Jailed Contractor Suspected of Bilking County

Los Angeles County unwittingly awarded the contract to build a child-care center and low-income housing project in unincorporated South Whittier and East Los Angeles to a federal prison inmate, whose company then bilked the county out of $690,000 in cash and $900,000 in costs for cleanup and unfinished construction, officials alleged Tuesday.

Carlos Jackson, executive director of the county’s Community Development Commission, said that Jaguar Rehab & Investment Corp. failed to pay its subcontractors or complete work on the projects. When housing administrators went to inquire in November, they found the firm’s office bolted and empty.

In addition, Jackson said, county officials have recently learned that one of the principals of the company, John Chatric Ferguson, is a convicted drug dealer in federal prison and was already there when his contractor’s license was presented to county officials as proof of the company’s legitimacy.

Syed Rushdy, the county’s director of housing development, said his department checked Jaguar’s license before awarding the company a $3-million contract in 1996. The firm was the low bidder in the competition for the work. The award subsequently was approved by the Board of Supervisors.

Tuesday, those same lawmakers agreed to cover the $690,000, as part of an agreement under which the bonding company insuring the deal will cover the about $900,000 in remaining costs for the two projects.

A check of state records on Jaguar Rehab and on Ferguson show that he and several other people with the same last name, presumably relatives, together held three contracting licenses. Two were expired and one was suspended in December for failure to pay another contractor. The company has also been cited nine times by the state contractors board for violations including abandoning a job, failure to pay a court-ordered judgment and executing improper contracts.

“It’s outrageous,” said county Supervisor Gloria Molina, whose district includes the sites of the two projects.

Molina sharply criticized the surety company, American Motorists Insurance Co., for failing to pick up the entire tab, and state licensing officials, who kept Ferguson’s contractor’s license current despite his incarceration and previous violations. “It’s outrageous that it happened and it’s outrageous that we were not protected. . . . The big government agency was bamboozled.”

No criminal charges have been filed, and county officials have turned the case over to the fraud unit of the Monterey Park Police Department.

According to Jackson and county documents, Jaguar diverted $440,000 meant for construction of the Laurel Avenue Housing Development in South Whittier, and $250,000 earmarked for the Centro de Ninos Child Care Center on Cesar Chavez Avenue in unincorporated East L.A.

He said work was begun on the projects, but the money meant for subcontractors was not paid out. The first three checks from the county were diverted, Jackson said, and when the fourth check came in, the subcontractors were finally paid--and told that this was the first payment.

Work continued through late summer. The child-care center was completed, and the 41 housing units were framed and covered with plywood.

“After a couple of months, we began to notice problems with the workmanship,” Jackson said. “We had to be on them all the time.”

Then the whole thing ground to a stop.

“The workers started walking away,” Jackson said.

A county worker went to Jaguar’s Northridge office in November to order the company to pay its contractors and to resume work or forfeit the contract.

“Locked,” said Rushdy. “The office was locked and nobody was there.”

Now, because of shoddy workmanship and this winter’s rains, the county is faced with tearing down much of the work on the housing project, Jackson said. In addition, 27 locations at the child-care center were either damaged, improperly built or poorly installed, and must be replaced. These include electrical outlets that were put in upside-down, a concrete drain that must be ripped out and door locks that were incorrectly configured.

At the board meeting Tuesday, Molina demanded that the company be put on a list of contractors banned from county projects, and asked that, in the future, such contract awards be preceded by in-depth background checks.

She said the background check in this case consisted of a telephone call to the state board of contractors, to make sure Jaguar’s license was current.

But the county failed to uncover the firm’s history of violations or the fact that Ferguson had been in federal prison on cocaine and firearms charges since 1992.

There were no phone numbers listed in Los Angeles or the San Fernando Valley for Jaguar, which state documents describe as based in Northridge. One of the company’s expired licenses lists a Panorama City address, but there was no phone number there, either. The company’s principals could also not be found at the addresses listed on their contract, Rushdy said.

“It’s pretty bad,” Rushdy said. “No matter how many systems you put together, if somebody wants to commit fraud, you can’t keep them from doing it.”

To make matters worse, the surety company at first refused to pay anything, saying that the county inappropriately paid money meant for subcontractors to Jaguar instead of an escrow company.

Assistant County Counsel Karen Lichtenberg confirmed that the checks--which officials now believe were diverted to Jaguar’s principals--were paid to the contractor, not to the escrow company.

But, she said, the checks were made out to both the contractor and the escrow company, in an effort to make sure that they were deposited in the proper account.

In an agreement reached over the last three months, American Motorists Insurance agreed to cover the costs of all future construction on the deal, estimated at $900,000 or more. The county agreed to pick up $691,000, the amount believed diverted from the two projects.

The county’s portion will come from the Housing Authority’s contingency budget for the project, which is made up of federal funds for low-income housing.

Times staff writer Miles Corwin contributed to this story.