Developer Says County Owes Firm $1.6 Million

An Orange County developer that figured in an earlier investigation of the U.S. Department of Housing and Urban Development has asked the county’s planning department to reimburse it $1.6 million for road construction done years ago at the Robinson Ranch project.

In a cost-sharing program, the county agreed in 1981 to reimburse the original developer of Robinson Ranch part of the $3.1 million it paid to build a highway to its project. That refund was acquired by the William Lyon Co. when it bought the project in 1985.

In a Nov. 13 letter to Ernie Schneider, then director of the Environmental Management Agency, lawyers for Lyon said the $1.6-million payment came with the rural development near Mission Viejo and Coto de Caza when the company bought it from HUD for $16 million.

Although county lawyers are studying the request for the money, most county officials surveyed believe that the county will have to pay Lyon as outlined in the agreement.

HUD officials said the original developer of the project, Ridgewood Development Inc., paid $3.1 million to extend Santa Margarita Parkway and that the county had agreed to refund the firm $1.6 million for the work.

Faced with financial problems, Ridgewood assigned its rights to the development back to HUD, which was insuring $30 million in loans that Ridgewood had borrowed.

Harold Matzoll, deputy manager of HUD’s Santa Ana office, said the agreement stated that the county agreed to refund the developer $1.6 million for the work on the parkway. According to the purchase agreements, those rights were transferred from Ridgewood to HUD, then from HUD to Lyon when that company bought the development.

“Nothing has been put over on anyone,” Matzoll said. “It was agreed to and lawyers in Washington had studied it. The department was throughly aware of the agreement and contract of sale.”

Complaints from losing bidders after the controversial sale of the Robinson Ranch prompted HUD to issue a report, which indicated that possible favoritism was involved in the sale to Lyon.

The 1985 HUD report said Lyon’s original bid on the project of $8.5 million was the lowest of the four considered by HUD officials. The report criticized the sales process because Lyon was then allowed to submit a second bid based on a higher rate of development on the land than others bidders had considered.

The other companies, including Kaufman and Broad, were never given a chance to prepare a bid on a higher rate of development, the report said, and if they had, their bids would have been better than Lyon’s.

According to the internal report, company owner William Lyon, a retired Air Force brigadier general and a major contributor to the Republican Party, was friends with a key HUD official who was instrumental in deciding that Lyon Co. got Robinson Ranch. That official, Shirley M. Wiseman, then an acting assistant HUD director, denied she had a personal friendship with Lyon.

The Lyon letter to the EMA requested a reimbursement for $1,617,605.95, plus an additional $184,172.75 for what was described as a “double payment” made by the company for the construction of a 3 1/2-mile extension of the Santa Margarita Parkway connecting the South County project with El Toro Road.

A spokesman for Lyon said the company is seeking the money now--nearly five years after the contract was signed--because the county now has sufficient funds to cover the payment. But Kenneth R. Smith, EMA’s director of transportation, said he does not believe there is enough money in the fund to reimburse Lyon in one payment.