D.A. Reviewing Sale of Home by Ex-Recycler, Sources Say

The district attorney’s office is reviewing the sale of a home once owned by former recycling executive Jeffery Hambarian, who is under investigation for allegedly stealing more than $6 million in city funds, sources say.

The $580,000 two-story house was sold by Hambarian with help from real estate broker Carol Rudat, who is the wife of City Manager David L. Rudat.

Hambarian is former president of a firm that got a no-bid contract from Orange to collect and sell recyclables salvaged from city trash. He was fired after investigators said that about $6 million of recycling funds had apparently been diverted to his own use.

In the course of investigating the alleged theft of funds, district attorney investigators began reviewing the permits that Hambarian obtained when he made improvements to the home in 1983, which he rebuilt after a fire the year before.

They also obtained other city documents from a lawyer representing the people who bought the house in 1995, only to later complain to city and state officials about a number of undisclosed defects. The couple fixed the defects and sold the home at a loss and now are threatening to sue Hambarian and his broker.

Attorney Marshall M. Schulman, who represents Hambarian, said recently that his client declined to comment about the house sale.

And district attorney officials would not comment on the status of their investigation.

But the development is only the latest in a scandal that unfolded last summer when the city announced that police were investigating the alleged misappropriation of trash funds. The scandal has embarrassed City Council members and Hambarian’s family and was punctuated by the ouster of the police chief, who contends he faces termination by Rudat because of his department’s investigation.

In a recent interview, the city manager said he personally monitored how city employees dealt with the dispute between Hambarian and the home buyers, whose attorney accused Hambarian and agent Carol Rudat of being party to an allegedly fraudulent sale. They alleged that the home had undergone extensive modifications without the usual city permits and that damage to the property was not disclosed.

The city manager said he got involved to make sure the city itself didn’t get named in a lawsuit but he provided Hambarian no special treatment. Besides, he added, “lots of pretty powerful people come in and ask me to listen to their problems, to find a resolution in their favor, and they’ve left unsatisfied.”

The Orange city attorney already has investigated the city manager’s dealings with Hambarian in the wake of Carol Rudat’s $13,735 commission for selling Hambarian’s home. The city attorney concluded that the city manager had a conflict of interest that warranted the district attorney’s attention.

In a memo to the district attorney’s office late last year, Orange City Atty. David A. De Berry said that “it appears that Mr. Rudat did make or participate in the making of decisions which had a reasonably foreseeable financial impact on Jeff Hambarian during the relevant 12 months.” De Berry said Rudat had done so at least 13 times.

Letters Reveal City’s Involvement

State law requires that public officials who directly or indirectly accept income of more than $250 in any 12-month period from a contractor must abstain from influencing any official decisions that could affect that contractor in the following year.

The city staff’s involvement in the dispute over the house sale is revealed in a series of letters from city officials. Hambarian made improvements to the house, but the building permits that were obtained at the time did not exactly match the work that was done.

Building officials explained that may have happened because at the time the improvements were made, it was the city’s practice to approve construction work by field inspectors without the homeowner necessarily being required to submit revised plans or obtain new permits.

After Farzin N. Ghodsi and Margaret C. Leahy bought the home from Hambarian, they began threatening to file a lawsuit alleging they were defrauded. They resold the house at a loss of more than $100,000 and have since moved back to Michigan, Ghodsi said.

Carol Rudat, who helped sell the house on Crest de Ville, denied that Ghodsi and Leahy were defrauded or that she acted improperly in any way.

Termite Damage Discovered

The problems with the house surfaced when Ghodsi, an engineer from Detroit, and his wife moved to Orange in late 1995.

They fell in love with the custom two-story home with its wrap-around porch, polished wood, gas fireplaces and swimming pool.

The couple closed escrow on Nov. 15, 1995, and moved in. Shortly thereafter, Leahy received an unexpected call from Art Forbes, owner of Anaheim-based Art’s Termite Control.

