Two executives at a Los Angeles-based real estate development company and two of their employees have been indicted on charges they defrauded government agencies of millions of dollars in funds for housing low-income families.
The 67-page federal grand jury indictment says Salim Karimi and three others at Advanced Development and Investment Inc. engaged in a conspiracy to fraudulently obtain more than $50 million in loan proceeds for affordable housing projects in Chinatown, Glendale and elsewhere.
As part of the scheme, Karimi and others submitted fraudulent invoices that “significantly overstated” the true costs of framing, plumbing, drywall and other construction work at affordable-housing projects built with taxpayer support, according to the federal grand jury indictment, which was filed in 2014 and unsealed this week.
Karimi, ADI’s onetime president and co-owner, was arrested Dec. 26 in Mumbai, India, as he was boarding a plane to Mexico, according to Indian police. He was later released on bail of 15,000 rupees, or around $225. In the U.S., he has been charged with felony counts of conspiracy, wire fraud, aggravated identity theft, tax evasion and making false statements to a federal financial institution.
Federal officials are seeking Karimi’s extradition. Atulchandra Kulkarni, chief of the Mumbai police crime branch, said police have filed an appeal to cancel Karimi’s bail so he can be turned over to the U.S.
Also facing federal charges are Ajit Mithaiwala, ADI’s founder and Karimi’s father-in-law; Ulhas Jain, ADI’s controller; and Mekala Ganapathy, who ran the company’s compliance department. Prosecutors believe they also are in India, said Thom Mrozek, spokesman for the U.S. attorney’s office in Los Angeles.
“We are continuing to look for the other three defendants with the intention of seeing them face the charges in Los Angeles,” he said.
Neither the four defendants nor their lawyers could be reached for comment by The Times.
ADI built 50 affordable-housing projects across California over nearly two decades. The conspiracy spanned from 2001 to 2010, according to the federal indictment. Among the company’s victims were the cities of Los Angeles and Glendale, as well as banks that provided construction loans, the document states.
ADI’s financial practices first became public in 2010 as part of divorce proceedings between Karimi and Jannki Mithaiwala, daughter of the company’s founder. A court-appointed receiver overseeing the company informed the divorce court that he had uncovered “potential fraud and criminal activity.”
An investigation by The Times found ADI subcontractors provided more than $400,000 in campaign contributions to politicians across the state, including at least $165,000 in Los Angeles. Four subcontractors told The Times they felt pressured to donate by ADI.
In Glendale’s 2009 City Council election, nearly one of every four dollars received by the top four candidates — more than $100,000 — came from ADI subcontractors, those subcontractors’ employees and the employees’ relatives, The Times found.
Glendale provided ADI more than $33 million to help build four affordable-housing projects. Officials there believe roughly half that amount was lost because of fraud.
“Hopefully they’ll be able to bring these folks into custody and look at their assets,” Glendale City Manager Scott Ochoa said. “Because whatever assets they’re sitting on, at least some of that should accrue back to Glendale.”
In Los Angeles, officials provided $29 million in subsidies for 15 apartment projects. After the federal probe into ADI was launched, ethics investigators concluded that ADI employees had engaged in “campaign money laundering” — reimbursing donors so that they could exceed the city’s limits on campaign contributions.