After $38-million deal collapsed, L.A. County secretly launched public corruption probe of retired CEO

The Los Angeles County Board of Supervisors secretly launched a public corruption investigation of its former Chief Executive William T Fujioka shortly after his retirement two years ago, examining his role in real estate dealings, a multimillion-dollar emergency communications project and other county business, according to a document obtained by The Times and officials familiar with the probe.

County officials have refused to discuss the details of the investigation, or specify how much the probe cost. They hired an outside consultant to do the work, but shielded the contract, billings and a report behind assertions that those documents are protected by attorney-client privilege.

At the request of the board, the county’s consultant — the downtown law firm Paul Hastings LLP — requested a meeting with the district attorney’s Public Integrity Division to spark a criminal probe, according to a letter obtained by The Times under the state’s Public Records Act. The district attorney “concluded there was no basis for a criminal investigation,” a spokeswoman said.

Fujioka denied any wrongdoing, but declined to respond to the details of the investigation. He said he was “glad the DA found no merit to these allegations” and said the probe was among a string of political attacks against him orchestrated by Supervisor Mark Ridley-Thomas. Other examples included the ouster of high-ranking executives viewed as too close to him, Fujioka said.

Ridley-Thomas declined to discuss the investigation, but said in a statement: “The Board of Supervisors took necessary action to maintain accountability and transparency as elected officials serving the residents of Los Angeles County. No employee —department head or otherwise — is above scrutiny. It was simply the right thing for the Board to do.”

Other supervisors declined to respond or deferred to county lawyers. In a statement emailed to The Times, County Counsel Mary Wickham said the investigation was necessary “based on the information that was made known to the board.” She did not disclose what that information was.

The county investigation by Paul Hastings was launched in late 2014 after the collapse of a $38-million deal to purchase a building in Monterey Park known as the Saturn Property. The county needed to move employees out of dilapidated buildings in Koreatown, and Fujioka had proposed buying the property as a solution.

But Fujioka’s handling of the transaction raised red flags, according to the letter by Paul Hastings attorney Thomas O’Brien. Sources familiar with the probe said Ridley-Thomas and other supervisors were particularly alarmed when Fujioka waived the vetting period in which the county could back out of the deal and obtain a deposit refund, contradicting the board’s direction.

The county counsel’s office rescinded that action and restored the “due diligence” period. Still, Ridley-Thomas openly expressed deep suspicions about the deal, and it was canceled with a motion he introduced at the Dec. 9, 2014, board meeting.

The cancellation came just days after Fujioka retired and two new supervisors took their seats, forming a new board majority with Ridley-Thomas.

Under the canceled deal, the county would have paid $38.4 million for the property. A memo from Fujioka to the supervisors called it an “exclusive opportunity” and said “a building of this size, quality, and at this price, is not often available.”

Eight months later, the property sold for $25.3 million, public records show.

The team from Paul Hastings was brought in to investigate “allegations of the potential misuse of public funds, self-dealing, and/or conflicts of interest” surrounding the Saturn Property deal, the firm’s letter to the district attorney said. The probe was soon expanded to include other county business, including “what appear to be improprieties and/or potential unlawful conduct perpetrated by, or in connection with the former Chief Executive Officer of the County, William T. Fujioka, with respect to several capital projects involving millions of taxpayer funds.”

The letter doesn’t present specific evidence of wrongdoing by Fujioka. The firm said it reviewed nearly 8,500 documents and conducted more than a dozen interviews. But it also said the firm was hamstrung because it didn’t have the power to compel Fujioka’s testimony or the production of records that could show whether he or a relative “might have had a pecuniary interest in this or other transactions,” the letter stated.

The Board of Supervisors requested the firm to refer the matter to the district attorney’s office for “further investigation,” it said.

