One mechanism for receiving money is a California loophole known as “behested payments.” This allows politicians to establish nonprofits, and then solicit money for those nonprofits from businesses who want something from their office. Few in California politics have been more effective at doing this than Eric Garcetti. The contributions are often large—much larger than campaign contributions—and they are mostly unregulated. Observers note the irony that Garcetti excels at collecting large sums given that he is “a longtime critic of big money in local politics.”35
Between 2009 and 2017, Garcetti took in $31.9 million in such payments from “individuals, businesses, and foundations, some of which have won sizable contracts and crucial approvals from the city in recent years.” The bulk of those behested payments were directed to the Mayor’s Fund, which fused together city government and his own political machine.36
To get a sense of the scale of Garcetti’s money stream, that was twice what California governor Jerry Brown raised in behested payments during the same period, and more than forty times what the then lieutenant governor, Gavin Newsom, did. Behested payments provide “an ideal opportunity for the very wealthy and the lobbyist to buy access to lawmakers,” said Craig Holman, with the group Public Citizen.37
Garcetti’s use of behested payments is ironic given that back in 2011 he pushed for an initiative that was supposed to reduce the flow of big money. Charter Amendment H barred campaign contributions from those bidding on city contracts larger than $100,000. “Special interests are always trying to buy influence at City Hall,” he said at the time. “Charter Amendment H will help stop them.” But what was not included in that ban was behested payments. And while campaign contributions were capped at $1,400 for the Los Angeles mayor’s race, behested payments have no restrictions. Politicians are required to disclose behested payments only if they are more than $5,000 a year per donor.38
Consider the case of AT&T. The telecom giant was a $30 million contractor with the city of Los Angeles, so it could not make campaign contributions. But Garcetti’s fund collected three payments totaling $105,000 from the company over a six-month period. Likewise, in 2015, Verizon received a contract worth up to $15 million from the city. Again, they were not allowed to make a campaign contribution. But a little more than a month after they received approval for that contract, they donated $100,000 to Garcetti’s fund.39
“If there’s anyone that’s paying attention, you realize that the company doesn’t have to give the money to the legislator directly,” notes broadband industry analyst Craig Settles. “You just basically funnel it into different activities where the elected official can get a great photo op and then, boom, there you go.”40
Less well-known companies got into the game, too. An LA landscaping company called Turf Terminators got behind Garcetti. They cashed in more than $23 million in rebates. In April, thirteen contributions were made to Garcetti’s campaign and his nonprofit totaling $25,650. Just a month later, Garcetti mentioned the company in his 2015 State of the City address. He even pointed out the company’s twenty-nine-year-old former CEO in the audience.41
The company, which converts lawns to less water-intensive landscaping, is a niche but lucrative business. Homeowners and the company receive rebates from the local utility or the water district. After Garcetti mentioned them in the State of the City address, they saw a business boom. As the local CBS affiliate put it, Turf Terminators “would go on to take in millions of dollars in ratepayer rebates.”42
“Limits on the amount that a donor can give directly to a candidate are in place for a reason, and that’s to limit corruption,” says Brendan Fischer, an attorney with the Campaign Legal Center in Washington, D.C. “By a donor being allowed to support a public official above and beyond the legal contribution limits undermines the law’s anti-corruption purpose.” The reason is that the behested gifts are actually solicited by the politician. As Columbia law professor Richard Briffault notes, “A true gift may come out of the blue, unasked-for, and may not even be something the covered person wants. But a behested gift is one that the public servant has actually asked for. So the likelihood of actual gratitude is much higher.”43
The Mayor’s Fund often appears to sit on cash rather than passing it out to charities. The nonprofit only spent about 40 percent of the money donated during the first two full years.44
“People who have business pending in the city of Los Angeles shouldn’t be making payments at the behest of the mayor,” says Bob Stern, a former general counsel of the California Fair Political Practices Commission.45
At one point during his 2013 mayoral campaign, Garcetti made a public declaration that he would not accept campaign contributions from Walmart on the grounds that they paid their workers low wages. But the following year, he collected a $100,000 check from Walmart for the Mayor’s Fund—at his behest.46
The flow of money from those who got approval for projects was staggering. Developer Samuel Leung was seeking to clear a real estate project near the Port of Los Angeles. He wanted to construct a residential development in an industrial area of the city known as Harbor City. Leung was accused of then using “straw donors” to funnel hundreds of thousands of dollars to local politicians, including Garcetti. On the same day in February 2015, there were multiple checks written in what appeared to be the same handwriting from Leung’s handymen, a gardener, and a chef for a hotel run by his company. Later, when asked about the contributions, these individuals either denied ever making them or said that they did not remember giving. Leung wanted to build apartments in an area zoned industrial. Residential properties, of course, offer much larger profit margins than industrial real estate. The city’s planning commission had rejected the proposal in March 2014.47 Janice Hahn, who was a U.S. representative at the time, received more than $200,000 in straw or real donations from those connected to Leung. Indeed, in 2013 Leung coughed up $60,000 for a committee seeking to elect Garcetti as mayor. The organization, dubbed Committee for a Safer Los Angeles, was an independent expenditure committee run for his benefit. Garcetti employed a rarely used mayoral prerogative that reduced the number of city council members needed to approve the project. That did the trick; the project was approved.48
Hahn later became a Los Angeles County supervisor. In December 2016, not long after the news broke of the payments from Leung, Hahn hired the mayor’s sister, Dana Garcetti-Boldt, as a policy advisor.49 After Garcetti’s sister joined her staff, legal problems continued to follow Hahn. An aide for Hahn was convicted on bribery charges in an unrelated case in March 2018.50
As we will see, Dana Garcetti-Boldt’s husband would also become enmeshed in controversial projects at the center of an FBI probe.
