Glendale Mayor Ara Najarian on Wednesday said the city was pursuing a lawsuit against a prominent affordable housing development company that allegedly bilked the city out of millions of dollars in inflated construction costs.
The developer, Advanced Development & Investment Inc., is under federal investigation for allegedly transferring millions of dollars to personal accounts and artificially spiking costs for projects across the state.
"This is significant and we are treating it as such," Najarian said. "We feel what they did was wrong…If need be, a judge and jury will confirm that what they did is wrong."
ADI officials could not be reached Wednesday.
Glendale's potential litigation was announced after a Times investigation found that ADI channeled tens of thousands of dollars in campaign contributions through its subcontractors to past and current Glendale City Council members who ultimately voted to allocate millions in redevelopment assistance to the company's housing projects.
They did so even after city housing officials raised concerns about the quality and rising costs of the most recent ADI project, Vassar City Lights, according to internal staff memos.
The council members contend they were unaware of the memos and that the contributions were tied to ADI subcontractors. A number of those subcontractors told The Times that they were pressured by the developer to contribute to certain politicians or risk losing work.
During the last 20 years, ADI has built more than 50 affordable-housing projects across the state, including in Los Angeles, Glendale, Anaheim, Fresno, Long Beach, Sacramento and San Diego.
Since 2005, the city has committed roughly $34 million to ADI for four Glendale projects through a combination of redevelopment dollars and federal housing grants.
In an effort to determine the scope of potentially inflated construction costs, the City Council on Tuesday is set to consider issuing legislative subpoenas for ADI records currently held by the court-appointed receiver of ADI, David Pasternak, said City Manager Jim Starbird.
"At this point, we frankly are continuing to rely on the receiver and the work that they are doing to generate the information," Starbird said.
In one court filing, Pasternak pointed to millions in alleged fraud on a single Glendale housing project, Vassar City Lights. Of the $24.7 million in construction costs reported by ADI, about $6.5 million was fraudulent, Pasternak alleged.
Al Hofmann, president of the Glendale Homeowner's Coordinating Council — an umbrella organization for the city's roughly 20 homeowners associations — said taxpayers would be expecting answers as to why such allegedly large scale fraud went undiscovered.
"I think all of our members would be extremely interested to hear more about it," Hofmann said.
Answers would also be demanded of the outside firms brought in to audit the ADI projects, Councilwoman Laura Friedman said — despite what the internal staff memos showed.
Friedman — who was not on the council when the Vassar project was approved — and other city officials have pointed to ADI's outside auditors and the city's consulting firm as apparently having failed to catch the alleged overbilling.
"We rely on these groups to help us make decisions and to vet the projects when they are finished. And there needs to be accountability," Friedman said. "The city of Glendale has been scammed of millions and millions of dollars. And the firms that were hired to make sure that didn't happen failed us."