The letter does, however, raise questions about Fujioka’s management. Fujioka “appeared to have radically underestimated tenant improvements” at the Saturn Property by as much as $23 million, and he mischaracterized the condition of the building, despite evidence to the contrary, the memo stated. Also, Fujioka’s chief deputy, Brence Culp, told investigators that Fujioka frequently “finessed transactions,” and that “she (and potentially others) turned a blind eye toward Mr. Fujioka’s ‘finessing’ and lack of candor with the Board,” it said. Culp could not be reached for comment.

The supervisors’ secretive handling of the investigation has also raised questions about whether supervisors violated open government laws. A week after the deal was canceled, Ridley-Thomas introduced another motion to hire a consultant for a review of real estate “procedures and practices” and of recent transactions, including the canceled purchase of the Saturn Property.

His motion mentioned nothing about an investigation into self-dealing or conflicts of interest.

The motion wasn’t on the board meeting agenda and, as such, violated the advance public notice requirements of the government transparency Ralph M. Brown Act, said Kelly Aviles, an attorney with the open government advocacy group Californians Aware.

One source said the board then met twice in closed session last year to discuss the findings of the probe and sign off on expanding the investigation. If true, those discussions and subsequent action may have also violated the Brown Act because they occurred behind closed doors, Aviles said, who represents The Times in other public access cases.

Although there are exceptions that allow supervisors to have closed meetings — including performance evaluations of employees, the price and terms of real estate deals and threats of litigation — private discussions about a corruption probe of Fujioka goes beyond these exceptions, Aviles said.

Paul Hastings has been paid more than $430,000 from the county since late 2014, when the investigation into Fujioka began. County lawyers would not specify what the payments to the firm were for, or whether the firm had more than one contract with the county at the time.

In addition to O’Brien, a former U.S. attorney, the law firm assigned at least one other lawyer and one former FBI agent to look into Fujioka’s work, according to officials who were contacted as part of the investigation. Online biographies reveal that they are experts in corporate malfeasance and anti-corruption laws.

Pat Mallon, the former executive director of the Los Angeles Regional Interoperational Communications System, known as LA-RICS, said his interview with the group was short and focused primarily on Fujioka’s involvement in the Saturn Property deal and LA-RICS. He said it was clear it was looking for wrongdoing.

Mallon said he was surprised by the questions because Fujioka’s involvement in the LA-RICS project was limited. The tone of the questioning struck him as suspicious, as if “somebody’s out to get [Fujioka],” he said.

He said the questions were “from way out of left field.”

The letter also said the group asked about a memo written by Fujioka and approved by then-County Counsel Mark Saladino that allowed Supervisor Don Knabe to cash out more than $100,000 in accrued vacation time, despite the fact that Knabe was elected in 1996 and county elected officials could only enjoy that benefit if they had been elected or appointed by supervisors before 1994. The memo stated that, because Knabe was employed by the county in another capacity before he was elected, he was eligible for the benefit.

The memo was politically sensitive. Another legal analysis provided seven months later countered the memo’s conclusion and said Knabe was not entitled to the payout. Days later, Saladino stepped down from the county counsel’s office. Knabe, who will leave the board in December, will not receive the money.

Its leak to The Times in July also sheds light on the apparent friction that existed between Fujioka and Ridley-Thomas. When the memo became public, Fujioka told The Times that Saladino was ousted in an act of “gross retaliation on the part of Ridley-Thomas.”

In his wrongful termination lawsuit against the county, Saladino alleges that, among other reasons, he was ousted because Ridley-Thomas viewed him as too close to Fujioka, and Fujioka and Ridley-Thomas had been “feuding for several years.”

Knabe’s office declined comment. O’Brien also didn’t return calls and an email seeking comment.

[email protected]

Twitter: @adamelmahrek

ALSO

A $72-million apartment project. Top politicians. Unlikely donors. Who wrote the checks to elected officials weighing approval?

Jerry Brown touted his pension reforms as a game-changer. But they’ve done little to rein in costs

Car-crazy Los Angeles might have a few things to teach the smug Bay Area about mass transit