Glendale weighs affordable housing issues

CITY HALL — As federal officials begin to investigate alleged fraud surrounding Advanced Development & Investment Inc., city officials are grappling with what it means for the dozens of low-income families hoping to move into the affordable housing developer's latest project.

ADI — under federal investigation for allegations that the firm's top officials transferred millions to personal accounts and bilked cities out of millions in taxpayer dollars — has built four projects in Glendale and received nearly $34 million in city assistance.

Allegations have been levied in Los Angeles County Superior Court that similar fraud was committed in cities across the state.

As Glendale officials continue to grapple with the implications of the investigation, officials are also working to draft safeguards to prevent any future fraud.

"We need to come up with ways to make sure we can keep a better eye on developers, assuming the allegations are true," said City Councilwoman Laura Friedman, not yet elected when the four current projects were approved.

The fraud allegations stem from a report by David Pasternak, a receiver appointed by a Los Angeles County Superior Court judge as part of a divorce proceeding involving the company's former president, Salim Karimi, and Jannki Mithaiwala, the daughter of company founder Ajit Mithaiwala.

Vassar City Lights, the developer's most recent development, was originally scheduled to open to residents this month. But final work on that project was put on hold indefinitely during Pasternak's initial investigation — leaving it 95% complete.

Pasternak said last week he is working with affected agencies and investors to try to get construction back up and running on current projects, but there was no timeline as to when that would happen, leaving hopeful residents of the Vassar project in the dark.

A management firm was in the process of interviewing winners of the Vassar affordable housing lottery to determine eligibility. A list of residents had not yet been finalized.

City officials this week notified the potential residents, many of whom have current leases of their own, that they now don't know when Vassar will be ready for move-ins.

"A concern is that some of the candidate residents will need to extend leases and will have notification requirements that will be impacted by the obvious delay that will occur," City Manager Jim Starbird said. "We are being sensitive to the impact of this situation on prospective residents and will keep them updated as best we can."

City officials are conducting a survey of vetting practices put in place by other cities in an effort to safeguard against future fraud, Starbird said.

One option being considered is using developers that hire independent construction contractors — as opposed to ADI, which worked with its own general contracting firm, Pacific Housing Diversified.

"I think there's a little more independence and checks and balances when you've got a housing developer who does not have a construction arm," Starbird said.

Other issues being considered include conducting third-party confirmations to affirm invoices submitted to the city by developers. ADI allegedly submitted fraudulent invoices for materials and work with inflated costs.

Starbird has also acknowledged that, in hindsight, rapidly increasing project costs, combined with diminishing construction quality, should have served as a warning sign.

ADI's ability to repeatedly secure competitive state tax credits needed to get the projects built was a major factor in their getting approved, officials said.

Still, Friedman cited that other housing developers have also proved their ability to secure the tax credits and have built quality developments in Glendale.

"It's not the case that ADI had some kind of monopoly on building in Glendale," she said.

As the City Council moves forward with spending future Housing Authority funds, Friedman said she will be looking for developments that are high-quality, but economical — whether that means building new projects or buying and refurbishing existing units, a concept recently advocated by Mayor Ara Najarian.

"I just think we need to really find a way to keep a very close eye on anything that involves taxpayer money," she said. "It needs to be really scrutinized."

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