Top Los Angeles County officials discarded the rule book governing public acquisitions in their eager pursuit of a luxury office tower and department store owned by a major campaign contributor, county records show.
On the part of the deal that went through, the campaign contributor, Alexander Haagen, made a profit of at least $9 million when the county last year bought the former Western headquarters of Sears, Roebuck & Co. on Fremont Avenue in Alhambra.
No laws apparently were broken, but because of the single-minded zeal with which the buildings were pursued, months were wasted in a vain search for a headquarters for the county's children's courts, millions of additional dollars were spent altering the tower for occupancy and at no time did the county advertise for a better deal.
As it turned out, one of two buildings at the site was turned down as unsuitable by its intended tenants: the county's dependency courts, which determine the fate of abused and neglected children. The other building, the 12-story former Sears office tower, became the home of the county's huge Department of Public Works.
But even before the tower purchase was final last year, the county knew that that building, too, fell short of requirements. Officials said a parking garage was needed. So was a three-story computer center. Both are under construction. More surrounding land had to be bought and the tower had to be renovated.
When the tab was totaled, the county paid Haagen $53 million--$37 million for the former Sears tower that Haagen had bought less than a year earlier for $27.9 million, and the balance in the improvements and new buildings that he would provide.
Haagen, who served a stormy year as chairman of the Los Angeles Memorial Coliseum Commission, is most influential as a private force in the community, with close ties to public officials and city and county redevelopment agencies. He has created the largest retail development company in Southern California as the developer of 40 major shopping centers.
Early in the Sears deal, the swiftness with which officials acted to buy Haagen's building, the limited alternatives given the county's real estate experts and the refusal to advertise for the best available court site raised internal concerns.
Carlos Brea, the county real estate expert charged with checking out the suitability of the transaction, complained in writing to his superiors: "It appears (the chief administrative office) wants this department to go out on a limb" to endorse the Haagen property. The chief administrator's office continued to pursue the purchase as a site for the dependency court until it was stopped later by the refusal of court officials to accept it and vigorous opposition from Alhambra.
The purchase of the adjacent tower was approved in the spring of 1987 by the Board of Supervisors. Although it caused no stir at the time, the tower property became an issue in the current 5th District supervisorial election between Supervisor Mike Antonovich and former Supervisor Baxter Ward. The building is located in the 5th District.
Ward said the deal was a scandal, and has implied that Antonovich and other county officials favored Haagen because of the developer's generosity to campaigns. Since 1984, Haagen has donated $73,150 to the supervisors, including $28,900 to Antonovich, the most that Haagen gave to any of the supervisors.
Defended by Antonovich
Antonovich has strongly defended the purchase, saying that his support was not influenced by Haagen's donations. "Because a person has contributed doesn't mean that he or she is going to be disqualified," Antonovich said. "What you have to look at is the bottom line--will the taxpayers get a return on their dollar for this type of acquisition of property."
Examination of county records and interviews by The Times disclosed that the deal was initiated by former county Chief Administrative Officer James Hankla and Haagen. They had worked together when Hankla headed the county redevelopment agency.
When Hankla left office in March, 1987, negotiations were continued by the present county administrative officer, Richard B. Dixon, and Thomas A. Tidemanson, head of the Public Works Department.
Known to county staff as "Tom's Taj Mahal" or "Tidemanson's Tower," the new home for 1,500 public works employees is an impressive, towering glass-and-metal cube with sweeping entrances, a landscaped patio and fountain, mirrored elevators, an exercise room and magnificent views of the San Gabriel Mountains.
When the county buys or leases real estate, standard written procedures call for specific ways to acquire it. In the case of the former Sears tower and the adjacent windowless department store, the county bypassed several of these steps, a Times investigation of records showed. Some of the infractions were minor, not directly affecting a good or bad financial deal for the county. But two of the shortcuts may have made a major difference.
