In City of Industry, business and governance converge

By Rich Connell

Oct. 20, 2009 12 AM PT

Everyone who does business in the city of Industry is required to sign up with Mayor David Perez’s company.

For years, a firm partly owned by the mayor has held an exclusive, multimillion-dollar franchise to pick up trash from the warehouses, manufacturing plants and other commercial enterprises packed into this oddly configured, avidly pro-business San Gabriel Valley city.

And that is just one Perez investment thread that runs through town -- a place with fewer than 100 voters, tight-knit City Hall relationships and now a good chance of becoming home to an $800-million stadium complex and Los Angeles’ next professional football team.

On top of the commercial refuse franchise, which generated more than $12 million for Perez’s disposal operation over the last year, another Perez firm collected nearly $6.8 million from the city for maintaining street medians and parkways, removing graffiti and other services, a Times review has found.

The mayor’s business-partner brother serves on the city planning commission. A nephew, who works for the family’s management company, is on the board of Industry’s redevelopment agency, which provided income last year to yet another family business in which the mayor and his brother are investors.

Industry has always been an anomaly among Southern California cities -- a narrow, jagged corridor along freight train lines stretching from Pico Rivera to Pomona with hundreds of millions of dollars’ worth of businesses, a tiny population and a political structure that more closely resembles an alliance of deeply rooted families than a traditional municipality.

For years, the city has done business largely out of the limelight. But now, as Industry’s leaders have pressed their support for a 592-acre football stadium and retail, dining and office complex, new attention has been drawn to a local governing culture that critics view as disturbingly insular.

Nearly a third of the town’s registered voters appear to be related to the mayor or residing in homes owned by a family land investment partnership, The Times’ review found.

That land investment partnership also has financial ties with at least two other City Council members: one a tenant and the other a landowner that the company paid more than $100,000 last year, records and interviews show.

In a recent interview, the mayor and a deputy city attorney said all of Perez’s investments have been properly disclosed and his interests in contracts have been carefully managed to avoid self-dealing and conflict of interest violations.

“We work hard at it,” Perez said, noting that the rubbish and maintenance agreements were in place well before he took office in 2001. At that time, he said he removed himself from day-to-day business operations and dealings with the city. The mayor also said he sees no issues of potential political influence in his financial ties to other Industry decision-makers.

Concentrated power

Cal Poly San Luis Obispo professor Victor Valle, author of a new book on Industry’s formation, sees the city as a vivid example of jurisdictions designed to “concentrate the power to make major economic decisions in a tiny group of like-minded people.”

It’s a model that can not only distort voter power but contribute to an “incremental erosion of our democratic institutions,” argues Valle, a former Times reporter who covered a 1980s construction kickback scandal that landed an Industry founder in prison.

Critics of the city’s approval of the 75,000-seat football arena complain about Industry’s municipal election earlier this year. By a 60-1 vote, residents endorsed $500 million in city borrowing, part of it earmarked for public improvements to support the would-be National Football League stadium.

“This is ridiculous, such a small number” deciding an issue affecting “the whole, entire San Gabriel Valley,” said Howard Wang, part of a group of residents in neighboring Walnut who sued in hopes of forcing a new environmental impact study of the stadium.

Industry leaders and elected officials from several nearby cities note that the stadium would create thousands of jobs. And the city should get credit, supporters say, for the good that comes from its business development.

The city’s corporate community helps raise hundreds of thousands of dollars for community and school programs serving nearby cities, said longtime civic activist Donald Sachs, executive director of the Industry Manufacturer’s Council.

“It’s a matter of giving back. We are supporting all of those communities,” he said.

Mayor Perez, a key stadium backer, says his city is “the economic engine of the San Gabriel Valley. . . . So if we affect our neighbor, we give them jobs.

“And that’s why this city was formulated . . . a unique city, to provide jobs and not have a large residential base that [would] complain about factories running” around the clock, he said.

The size -- and independence -- of that residential base is open to question. Many estimates put the city’s population at about 800, a figure the mayor stands behind.

But Sachs, whose organization promotes the city, thinks the population is as much as 40% less, or about 500. By his count, there are 54 homes in the entire 12-square-mile city.

He suspects that residential pockets outside Industry’s meandering boundaries get included in census counts.

Election records are clearer. As of last month, the county registrar listed 91 potential voters in Industry.

About 30 appear to be part of the extended Perez clan or living in residences owned by a family investment firm, Larrache Land Co., The Times found.

Many of the remaining voters are city political officials or executives and their relatives, tenants in city-owned homes, residents of a city-owned nursing home, or employees at a large golf and conference center in the city. (The resort is operated by a company connected to a key developer behind the stadium project, billionaire Ed Roski Jr.)

Critics complain that normal government checks and balances are undermined by Industry’s small voter pool loaded with insiders. But given the population, voter participation rates are fairly typical, Perez counters.

“Not everyone wants to vote; can’t force them to,” he said.

The city owns about 20 of Industry’s homes. Among the tenants are a majority of the City Council and redevelopment agency board members, two planning commission members, the city manager and the city clerk. They pay $600 or $700 a month for single-family houses or town homes, some in a gated area near the golf courses in Industry Hills, records show.

Another council member, school security officer Roy Haber III, rents his home from the mayor’s Larrache Land, which owns about a dozen industrial and residential properties in town.

Close ties

Haber said he got the home years ago, “probably through knowing” the mayor. He estimated he pays “close to $1,000” monthly. “I never really compare prices elsewhere,” he said. “I guess it’s pretty reasonable.”

