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By Brian Hews
It looks as if Montebello City Treasurer Charlie Pell is having quite an effect on the city of Montebello, the City Council and high-ranking City officials.
Just not in a good way, unless you are a resident.
A few weeks ago Pell was verbally admonished at a Council meeting by members of the City Council for pointing out what he sees as major discrepancies in City operations and finances.
City Manager Francesca Tucker-Skyler, in an anger-filled statement, joined the fray and admonished Pell for “speaking out of turn.”
He was told, even though he is an elected official, that he was “not allowed to speak in public at the meeting unless it was on the agenda.”
There was likely an underlying reason the City Council and Tucker-Skyler acted the way they did, as Pell, in the months since his election, has been hard at work documenting financial discrepancies and is ready to speak out.
Hews Media Group-Community News has obtained a letter written by Pell slamming City Officials and City Council members for “waste, fraud, abuse, misuse of public funds, and neglecting its fiduciary duty.”
The letter relates to the April 2000 agreement between Michael Minasian President of Garfield Financial Corporation (GFC), and a good friend of Montebello Councilmember Jack Hadjinian, and the city’s Redevelopment Agency, (RDA).
In April 2000, the Montebello RDA loaned $1.574 million to GFC, at 7% annual interest, to construct 20 single-family residential homes in the City.
The agreement restricted the sale of those 20 homes to low income first-time homebuyers.
The agreement was secured by a Deed of Trust and included an Assignment of Rents. The Deed and Assignment granted the City the legal right to collect rents from the properties if GFC defaulted on the agreement.
In November 2005, to avoid what both parties saw as impending litigation, Garfield and the RDA executed a Settlement Agreement (Agreement) signed by both parties and their attorneys.
The Agreement provided the City “a general release of all claims, known or unknown that Garfield might have. ”
Garfield stipulated they owed the City $1.574 million, and agreed to pay off the $1.574 million using funds from the sale of the last five houses that remained.
The City graciously agreed to not charge 7% interest on $1.574 million debt and to remove the low-income requirement to sell the homes.
The changes would allow GFC to sell the houses at market prices, with GFC agreeing repay to the RDA a minimum of $314,800, $1.574 million total, from the sale proceeds of each of the final 5 homes GFC sold.
But GFC has not followed through on their end of the agreement.
More than 10 years later, GFC has sold only three homes, repaying $1 million, but has failed to sell the remaining two, owing the City over $500,000.
Given that scenario, the terms of the agreement allow the City to begin collecting rent on the two homes and charge 7% interest on the outstanding debt.
But sources have told HMG-CN that Councilman Hadjinian and his allies have blocked every attempt to enforce the agreement.
A 7% simple interest calculation on a $500,000 debt for ten years would net the City $350,000, more than $35,000 per year.
Comparable rents on the two remaining homes are valued at $2,500 per month for each house, or over $60,000 per year.
Consequently, inaction by Council and other City officials over the years have left over $95,000 uncollected per year.
In his letter, Pell, a U.S. Federal Prosecutor said, “The legal right to collect rents under an Assignment of Rents provision in the Deed of Trust (from the April 2000 agreement) is well established in California. Under California Civil Code, the City’s Successor Agency has the right to enforce its collection of the rents from the above two [GFC] properties.”
It is a fairly simple process, as the City only needs to deliver to GFC and the tenants of those properties a written demand for the rents, at which time the tenants are legally obligated to pay rent to the City, rather than to GFC.
But the City has failed to exercise that option.
The letter went on to say that the demand for rent would not preclude the City from suing Minasian for the $500,000.
“Moreover, enforcing a right to assignment of rents does not limit any rights otherwise available to the City, including initiating formal legal action against GFC and/or Mr. Minasian to collect on the underlying [$500,000] debt.
Pell then slammed City officials for their inaction saying, “The City has the legal right-and fiduciary obligation-to enforce the terms of the underlying Deed of Trust, which specifically includes an Assignment of Rents. Particularly in these trying financial times, the City can ill afford to forego thousands of dollars in monthly revenue. Nor can it afford to forego collecting more than $500,000 in debt.
HMG-CN asked current City Manager Francesca Tucker-Schuyler who was appointed in May 2012 and earns over $200,000, why the City, under her fiscal leadership, has delayed taking action against GFC.
Tucker-Schuyler had not responded at the time of publication.
Her lack of action in the 51 months she has been in charge has cost the City over $255,000 in uncollected rents and over $120,000 in interest charges.
But even more money could be attributed to Tucker-Schuyler’s inaction, as she was the City’s Finance Director since 2010, and likely knew that the City was not pursuing GFC.
That would add an additional 24 months, equaling $120,000 in uncollected rent and $70,000 in interest charges.
Pell ended his letter saying, “It is inexcusable that the City has failed to enforce its legal rights regarding this huge debt owed by GFC, which has remained unpaid for a decade. The continued failure of the City to enforce its legal rights to collect the rents and recover the outstanding debt of public funds exceeding $500,000 constitutes waste, fraud, abuse, and/or mismanagement of public funds. That failure must be rectified immediately.”
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