Forbes said he told Leahy he was surprised the deal had closed because of all the damage he had discovered during a termite inspection that Carol Rudat hired him to perform in September 1995.

“It was like I’d opened the door on the plague,” Forbes recently recalled in an interview with The Times. He said when he inspected the house, he discovered extensive damage to a second-story porch. There was dry rot in support beams, posts and railings.

The damage was so extensive, Forbes said, it convinced him that the structure had not been properly built in the first place. He wrote a report detailing his findings to the California Structural Pest Control Board in Sacramento.

Forbes said Hambarian later “read me the riot act” and instructed him to reinspect the house and note that repairs had been made.

Conflicting Inspections

When Forbes went back to do a second inspection, shortly before escrow closed, he wrote in a supplemental report to the state that the problems “have been completed in a manner as to hide and cover up the true extent of the real damage and infestations.”

Hambarian hired a new firm, Baker’s Termite Co. of Anaheim, to inspect the house on Nov. 5, 1995, and Baker wrote that “no evidence of active infestation or infection was found.” An official for Baker’s Termite told The Times the company did a limited inspection of the porch, believing that repairs to any damage had already been done.

Carol Rudat said last week that it is not uncommon for termite reports to conflict. “There are always multiple termite [inspections] and opinions on how those [problems] are repaired.”

Ghodsi said he never saw Forbes’ report until Forbes contacted him after the sale.

Forbes called Ghodsi after receiving payment for his inspection and realized the sale had gone through. “I started wondering if the buyer ever got my termite report, which falls under full disclosure,” he said.

So Forbes visited Ghodsi and Leahy, took them to the porch, uncovered some of the patchwork and showed them what he considered the crudely concealed damage. Ghodsi just said, “That’s enough,” Forbes recalled.

Ghodsi said he was shocked when he later received estimates that it would cost as much as $37,000 to repair the house.

After Forbes’ visit, Ghodsi went to City Hall to check on the original designs but said that nobody could provide the paperwork.

When he finally received the blueprints on file with the city, Ghodsi said, he found at least 15 material modifications to the house not reflected in the plans.

Missing Permits, Plans

Ghodsi fired off a blistering six-page letter to everyone involved with the sale, declaring, “there has been an unconscionable cover-up of facts of serious and material damage” and that “no honest repairs” had been made prior to the sale.

He also hired Santa Ana attorney William E. Baker, a construction defect specialist, to represent him. Baker has no relation to Baker’s Termite Co. but is the attorney for Forbes.

On Feb. 26, 1996, city building inspector Terry Frederick came to the house at Leahy’s request and wrote up three pages of apparent code violations, records show.

David Rudat said Hambarian came to City Hall in March 1996, upset that city officials could not find the original permits or plans on file for Hambarian’s property. After Hambarian met with Frederick and other city employees on that day, Frederick wrote back to Ghodsi and Leahy to say Hambarian had “met with city staff to provide additional input as to how the patio deck was reviewed, approved and constructed.”

City officials found copies of the building permits, but they did not match all of the work that was done in 1983. In his review, Frederick sought to explain why. He wrote that it was the building department’s “practice at the time” to allow “such plan . . . modifications to have taken place without revised plans” or new building permits.

Frederick did not return repeated phone calls for comment.

Home Rebuilt After Fire

After his home and 13 others in the neighborhood were destroyed in the 1982 fire, Hambarian rebuilt the home with a large porch that included a second-story walkway, gas fireplaces and second-story doorways onto the deck. City officials cannot say for sure whether the improvements were ever inspected.

Kevin Shear, the city’s chief building official, said the city doesn’t have any written regulations dating back to the early 1980s. He said inspectors back then routinely approved impromptu construction changes that deviated from plans and permits, so long as they were up to code.

Although the state pest control board made Baker Termite replace the rotted deck, Ghodsi and Leahy decided to sell the house at a loss and move back to Michigan, saying they wanted to put the bad experience behind them.