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Two weeks ago, a Hews Media Group-Community News investigation found that Morley Justman and Russel Justman, owners of Commerce-based Justman Packaging, and a family that has donated tens of thousands of dollars each to the campaigns of current Commerce Mayor Tina Baca Del Rio, Mayor pro tem Lilia Leon, and Councilman Ivan Altamirano, received $9.8 million of City redevelopment funds in 2010, $4.4 million more than they were offered in 2006, for their building and property at 5918 Telegraph Rd. located in Commerce.
The City authorized eminent domain on the property and building for the planned “Telegraph Corridor Urban Entertainment Center” four years earlier in 2006, at the height of the real estate bubble, and deposited $4.442 million as “just compensation.”
Just compensation is defined as the fair market value of the building, plus moving costs, and loss of goodwill due to the company having to move.
Meanwhile, the promise of the Telegraph Corridor Urban Entertainment Center was never realized.
In 2010, the City paid $9.8 million, an additional $5.358 million, or an increase of 120% over the amount deposited in 2006, long after the real estate market had crashed and its high valuation was no longer appropriate.
The Feb. 2010 agreement was between the Commerce Community Development Commission (Commission) and the Justmans, signed by then Commerce Mayor Tina Baca Del Rio and City Attorney Eddie Olivo.
In addition, the agreement stipulated that the Justmans had to vacate the building by Dec 31, 2010.
But the investigation found that the company failed to vacate the premises and remains in the building to this day, receiving millions for a building they should have vacated years ago, while paying the same sum for rent agreed to in 2010.
Essentially, the Commission has forfeited over $240,000 by not raising the rent on the family and given a huge bonus on an inappropriately high property valuation made at the peak of the real estate bubble, all to a family that donated thousands to certain Commerce Council-members.
Now, part two of the HMG-CN investigation has exposed a series of extremely questionable transactions occurring after the Justmans were paid the $9.8 million in “just compensation” for their building.
In a flurry of quick legal maneuvers and probable backroom deals, $2.15 million of the $9.8 million paid to the Justmans was immediately paid back to the Commission and the City for “settlement of claims” the Commission had against the Justmans.
Put another way, it appears from the documents that the Commission overpaid $2.15 million on the purchase price of the building so the Justmans could pay legitimate monetary claims the Commission had against them, making the city the direct source of repayment of the Justman’s obligations.
The Commission’s “Claims” Against the Justmans
The agreement stipulated that $1 million of the $2.15 million would be paid for past “rent obligations” the Justmans owed the Commission.
There were no supporting documents that outlined what the “rent obligations” included.
Another $900,000 was paid related to “Commission claims on Commission owned properties in Commerce.”
The Justmans occupied “Commission owned” property located in the area, specifically 2309-2311 Travers Rd and 6003 Telegraph Rd. pursuant to a lease agreement with the Commission. A portion of that rent was in dispute.
In addition, a portion of the purchase price settled a tax lien Los Angeles County had filed on the Justman property.
There were no supporting documents that outlined the amount of the tax lien.
Finally, $250,000 was applied to future rent on the building through Dec. 2010, the date when the Justmans agreed to vacate the building, an amount that far exceeded the rent rate the Justmans currently pay.
In a stipulation to the agreement, the Commission and the Justmans agreed to pay $11,755 in monthly rent after the Justmans failed to vacate the building by Dec. 2010.
The $250,000 pre-paid rent was applied from Feb. 2010 to Dec. 2010, indicating the Commission valued the monthly rent on the Justman building at $25,000.
Yet, after 2010, the Commission charged the Justmans only $11,755, a monthly difference of $13,423, from the Commission’s own valuation, amounting to a loss to the city of over $134,000.
Calls and emails into City officials went unreturned.
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