Struggling to pay contractors for a disputed $213,000 worth of construction on his condominium, former City Councilman John Drayman asked two prominent development figures for a $100,000 loan in late 2010, a debt he felt could be detrimental to his reelection campaign, according to recently unsealed grand jury testimony.
The account of the lunch meeting between development consultant Rodney Khan, developer Marc Nathanson and Drayman at the Hilton Glendale also indicates how far the former councilman — who has since been indicted on charges of embezzlement, forgery and filing false financial statements — was in the red before Montrose Harvest Market organizers began honing in on the fraud he allegedly committed for years.
Nathanson testified that he and Khan — who now serves on the Parks, Recreation & Community Services Commission — turned down Drayman's loan request that day because they both do business with the city, and the money would cause a conflict of interest.
But a few days after the meeting, Nathanson connected Drayman with a friend, John Moller, a gas station and rock quarry owner who lent the money in January 2011, according to the testimony. Although Drayman had been an ardent supporter of projects submitted by the developer — including Laemmle Theatres and a six-story apartment complex — Nathanson told jurors that the meeting was not set up as a favor.
According to the grand jury testimony, after getting a wire transfer from Moller, Drayman wrote a $100,000 check to National Fire Systems & Services, the contractor that worked on his condominium at 3841 Stancrest Drive in 2010 — the same project that got the councilman in trouble with the city for not pulling proper construction permits.
It wasn't until Drayman mentioned the construction to former City Manager Jim Starbird that city officials found out about the permit issue.
During a closed-door meeting in fall 2010, Starbird gave City Council members a court receiver's presentation that raised concerns that some on the council may have received illegal construction work from Advanced Development and Investment Inc., a Los Angeles developer that allegedly defrauded cities, including Glendale, of millions of dollars.
After the closed-door meeting, Drayman told Starbird that he had an ADI subcontractor renovating his condo, and that he believed he was being overbilled.
“As time went on, it became obvious to me that this whole situation was much more convoluted than a simple contractual issue between John and a contractor who coincidentally had also done work for ADI,” Starbird testified.
He also told the grand jury Drayman was one of ADI's biggest cheerleaders on the council.
Drayman has consistently denied that he knew ADI was involved in the revamp. However, National Fire's vice president, Sipan Arezoomanian, testified otherwise.
An ADI official connected Arezoomanian with two of the company's employees to help guide the work on Drayman's condo, he testified. At first, Drayman asked for new drywall, flooring and tiles to fix water damage. National Fire estimated the cost at $95,000 in March 2010. But that was before Drayman started tacking on amenities that roughly doubled the price tag, Arezoomanian testified.
As construction at the condo proceeded, Arezoomanian testified that he told an ADI accountant, Ulhas Jain, that he was worried about getting paid for all the work. Jain told him that the homeowner's insurance policy would cover the cost of the repair work, but that ADI would take care of whatever was left over.
Drayman paid ADI part of the bill — $3,000 or $5,000 a month to reach a sum of $47,000, Arezoomanian told the grand jury. But Drayman asked Arezoomanian not to deposit some of the checks because he needed cash in his bank account to secure a loan — an effort that failed due to his low credit score, a bank underwriter testified.
Once Drayman got $100,000 from Moller, he wrote a check to National Fire for the same amount.
Drayman has said he owed $117,000 for the work, but National Fire claimed in a lawsuit filed last year that the project cost $213,000.
After $30,000 worth of held checks bounced or were stopped, Arezoomanian turned to ADI, but representatives for the firm had all but disappeared amid the multiple lawsuits and federal fraud investigation that had cropped up in the meantime.
“He was just gone,” Arezoomanian told the jury, referring to Jain. “You couldn't find him anymore.”