Leung has been indicted on bribery and money-laundering charges related to this case. He has denied the charges.51
The FBI launched investigations related to other real estate development projects approved in Los Angeles. These involved several Chinese-controlled companies. In 2018, the FBI issued a search warrant as part of a federal corruption probe into potential crimes involving Los Angeles City Council member Jose Huizar. The probe focused on high-rise development projects in downtown Los Angeles funded by Chinese investment companies. The warrant specifically named the Shenzhen New World Group, a Chinese real estate firm. Shenzhen is looking to build the tallest building in Los Angeles on the site of the Grand Hotel. The warrant also named Greenland USA, another Chinese firm, and sought email communications from Raymond Chan, an LA city official who served as Garcetti’s deputy mayor for economic development. The FBI executed a warrant asking Google for all communications and data connected to Chan’s Gmail account. The mayor named him interim head of the LA Department of Building and Safety in 2013, and the permanent director the following year. He was then appointed Garcetti’s deputy mayor, lasting a year at that post. The warrant noted that it was seeking information on “other foreign investors not yet identified.” The FBI also raided council member Jose Huizar’s
house and office to look for evidence of money laundering, bribery, conspiracy, extortion, and kickbacks, among other possible crimes. Huizar, his family, and his staffers were included in the search warrant.52 Another council member, Curren Price, was also named in the FBI investigation. Joel Jacinto, a Garcetti appointee who sat on the Board of Public Works, also resigned because of the investigation.53 (No charges had been filed against any of the politicians being investigated as of the date this book was sent to press.)
As the New York Times put it, the “warrant described a sprawling web of possible corruption.” Local observers saw the scandal as reminiscent of the 1974 movie Chinatown, about shady real estate deals.54
A citizens group called Coalition to Preserve LA sent a fifty-four-page complaint to the LA County Civil grand jury requesting an investigation into corruption involving Garcetti and developers. The group complained that Garcetti had closed-door meetings with developers who were putting money into the Mayor’s Fund.55
City Councilman David Ryu tried to ban some contributions from developers, but his reforms were thwarted by the city council’s decision to delay the vote.56
The Shenzhen New World Group purchased the Los Angeles Marriott Downtown and the Sheraton Universal Hotel for an estimated $150 million in 2010 and 2011, respectively.57 Oceanwide Holdings, another Chinese firm, was developing Oceanwide Plaza, a housing and retail project near the Staples Center, where the Los Angeles Lakers play. The billion-dollar, three-tower complex high-rise would feature 504 condominiums, retail space, and a five-star hotel.58 Zinner Consultants, an environmental firm that just happens to employ Garcetti’s brother-in-law, Glenn Boldt, as an executive, listed the Park Hyatt, which is part of Oceanwide Plaza, as a project on which they consult.59
The aforementioned Greenland USA was approved for the Metropolis development. The four-tower complex was another $1 billion project. Again, Garcetti’s brother-in-law’s firm was retained as a consultant on the project.60
Projects linked to Garcetti’s brother-in-law seem to do well in city hall. When the developers sought to redevelop the Century Plaza Hotel, Garcetti not only approved of the project, he also helped arrange international funding for the redevelopment.61 Zinner Consultants was again hired as mitigation consultants for the project.62
Garcetti’s ties to developers go even deeper. The Zolla family is a major developer of real estate in Los Angeles. Garcetti co-owns with the Zolla family a small boutique hotel called the Inn at Playa del Rey.63 The Zollas also owned several properties on Manchester Avenue, located near the site of a redevelopment project along Los Angeles International Airport’s northern rim, something called the LAX Northside Plan Update. The Inn at Playa del Rey is also not far from the project site. Garcetti has championed the project.64
Developer Rick Caruso donated $125,000 to Garcetti’s nonprofit. Caruso wanted to develop a project that was too tall given zoning restrictions. A year later, his development project—with only slight modifications—got the necessary approvals to proceed.65
Garcetti’s apparent willingness to look the other way when it comes to city corruption involving his political allies includes the Los Angeles Fire Department (LAFD). In late 2015, LAFD officials found that Inspector Glenn Martinez had claimed hundreds of hours of overtime for his inspection work. Internal investigators at the LAFD looked into his claims and discovered that no one had actually seen him where he had professed to work. For example, he claimed to have put in six and a half hours of inspection time at Our Lady Help of Christians School. But he was “not seen by anyone” on site. In another case, he claimed to have spent four hours inspecting two buildings at Occidental College. The problem: at the time, the campus was shut down for winter break. And again “nobody” saw him on the premises.66
