Bondholders Sue City, Developer in Bid to Recoup Investment in Housing Project

Bondholders who invested $13.4 million in a Skid Row affordable housing project in downtown Los Angeles filed a lawsuit Tuesday against the city and the project developers, seeking to recoup their investment.

Among the allegations in the lawsuit--which names the city of Los Angeles, the Housing Authority, city housing department general manager Gary Squier and developer Thomas Bell--are charges of fraud, negligence, conspiracy and breach of official duty.

The Hayward Manor project, a 525-unit single residence occupancy hotel, was part of a $110-million development plan conceived by Mayor Tom Bradley to create affordable housing throughout the city.

In 1992, Bell and several other investors received $10 million in city housing development money and nearly $13.4 million in Housing Authority revenue bonds to acquire and renovate Hayward Manor.

But the development partnership defaulted on the loans last year. Bondholders, who are represented by Wells Fargo Bank acting as their trustee, allege in the lawsuit that the city was negligent in its management of the project described in the suit as being “mired in financial improprieties.”

The lawsuit further alleges that the building was never completely renovated and was not brought up to health and safety codes.

“Mr. Bell is innocent of all allegations of any wrongdoing whatsoever pertaining to the project,” said Bell’s attorney, Donald Etra.

Etra declined to comment further on the lawsuit, saying he had not yet seen a copy of it. City officials had not seen the lawsuit either, and declined to comment.

Bell was recently convicted in an unrelated case for misrepresentation in connection with a Housing and Urban Development audit. He is due to report to prison Dec. 2 to serve an 18-month sentence, Etra said.