CommentsCORRUPTION REPORT-Each week CityWatch has more articles that could be categorized as “Organized Crime is Ruining Las Angeles.” The technical name of the vehicle which the Mayor and City Council use in their destruction of Los Angeles is called “Accounting Control Fraud.” The biggest problem with Accounting Control Fraud is that the name puts everyone except certified public accountants to sleep. An alternate name is Criminal Accounting.
Many readers will remember Enron whose wunderkind, CEO Ken Lay, was the toast of Dallas until he made toast of Enron through massive frauds. Los Angeles has its own wunderkind in Eric Garcetti. Garcetti’s mastery of Criminal Accounting is prodigious.
The characteristic feature of Criminal Accounting is that the company or the city itself is the target of the fraud which is orchestrated by the executives. In a city, the insiders are the mayor and city council. Rather than using a Ponzi scheme to dupe individuals out of their money, the mayor and city council steal money from their own city and divert tax dollars to their buddies.
A city like Los Angeles is no different from a company like Enron; it can be bilked into ruin by transferring the city’s wealth to a handful of thieves.
Organized Crime in the DTLA Hotel Market --In 2013, the City commissioned PKR Consulting to study how to divert city revenues to a few friends of the Mayor and City Council. PKR Consulting (which is now CBRE Group) specializes in helping the hotel industry become more profitable. Habitually, the City retains consultants which cater to the desires of a particular industry in order to obtain “independent” studies identifying which private person(s) should receive huge gifts of public money. Here’s what the lobbyists for the hotel industry found.
Hotels were doing exceedingly well in Los Angeles with the DTLA hotels showing an 80% occupancy rate. In an economy which is not dominated by organized crime, one expects ample investment money to flow into that portion of the economy which is doing very well. Since the DTLA hotels were doing fantastically well, no subsidies were necessary. Yet, PKR Consulting found that the City should give new hotels hundreds of millions of dollars in tax rebates. We hasten to add that providing a silly opinion is not a criminal act.
When a city solicits foolishness and then relies on the silliness in order to divert tax dollars into the pockets of its cronies, the city itself is the criminal enterprise.
The Legal Function of a City--People form governments in order to provide public services. I cannot construct the streets, nor can I build the water system, nor can I maintain the parks. The function of city government is not to make the friends of the mayor and city councilmembers wealthier by diverting tax dollars into their pockets. Yet, that has been happening for over a decade in Los Angeles and it is the reason that Los Angeles is rapidly becoming a “failed city.”
Readers of CityWatch will remember the criminal appraisal fraud with the CRA project at 1601 N. Vine, i.e. Cesspool on Vine. In that case, the City obtained an appraisal of the property for $4 million, but the developer obtained an appraisal in the same month for $5.4 million. In recommending that the City pay his buddy an extra $1.4 million for the property, Garcetti withheld from the City Council the lower $4 million appraisal. Thus, nobody questioned the $5.4 million purchase price.
Later, Garcetti arranged for the City to sell back the same piece of property to the developer for only $835,000. In addition to the $4,564,000 which the developer made on these exchanges, he did not have to make any mortgage payments on the property for the time during which the City “owned” 1601 N. Vine. Now that’s organized crime, LA style.
Organized Crime Favors Its Own while Harming Everyone Else--When a hotel gets to keep between 40 to 100 percent of all the hotel taxes for 30 or 40 years, it has a great advantage over its competitors. Just look at a Trivago.com advertisement. Hotel rooms are booked on the basis of price and any hotel that doesn’t have to pay taxes has a competitive advantage over hotels that must pay the hotel tax.
Is there anyone so naive as to think that these hundreds of millions of dollars in gifts by the mayor and city council do not result in money flowing into the political campaigns of the mayor and councilmembers?
The economic malarkey fed to the City by the mayor and city council is astounding. The public thinks that it benefits them to give their tax dollars to billionaires because the billionaires’ businesses are doing fantastically well. The hotels have over 80% occupancy rate, and therefore, we need to give them hundreds of millions of tax dollars!
With criminal accounting, the crooks devise a bunch of false and misleading studies to deceive people into thinking that the city is making sound investments when in reality the city treasury is being looted. The foregoing has illustrated a couple penny-ante scams showing City Hall’s use of Criminal Accounting. But it gets worse.
The Sophisticated Organized Crime Syndicate that Rules LA --When Judge Goodman ruled in January 2014 that Garcetti’s Hollywood’s Community Plan 2012 Update had knowingly used fatally flawed data, Judge Goodman did not go farther to describe how the entire criminal enterprise operated. Judge Goodman stopped short because the lawsuit was a civil lawsuit, and thus, he had no power to advance into criminal matters. Nonetheless, his ruling did reveal the widespread criminality.
When one intentionally makes materially false representations of fact on which the deceiver expects other people to rely, that is criminal fraud.
The Subways are an Example of Criminal Fraud--But let’s look a little deeper into how this massive fraud works. The history of Metro subways shows how a multi-million dollar criminal scam becomes a multi-billion dollar criminal enterprise. Subways and trolleys are not inherently criminal, but in the hands of sophisticated fraudsters, any public agency can become a criminal enterprise.
In the CityWatch article on July 28, 2016, “Expo Line Expansion Fails to Make Up for LA Transit Loss,” by Wendell Cox, we see how Organized Crime has manipulated Metro to divert money away from bus services (which actually benefit Angelenos) toward subways and fixed-rail transit which benefit developers. Mr. Cox’s article links to an extraordinarily important analysis by Thomas Rubin showing how Metro’s decisions have devastated bus service. When one understands how organized crime operates, one can see the rationale behind many of Metro’s current decisions.
Here’s the essence of the complex criminal scam to divert tax dollars away from public services in order to benefit the friends of Garcetti and the City Council. Once a subway or fixed rail system has a station at a particular development project, that mass transit will never deviate one inch from that location to service another project. The purpose of LA’s subways and trolleys is not to provide better public transportation but to maximize the value of certain private projects over other real estate projects.
When there is a subway station in the basement of a high rise, that project has a huge competitive advantage over all projects which do not have their own subway station.
We are not saying that the mayor’s office and the city council are stupid; we are saying that they constitute a sophisticated Organized Crime Syndicate. LA is not dominated by criminals from outside City Hall. Los Angeles City Hall itself is The Crime Syndicate. The city operates in violation of Penal Code, § 86 which criminalizes all Vote Trading Agreements at any city council. Thus, by definition, Los Angeles City Council is an organized criminal enterprise. (The RICO statute does not apply to city councils.)
The fact that law enforcement turns a blind eye does not mean that Los Angeles City Hall has not morphed into an Organized Crime Syndicate. The Duck Test reveals its criminality. Are the mayor and the city council looting the public treasury to benefit their friends? Yes.
The Lynchpin of the Criminal Enterprise--City Hall’s criminal enterprise operates through a Vote Trading Agreement where each councilmember is required to support each other’s individual criminal scam. Although Penal Code § 86 criminalizes Vote Trading, law enforcement and judges all turn their blind eyes, while Organized Crime grows stronger each day.
(Richard Lee Abrams is a Los Angeles attorney. He can be reached at: [email protected]. Abrams views are his own and do not necessarily reflect the views of CityWatch.) Edited for CityWatch by Linda Abrams.
Vote Trading is a Crime and It’s Ruining Los Angeles
