the deed to the property and had permission from Cruz to take over the note. Grund said Montano did not say that he was related to the councilman.

Grund said Montano paid the $2,000 and made monthly payments on the note for the next year. The final balance of $7,500 was paid through an escrow company in January, 1986.

“It was probably the most bizarre real estate deal I’ve ever had,” Grund said.

Carl W. Boznanski, who was hired by the Redevelopment Agency to appraise the property, said in his report to the agency that Montano was “vague about the terms and conditions under which he purchased the subject property.”

In an interview, Boznanski said: “Frankly, his (Montano’s) knowledge of the whole property was minimal.”

After ownership was transferred to Montano, the assessed value of the property, which was $21,000 in 1982, rose to more than $66,000.

Jack MacLean, chief deputy assessor, said that when property changes hands as a gift, the new owner is asked to submit a value estimate. MacLean said the owner’s estimate is accepted if it seems to be in line with the value of similar properties.

MacLean said that the public records in his office do not indicate why the valuation rose so sharply but that the usual cause would be a buyer’s declaration.

Montano said he did not sign a declaration of the property’s worth and does not know why it was given that market value by the assessor’s office. He said he paid taxes at the high valuation without complaint because the total tax was comparatively small.

Boznanski said he did not consider either the purported purchase price of $33,360 quoted by Montano or the 1986 assessed value of $68,666 in arriving at his conclusions on the property’s worth, although both figures were included in his report to the city.

Instead, Boznanski said, he based his appraisal of $55,000 on a comparison with the sales prices paid on 10 pieces of commercial property in Azusa, Monrovia, Covina and Glendora. But none of the transactions examined by Boznanski involved lots as small as the Montano property. The other lots ranged from 11,200 square feet to more than 51,000. The Montano property was 6,462 square feet.

The lot closest in size was a vacant parcel of 11,200 square feet at the northwest corner of Azusa Avenue and 2nd Street in Azusa, which sold for $7.59 a square foot a year ago. Boznanski said this site was similar to the Montano property but “superior due to site size.”

Nevertheless, Boznanski put a higher value, $8.50 a square foot, on the Montano land for reasons that are not specified in his report. In an interview, Boznanski said he based his appraisal on a “spectrum of sales.” The other commercial properties he included in his appraisal report sold from $8.50 to $21 a square foot.

In his report, Boznanski said that “ultimate development of this property would appear to be tied in to the assemblage of this parcel with other parcels.”