Alatorre Faces Allegations Over Costly Hotel Deal

Los Angeles City Councilman Richard Alatorre helped win approval for a financially disastrous downtown housing project, allegedly in exchange for a $100,000 donation to a charity that hired a firm his wife founded, according to new accusations lodged in court documents.

The allegations were made by some of those who invested in an ill-fated plan to overhaul the 70-year-old Hayward Hotel and turn it into a showcase low-income housing development near skid row.

The $24-million project defaulted on $13.5 million in bonds two years ago under a heavy burden of debt and alleged shoddy management--a collapse that has cost taxpayers millions in losses and legal fees and could end up costing considerably more.

An Alatorre spokeswoman said Tuesday that the lawmaker had not seen the allegations and could not comment. The councilman has previously said his actions regarding the 525-unit Hayward project were proper and based on staff recommendations.

Nevertheless, the new allegations--filed late Monday in an ongoing Superior Court lawsuit against the city--could open yet another legal battlefront involving Alatorre. The Eastside councilman is already entangled in a federal corruption probe and a bitter child guardianship fight.

The filing makes a series of allegations of fraud and misrepresentation by city agencies and other defendants. But for the first time, the soured investors have zeroed in on Alatorre, accusing him of overlooking “unfavorable reports” on the Hayward project’s finances because of undisclosed links to the deal.

The businessmen who sold the hotel to a new developer donated $100,000 to a charity Alatorre helped create--the El Sereno Youth Development Corp.--directly from the escrow account on the city-backed transaction, the filing states.

The check was routed through Eventfully Yours, a fund-raising business founded by the councilman’s wife, Angie, that the charity hired. Over the next several years, the El Sereno organization would pay Eventfully Yours tens of thousands of dollars for its services.

The donation was intended to “alleviate the risk” that City Hall would back away from the deal, the investors’ filing asserts. “In exchange for the $100,000 . . . the council member would clear the way for the Hayward project and ensure that any unfavorable reports would not get in the way of passing the deal through the City Council.” Attorneys for the investors portray Alatorre as a pivotal player in the deal. C. Randolph Fishburn, an attorney with White & Case, the firm representing bondholders, said the El Sereno youth center donation was “the direct benefit that gave Alatorre the incentive to approve this project at any cost. . . .

“This is essentially a deal that should have been an arm’s length transaction. And it wasn’t.”

The project began to unravel soon after its 1992 city approval. Management and financial control problems developed. Construction costs far exceeded estimates. And the developers defaulted on the bonds in mid-1996. That year, the man spearheading the development was indicted and later sent to prison on unrelated charges of federal housing fraud.

When the financing package was being rushed through City Hall to meet a state funding deadline, analysts raised questions, particularly about the purchase price of the hotel, records show.

“We cannot ascertain whether . . . the [proposed city investment] is appropriate,” warned a staff report to the City Council. “The city could be financing the acquisition of the Hayward for more than it is worth.”

Councilman’s Cohort Allegedly Urged Gift

The council committee that swiftly recommended approval of the project despite such concerns was chaired by Alatorre, according to court records.

The new court filing also says the El Sereno youth center contribution was suggested by businessman Samuel S. Mevorach, an associate of both Alatorre and the hotel’s sellers.

Mevorach garnered about $1.5 million from the city-backed Hayward purchase when a debt from the previous owners was paid off, according to Times interviews.

Mevorach and one of the hotel sellers, Han Huskey, were involved in Alatorre’s purchase of a new Eagle Rock home in 1996, a transaction that helped spark the continuing federal investigation. The Times reported last year that Huskey--at Mevorach’s request--and several Mevorach associates assisted the lawmaker in seeking a loan for the home, as well as leasing and later buying a money-losing condominium that Alatorre needed to unload.

Attorneys for Mevorach, who has insisted that his dealings with Alatorre have been above board, did not return phone calls Tuesday.

Couple Have Denied Financial Wrongdoing

Previously, Alatorre and his wife told The Times that they did not know how the $100,000 donation, one of the El Sereno charity’s largest, came to be made. The couple have said their only interest in helping establish the nonprofit organization was to provide opportunities for needy children in the lawmaker’s district.

The couple also have said that Angie Alatorre transferred ownership of Eventfully Yours to her sister and thus was merely an employee of the firm when the El Sereno charity hired it.

The Alatorres’ ties to Eventfully Yours and its fund-raising on behalf of the the El Sereno organization are also part of the federal probe. The investigation involves the FBI, Internal Revenue Service and Metropolitan Transportation Authority’s inspector general, working with the U.S. attorney’s office.

The councilman and his wife have said they have done nothing improper in their personal finances and public actions.

An attorney for the city declined to comment on Monday’s court allegations regarding Alatorre or the charitable donation from the Hayward escrow account.

The hotel project’s financial travails have been “sad and very expensive,” said Deputy City Atty. Laurel Lightner, though the hotel itself has continued to serve low-income tenants.

Lightner said the city recently won a ruling dismissing it from liability for the defaulted investor bonds. However, the Los Angeles Housing Authority, the quasi-independent agency that issued the bonds, remains a defendant in the bondholders’ lawsuit.

The Hayward project was unveiled in the waning days of Mayor Tom Bradley’s administration. It was the costliest component of a $110-million citywide program hailed as the most ambitious effort to house the poor in the city’s history.

Partners Made Sizable Profit, One Says

The Hayward proposal, featuring $10.4 million in city loans as well as the bonds, included buying and completely rehabilitating the huge structure built in the 1920s.

Alatorre has said that in urging approval of the project, he relied on housing officials’ recommendations to proceed. He later helped seal approval of the project with a special motion to waive a full-blown environmental study.

Shortly after the council’s approval, the $100,000 donation was forwarded to the El Sereno charity, which was then just starting up and seeking seed money.

One of the former Hayward owners, Ben Karmelich, has told The Times that the donation was made at Mevorach’s behest. Karmelich said he and his partners made a sizable profit in the Hayward sale, after buying it from Mevorach a decade earlier.

“We sort of felt obligated to Sam Mevorach. He said it should go to the [charity]. He didn’t tell us that Alatorre was involved,” Karmelich said.

A few months after the Hayward deal closed, Mevorach was honored among the charity’s top donors at a gala downtown fund-raiser, commemorating Alatorre’s 20 years in elected office. Mevorach sat at the head table in the Biltmore Hotel ballroom with Alatorre and was recognized in the official program of the evening.

However, Mevorach, through his attorney, told The Times last year that he neither made nor arranged any donation to the charity. He could not explain why he was honored as a major contributor.

Cash Attributed to Per Diem Payments

In the early and mid-1990s, Alatorre met with Mevorach when the councilman was pressed for cash to pay his bills, the lawmaker’s former secretary has alleged in court documents in an unrelated child-custody case. After meeting with Mevorach, the secretary claimed, Alatorre would give her cash to deposit in his personal checking account.

The councilman recently testified in his and his wife’s attempt to retain custody of their 10-year-old niece that he had thousands of dollars in cash at his home, which he dipped into when he needed money to pay bills. He said he accumulated the cash in the 1970s and 1980s from per diem payments he received while in the state Legislature.