LA WATCHDOG--San Francisco based Carmel Partners, a multibillion dollar private equity firm, has “agreed to pay $1.2 million to resolve a federal criminal investigation that focused on the Company’s relationship with former Los Angeles City Councilmember Jose Huizar, who voted to approve its 35-story project” located at 520 Mateo Avenue in the low rise Arts District, just west of the railyards and the Los Angeles River, at the entrance to the iconic 4th Street Bridge.
[See the U.S. Attorney’s January 7 press release regarding the Carmel Partners’ Non-Prosecution Agreement for more information.]
But $1.2 million is chump change for Carmel compared to the estimated $30 to $50 million increase in value that resulted from its questionable relationship with Huizar, the former Los Angeles City Councilman who is facing a 34-count indictment that alleges that he ran a “criminal enterprise” which “gave favorable treatment to developers who financed and facilitated bribes.”
This raises the following questions:
- Will the most corrupt City Council in the history of the City of Los Angeles have the moxie to conduct an open and transparent investigation into the up zoning of Carmel’s Mateo Avenue development that resulted in a massive windfall for Carmel?
- Will the City rescind any or all of the development rights that were approved as a result of Carmel’s relationship with the corrupt Huizar and its campaign contributions (bribes?) of $75,000?
- Or will the City demand a substantial portion of the increase in value?
Carmel also agreed to a “policy that will prohibit the Company and its funds from making a contribution to any state or local PAC or to a state or local political candidate; a prohibition on raising or bundling state and local campaign contributions; tracking and logging interactions between Company staff and government officials; and increasing policies and training around gifts, contributions, and interactions with public officials.”
At the same time that the City Council is investigating the economics and politics of the Carmel’s 35 story mixed use luxury development, it should also review the Carmel’s Corporate Compliance Program (see below) that was approved by the U.S. Attorney’s Office and that was part of the Non- Prosecution Agreement with the thought of applying it to all real estate developers (and other contractors) who are working with the City. Of course, such an agreement will not be very popular with the members of the most corrupt City Council in the history of the City of Los Angeles who rely on generous campaign contributions (considered by many to be bribes) from real estate developers.
It has been suggested that these restrictions on campaign contributions should also apply to the City’s public sector unions who have managed to extract budget busting labor agreements and other concessions from the Mayor and City Council. Again, this will not be very popular with the members of the City Council.
The City Council has lost our trust, confidence, and respect because of the corruption exposed by the U.S. Attorney’s Office, its budget busting giveaways to the City’s public sector unions, and its failure to clean up its act. Investigating Carmel Partners’ Mateo Avenue luxury development will be a good start in restoring Angelenos faith in City Hall.
CORPORATE COMPLIANCE PROGRAM
The Company agrees to revise and address any deficiencies in its compliance code, policies, and procedures regarding compliance with applicable anti-bribery/anti-corruption laws. Indeed, the Company already has initiated substantial additions and changes to its compliance program, policies, and procedures. However, when necessary and appropriate, the Company agrees to adopt new, or to modify its existing, compliance code, policies, and procedures in order to ensure that it maintains a rigorous anti-bribery/anti-corruption compliance code, and policies and procedures designed to detect and deter violations of anti-bribery/anti-corruption laws. At a minimum, this should include, but not be limited to, the following elements to the extent they are not already part of the Company’s existing compliance code, policies, and procedures:
- The Company will ensure that its executives, directors, and senior management provide strong, explicit, and visible support and commitment to its corporate policy against violations of the anti-bribery/anti-corruption laws and its compliance code.
Policies and Procedures
- The Company will develop, memorialize, and promulgate a clearly articulated and visible corporate policy against violations of all anti-bribery/anti-corruption laws.
- The Company will develop and promulgate compliance policies and procedures designed to reduce the prospect of violations of the anti-bribery/anti-corruption laws and the Company’s compliance code, and the Company will take appropriate measures to encourage and support compliance by personnel at all levels and locations of the Company. These anti-bribery/anticorruption policies and procedures shall apply to all executives, directors, officers, and employees regardless of location and, when necessary and appropriate, outside parties acting on behalf of the Company, including but not limited to, agents and intermediaries, consultants, representatives, distributors, teaming partners, contractors and suppliers, consortia, and joint venture partners (collectively, “agents and business partners”). It shall also apply to other current and future affiliates of the Company. The Company shall notify all employees that compliance with the policies and procedures is the duty of individuals at all levels of the Company. Such policies and procedures shall address:
(b)hospitality, entertainment, and expenses;
(c) customer travel;
(d) political contributions;
(e) charitable donations and sponsorships;
(f) facilitation payments; and
(g) solicitation and extortion.