The mayor also helped him get on the City Council, he recalled.

“He had asked in the beginning. I was on the planning commission originally. Then he appointed me to the council.”

Larrache Land also has financial ties to Vice Mayor John P. Ferrero, who reported more than $100,000 in income last year from the company, records show.

The son of a past mayor with a family ranching business that was permitted to graze cattle on city land until several years ago, Ferrero said in a brief telephone conversation that the payment was for a property used for storage by Larrache.

Perez said he isn’t involved in the company’s property rental issues.

The mayor reported income last year of between $10,000 and $100,000 from Larrache Land. He also reported more than $100,000 in income (the highest category available) from Zerep (Perez spelled backward) Management Corp. That firm, of which the mayor listed himself as president, holds the multimillion-dollar city maintenance contract, records show, as well as stock in the family rubbish companies.

Perez disclosed additional income from Grand Central Recycling Co., which operates a trash transfer station in the city. The company received more than $10,000 in 2008 income from the city redevelopment agency, the mayor reported. Grand Central also entered into a land purchase and development agreement with the agency the year before the mayor took office, records show.

Perez said he never discusses family business matters with city officials. “My nephews basically run that operation,” he said, “and my brother.”

Council meetings typically begin with approvals of city payments, including hundreds of thousands of dollars to the mayor’s companies. And Perez routinely abstains from voting on them, records show.

Precautions taken

Deputy City Atty. Ralph Hanson said other precautions were taken when Perez became mayor to avoid potential self-dealing problems.

For example, state attorney general guidelines warn that if a member of a government panel has a financial interest in a contract, any extensions, rate changes or other amendments to the agreement can trigger potential ethics problems, even if the involved member abstains from the vote.

Five days before Perez was appointed mayor, the City Council changed the way it handled the Zerep maintenance contract. In the previous six years, it had amended the contract three times, partly for cost adjustments. This time council members approved a 24-year extension that included automatic cost-of-living rate increases. Based on billing histories, the action appeared to be worth tens of millions of dollars to the company. There have been no amendments in the eight years since the extension was approved, records show.

Hanson acknowledged that the action was intended to avert potential conflicts involving City Council decisions -- with Perez now serving as mayor -- on the Zerep contract. “There’s no coincidence there,” he said.

But, perhaps inadvertently, the effort served as a reminder of Industry’s close business and political relationships.

The council member who made the motion extending the contract -- and later seconded the motion to appoint Perez to the council -- worked for the mayor’s family management company, records and interviews show.

A Zerep carpenter, the late Earl Mayberry had routinely abstained from voting on matters involving the company. But he initiated the contract extension vote in May 2001 as part of a routine approval of several “consent calendar” items, meeting minutes show.

Hanson said he was unfamiliar with Mayberry’s voting record, but the contract extension vote was permissible.

“If you have someone who has a very minor connection to a business, like a carpenter, that’s not going to be a conflict of interest,” he said.

The mayor’s vote earlier this year to approve the stadium complex also was permissible, Perez and Hanson said, even though a city-approved study shows that the development would generate thousands of tons of commercial refuse each year -- trash that evidently would be picked up by the mayor’s company under the city franchise.

The stadium complex would “obviously” increase service demands and revenue for his family business, the mayor said. But he had no estimate of the possible increase and added that he relies on city lawyers “watching over us, doing everything by the letter of the law.”

Assuming the stadium is built, any financial benefits that might accrue to the mayor’s rubbish hauling interests are unclear, Hanson said, and he sees no potential conflicts.

The city had previous development plans for the stadium site, he noted. Those included a huge industrial park that studies show would have generated more solid waste than the stadium.

Using that comparison, Hanson suggested, the stadium’s effect on the mayor’s business interests might be viewed as “zero.”

In an interview, Perez expressed puzzlement over a reporter’s inquiries concerning his stadium vote and the refuse contract. The decision was not, he argued, anything particularly unusual for him or Industry.

“This is another development plan,” he said.

“We approve ‘em all day long.”

rich.connell@latimes.com

Times researcher Vicki Gallay contributed to this report.

BEGIN TEXT OF INFOBOX

City of Industry officials

Mayor David Perez

* President of Zerep Management Corp., which holds multimillion-dollar city maintenance contract.

* Part-owner through Zerep of City of Industry Disposal Inc. and Valley Vista Services Inc., which operate city’s exclusive commercial trash collection franchise, generating more than $12 million from city last year.

* Partner in Larrache Land Co., which owns about a dozen commercial and residential properties in town.

* Secretary and part owner of Grand Central Recycling Co., which operates trash transfer station in city, entered into development deal with city in 2000 and received more than $10,000 from redevelopment agency last year.

City Council

* John P. Ferrero, vice mayor: received more than $100,000 from Larrache Land Co. for storage property; rents city-owned home.

* Jeff Parriott: city redevelopment agency employee; rents city-owned home.

* Tim Spohn: rents city-owned home.

* Roy Haber III: rents home from mayor’s Larrache Land Co.

Urban Development Agency

* Ron Cipriani, chairman: rents city-owned home.

* Bert Spivey: rents city-owned home.

* Andria Welch: partner in real estate investments in city; rents city-owned home.

* Vince Perez: mayor’s nephew works for city contractor Zerep Management; rents city-owned home.

Planning Commission

* Manuel Perez: mayor’s brother and partner in Larrache Land Co., part owner of Zerep Management and rubbish companies.