Edelman Wants End to Secrecy in Land Leases

Responding to disclosures that Saudi Arabian businessmen and arms brokers secretly bought a major stake in leases on public land at Marina del Rey, Los Angeles County Supervisor Ed Edelman on Tuesday proposed that the county require that future investors in county-owned property be publicly identified.

Edelman, chairman of the Board of Supervisors, told his colleagues that he will propose adoption of a policy next week that would balance the public’s right to know who is doing business on public land against the need to attract investment in county projects.

After a two-month investigation, The Times reported in articles on Sunday and Monday that the Marina del Rey holdings were secretly purchased by a group of Middle Eastern investors headed by Khalid and Abdul Aziz Al-Ibrahim, billionaire brothers-in-law of Saudi Arabia’s King Fahd.

The articles also reported that the supervisors approved the deal without attempting to learn the investors’ identities.

“We should try to work out a policy that will bring that information to the public,” Edelman said Tuesday. “It’s not like a private corporation. It’s a public body, and the public is entitled to know. At the same time, we don’t want to give up opportunities so the county loses money.”

The Ibrahim group, in a $21.8-million cash transaction, became partners with the marina’s largest developer, Abraham M. Lurie, in three existing hotels, a planned luxury hotel, two apartment complexes, shops, offices, restaurants and more than 1,000 boat slips on 63 acres of county-owned property.

Edelman, the only supervisor who did not vote on the marina deal last summer, said he would have liked to have known the identities of the investors.

But whether Edelman’s proposed policy will be adopted is an open question. Rather than discussing the issue, two of the supervisors instead sharply criticized the Times’ articles.

Supervisor Pete Schabarum accused the newspaper of being “completely off base.”

He said the supervisors were told by the county counsel’s office that approval of the sale could not be unreasonably withheld. “That is the only recommendation” the board received from its lawyers, he said.

Supervisor Mike Antonovich added that “the board’s hands were basically tied” in approving the secret investors.

A year ago, however, the county counsel’s office advised the Department of Beaches and Harbors, which oversees the marina, that the county could “just say no” to such a deal to protect itself in case the money being invested had been illegally obtained.

The memorandum, authored by Frank Scott, principal deputy county counsel, warned that if “illegally obtained funds were used to finance the buyout” of marina property, the county’s economic interest could be jeopardized.

“Tainted money and those it touches could be the subject of criminal and civil lawsuits,” the memo said. Such lawsuits could disrupt marina businesses, possibly reduce county revenues and make the property subject to seizure.

Under the terms of the lease, “the county has the up-front power to protect itself from illegal financing of assignments,” the memo said, adding that the lease “allows the county to just say ‘no’ to the transaction.”

In July, the Department of Beaches and Harbors obtained additional legal advice from an outside law firm, Skadden, Arps, Slate, Meagher & Flom, urging that the county obtain specific financial guarantees from the investors because it could be difficult for the county to pierce the veil of secrecy surrounding them.

Despite that advice, county officials did not examine the finances, nationality or background of the investors, nor did they require disclosures of their identities.

Instead, they relied on assurances from Chicago attorney Cornelius J. Sullivan that his clients, the investors, were successful foreign business people who were not involved in criminal activity.

No evidence has surfaced of any criminal taint on the marina investment funds.

The deal gave the investors a 49.9% interest in the marina properties of Lurie, a major campaign contributor to the supervisors. If Lurie had sold more than 50%, his marina leaseholds would have been reassessed for property tax purposes.

Noting the complexity of the deal and the desire of the investors to avoid taxation, the county assessor’s office has begun a review of the transaction to determine whether the properties can be reassessed at market value.