Periodic Risk-Based Review
- The Company shall review its anti-bribery/anti-corruption compliance policies and procedures no less than annually and update them as appropriate to ensure their continued effectiveness, taking into account relevant developments in the field and evolving industry standards.
Proper Oversight and Independence
- The Company will designate an officer or employee to serve as the Company’s Chief Compliance Officer for the implementation and oversight of the Company’s anti-bribery/anticorruption compliance code, policies, and procedures, including for guidance and advice about compliance with such code, policies, and procedures. The Chief Compliance Officer shall have direct reporting obligations to independent monitoring bodies, and shall have an adequate level of autonomy from management as well as sufficient resources and authority to maintain such autonomy.
Training and Guidance
- The Company will implement mechanisms designed to ensure that its anti-bribery/anticorruption compliance code, policies, and procedures are effectively communicated to all executives, directors, officers, employees, and, when necessary and appropriate, agents and business partners. These mechanisms shall include periodic training for the following employees: (a) all executives, directors, and officers; (b) all employees in positions of leadership or trust; (c) all employees in positions that require such training, such as corporate, community, government and congressional affairs, internal audit, sales, real estate, legal, compliance, and finance; (d) employees of agents and business partners in the above positions, when necessary and appropriate. The Company will also require that all people in the above-described categories annually certify that they have received the necessary training and have complied with the law and the Company’s anti-bribery/anti-corruption compliance code, policies, and procedures.
Internal Reporting and Investigation
- The Company will maintain, or when necessary establish, an effective system for internal reporting and, when possible, confidential reporting by, executives, directors, officers, employees, and, when appropriate, agents and business partners concerning violations of the anti-bribery/anticorruption laws or the Company’s anti-bribery/anti-corruption compliance code, policies, and procedures. The Company will maintain, or when necessary establish, mechanisms to prevent any personnel action from being taken against any individual making such a report.
- The Company will maintain, or when necessary establish, an effective and reliable process with sufficient resources for responding to, investigating, and documenting allegations of violations of the anti-bribery/anti-corruption laws or the Company’s anti-bribery/anti-corruption compliance code, policies, and procedures.
Enforcement and Discipline
- The Company will implement mechanisms designed to effectively enforce its compliance code, policies, and procedures, including appropriately incentivizing compliance, disciplining violations, and re-assessing its compliance code, policies, and procedures to identify modifications necessary to ensure that the overall anti-bribery/anti-corruption compliance program is effective. Such procedures should be applied consistently and fairly, regardless of the position held by, or perceived importance of, the executive, director, officer, or employee. The Company shall implement procedures to ensure that, when misconduct is discovered, reasonable steps are taken to remedy the harm resulting from such misconduct and to ensure that appropriate steps are taken to prevent further similar misconduct.
- The Company will institute risk-based due diligence and compliance requirements pertaining to the retention and oversight of agents and business partners, including:
(a) conducting properly documented due diligence pertaining to the hiring, and appropriate and regular oversight of, agents and business partners;
(b) informing agents and business partners of the Company’s commitment to abiding by anti-bribery/anti-corruption laws, and of the Company’s anti-bribery/anticorruption compliance code, policies, and procedures; and
(c) seeking a reciprocal commitment from agents and business partners.
- When necessary and appropriate, the Company will include standard provisions in agreements, contracts, and renewals thereof with all agents and business partners that are reasonably calculated to prevent violations of the anti-corruption laws, which may, depending upon the circumstances, include: (a) representations and undertakings relating to compliance with the anti-bribery/anti-corruption laws; (b) rights to conduct audits of the books and records of the agent or business partner to ensure compliance with the foregoing; and (c) rights to terminate an agent or business partner as a result of any breach of the anti-bribery/anti-corruption laws, the Company’s compliance code, policies, or procedures, or the representations and undertakings related to such matters.
Mergers and Acquisitions
- The Company will develop and implement policies and procedures for mergers and acquisitions requiring that the Company conduct appropriate risk-based due diligence on potential new business entities, including appropriate anti-bribery/anti-corruption due diligence by legal, accounting, and compliance personnel. If the Company discovers any corrupt benefits of any kind or inadequate compliance processes as part of its due diligence of newly acquired entities or entities merged with the Company, it shall report such conduct to the United States Attorney’s Office for the Central District of California.
- The Company will ensure that the Company’s compliance code, policies, and procedures regarding the anti-bribery/anti-corruption laws apply as quickly as practicable to newly acquired businesses or entities merged with the Company and will promptly train the executives, directors, officers, employees, agents, and business partners consistent with Paragraph 6.
(Jack Humphreville writes LA Watchdog for CityWatch. He is the President of the DWP Advocacy Committee and is the Budget and DWP representative for the Greater Wilshire Neighborhood Council. He is a Neighborhood Council Budget Advocate. He can be reached at: [email protected].)