Now, this might seem like just another case of government employees milking the system. But there is more to the story. Deputy fire chief John Vidovich investigated this and other cases of overbilling and brought the matter to the attention of his boss, LAFD chief Ralph Terrazas. Terrazas, Mayor Garcetti, and the mayor’s chief of staff, Ana Guerrero, sat on the reports for nearly a year.67
Then Garcetti reassigned Vidovich. That reassignment “coincided with the donation of $350,000 to his re-election campaign, and those of his City Council successors, by the firefighters’ union.”68
Vidovich sued the city in January 2017, alleging that Mayor Garcetti and his aides, with the help of the fire chief, pushed him out of his office at the bidding of the firefighters’ union. In his case, he claimed that he was pushed out because he exposed “illegal and fraudulent acts” by inspectors, particularly some who were padding their pockets by making implausible overtime claims. According to court documents, fire chief Terrazas told Vidovich that “the mayor’s office has me over a barrel” and had to push him out. When asked who in the mayor’s office pushed him, Terrazas reportedly said, “the mayor.” Garcetti and aides denied the allegation.69 But the city ended up settling with Vidovich and reportedly paid him $800,000 to make the case go away.70
Eric Garcetti has been at the center of Los Angeles political power since 2001. When Garcetti goes to his office at City Hall, on the south side of the building there is a quote from Cicero: “He that violates his oath profanes the divinity of faith itself.” On the north side there is an etched quote from the nineteenth-century poet James Russell Lowell: “The highest of all sciences and services—the government.”71
While during his tenure he has constructed an efficient political machine for extracting money from companies who are doing business with the city, the City of Angels continues to struggle. It does poorly in quality-of-life rankings. Richard Florida, the urban theorist, places the Los Angeles area dead last among the twenty largest metro areas in the country when it comes to rankings of inequality and poverty. According to a study conducted by the University of California, Los Angeles (UCLA), 25 percent of people in Los Angeles spend half of their income on rent, the highest of any major metropolitan area.72
And Los Angeles continues to be plagued with a massive and inefficient government. Because of red tape, as of 2016 it took an average of 373 days to hire someone. Also, nearly one out of every six employees on the city payroll is off the job on workers’ compensation—and it is twice as bad for the police and fire departments.73
Another senior city official puts it more bluntly.
“You have to understand, it’s a fucking miracle your trash gets picked up.”74
10
Conclusion
Corrupt acts can take various forms. As we have seen, these can include using your political power to enrich your family; tilting the scales of justice for the benefit of friends; steering government contracts to friends and family; or using the machinery of your office to serve your interests rather than those of the people you are supposed to represent.
The progressive solution for every national problem is to give them and our political leadership more power. So, how have they managed the power they have already been granted?
The progressives featured in this book all profess to have the purest of motives in their quest for greater power. They seek that power for our benefit or to fix our problems, or so they claim. Even if we take them at their word, the reality is that, as economist and Nobel laureate Milton Friedman reminds us, “Concentrated power is not rendered harmless by the good intentions of those who create it.”1
History teaches that corruption follows power. The more power you accumulate, the more likely you are to exploit that power for your own benefit. History also teaches that power tempts those who wield it into corrupt acts. Founding Father George Washington once worried, “Few men have virtue to withstand the highest bidder.”2
But the problem is not just with accumulated power, but also with those who seek it. As scientist and author David Brin pointedly noted, “It is said that power corrupts, but actually it’s more true that power attracts the corruptible.”
Whichever is more true, the link
between power and corruption is an iron rule of human history.
What political figures do with the power they enjoy reveals a lot about who they are. The great historian Robert Caro has written a masterful four-volume set of books on the public life of President Lyndon Baines Johnson. After he finished the fourth volume, he commented on the truths he uncovered in his decades-long study of public power. “What I believe is always true about power is that power always reveals.”3
This book has hopefully served as a revelation of how power is exercised and how it can be twisted to serve the ends of those who seek more of it. It is, of course, very easy to blame our public figures for the state of public corruption. But ultimately the problem lies with us. We get the government we choose, the leaders we elect, and the corruption we tolerate. Novelist and essayist George Orwell wrote the masterpiece 1984 about a dystopian future. But he was also a shrewd observer of political life in democracies. He warned about the political choices people make regularly in an elective system of government. “A people that elect corrupt politicians, imposters, thieves and traitors are not victims, but accomplices.”4
Profiles in Corruption Page 23