By neglecting to advertise that it was in the market for property, not all suitable possibilities were exhausted. Furthermore, the shopping around that was done resulted in staff recommendations by county real estate experts being ignored in favor of Haagen's property, the records show. Limited to seven buildings, including Haagen's, in the search for new dependency court quarters, staff experts said the best choice was to start from scratch with a new building. The recommendation was ignored by Hankla and his staff in favor of the Haagen department store, ultimately never purchased. Simultaneously, interest had centered on the next-door tower; there was no attempt to find a better site.
Officials involved in the acquisition said they acted in the best interests of the county.
"I got one hell of a bargain out of the process," Tidemanson boasted as he sat during an interview in the 12th floor's executive wing with its wood-panel walls, smoked-glass doors, gold-colored fixtures. A huge artificial floral arrangement greets visitors to the executive suites.
Haagen agreed. He pointed out that a private appraiser, hired by the county before the $37-million sale, set the market value of the tower at $50 million, which did not include improvements.
And, Haagen added, "I'll buy it back from them if they don't like it."
Haagen purchased the tower from Sears on Sept. 30, 1986, for $27.9 million, according to county records. Several months earlier, while he still was negotiating to buy the buildings, he contacted Hankla to see if the county would be interested in the properties, records show.
Hankla concluded that the county's dependency courts could be moved into the department store area, the records show. He also decided that the office tower adjacent to the store would make a good headquarters for the newly consolidated Public Works Department, even though negotiations already were in progress to build new Department of Public Works offices in Lincoln Heights.
Hankla moved ahead on both the store and the tower without consulting Superior Court executive director Frank Zolin or Tidemanson.
For more than a decade, judges have wanted a new home for the children's courts, which currently share space in the dingy and overcrowded downtown courts building.
County Supervisor Ed Edelman in May, 1986, got the board to order a search for a new court location. Records show that Hankla's staff used that order to justify ignoring county rules requiring public advertising for space needs.
Hankla said he could not remember why no effort was made to advertise but added, "I know we were under a lot of (time) pressure from the dependency courts to find something."
In an interview, Edelman said his intent at the time was "to get the county off its duff. I certainly didn't know they weren't following normal procedures." At the same time, Hankla changed county policy that called for decentralization of the dependency courts. Hankla decided that the dependency courts should be located in a single building--while his office was touting the Haagen store as an ideal site.
Superior Court executive director Zolin ultimately rejected the store, citing the county Department of Facilities Management's own analysis that concluded that it was too expensive and its layout impractical.
Tidemanson, however, declared the tower ideal after touring it in August, 1986, and soon plans were scrapped for the Lincoln Heights building. Tidemanson had wanted more room for the Department of Public Works ever since 1985 when the Board of Supervisors merged three departments within the public works area. He found it inefficient and costly to oversee the larger department with employees scattered in three county-owned buildings. And major builders, the department's primary customers, had been clamoring for a one-stop office.
Once the county was committed to buying the tower, the price escalated.
In March, 1987, Haagen was offering to sell the tower to the county for $42.5 million, including $2.5 million in tenant improvements as well as building a parking garage and a separate building housing an automotive service center. A month later the price jumped to $49 million, which included $4.3 million in tenant improvements, garage and the extra building. When the board approved the deal in two separate votes in May and June the tenant improvements had mushroomed to $7.6 million, pushing the final price to $53 million.
County officials could provide no documents to explain why the cost escalated or why the county needed an entire new building, now planned as a computer center. Originally, the computer operations were to be located in the tower. As finally determined, the computers will occupy the first floor of the new building, while its two other floors will be rented.
"The data center is so I can put my data somewhere," Tidemanson said. "I have no place for it in this building. The parking structure is so we have enough parking. There's not enough parking on the grounds here to handle all the people we have in this building."
Tidemanson and Dixon said the tower's modifications were more expensive because asbestos was removed and sprinklers were installed. They said they could not provide documentation to justify the increased cost.
All $16 million in improvements and construction are being built by Haagen. County officials said they were not required to seek competitive bids for the work.
The project was financed with $49 million in flood control bonds. The county also sold two of its own buildings to help defray the costs, which continued to climb.
Alhambra objected to the loss of tax revenue when the building shifted from private to public ownership. To meet that objection, the county agreed to spend $5.5 million on public works projects in Alhambra.