Loading...
HomeMy WebLinkAboutRS01-Redevelopment Agency o o C I T Y 0 F SAN B ERN A R DIN 0 INTEROFFICE MEMORANDUM TO: COMMUNITY DEVELOPMENT COMMISSION FROM: DENNIS A. BARLOW Sr. Asst. City Attorney DATE: June 6, 1988 SUBJECT: District Attorney Investigation ----------------------------------------------------------------- Our office has received a copy of the report from the District Attorney Investigator to the District Attorney, Dennis Kottmeier, regarding the Redevelopment Agency of the City of San Bernardino. We have reviewed this voluminous material very carefully and, after consultation with the District Attorney, as well as individuals in the Attorney General's Office, we make this report to the Commission. The Investigator summarizes the findings as follows: "At this point I find that none of the parties involved in the evaluated Redevelopment Agency transactions violated any criminal law. Although there are other interviews which could be conducted, I have no reasonable belief that evidence of a prosecutable criminal offense would be discovered. "There is evidence of a violation of Government Code Section 53601.5 or 53635.5 which requires that investments not purchased directly from the issuer shall be purchased either from an institution licensed by the State as a broker-dealer, or from a member of a federally regulated securities exchange. The Department of Corporations confirmed that neither Astor Wood Financial nor its managing director, Maral Nigolian, has been issued a broker's license. "There is evidence of a violation of the Redevelopment Agency's 'Statement of Investment Policy' adopted December 21, 1987, which requires the RDA to choose only those investments that are prudent and allowable. There is no evidence of any evaluation by the RDA, Miller and Schroeder or Astor Wood Financial of the financial strength of any institution which received RDA money. RDA's 'Statement of Investment POlicy ;25'-/ o 0 Community Development Commission June 6, 1988 Page Two includes two requirements: (1) funds are invested to obtain the highest possible yield and (2) funds will be invested in time certificates of deposits issued by local banks. The investigation showed that pursuing the highest possible yield has resulted in bypassing the investments in local banks. "Although no clear violation of law or pOlicy, the relationship between Miller and Schroeder and Astor Wood Financial is questionable. Redevelopment Agency paid Miller and Schroeder under contract approximately $65,000 to act as financial consultants, but Astor Wood also paid Miller and Schroeder a 'co-brokers fee' in the amount of 25% of the net profit. This arrangement creates the appearance of a conflict of interest in the part of Miller and Schroeder." Based on the above report, the City Attorney's office recommends as follows: 1. The Investment Policy should be carefully reviewed to assure that it meets the needs of the Agency as well as to assure it protects the public's funds. It should also be clarified to eliminate any areas of possible misunderstanding. As part of this revision, a review of the City's policy would be helpful. 2. At the suggestion of the District Attorney's office contained in the last paragraph of the above summary, our office will review the issue of the "co-broker's fee" and will report back on any recommended action. 3. Now that the District Attorney investigation has been completed, it would be in order to review the possibility of any disciplinary action against Agency employees. 4. We recommend that all Commission contracts for consultants be reviewed and amended to not allow such consultants to receive fees from firms and entities referred to the Agency by the consultants, and that all future consultant contracts contain such language. o 0 Community Development Commission June 6, 1988 Page Three We have attached a copy of the District Attorney's summary with confidential items deleted. BARLOW City Attorney DAB:cm Attach. ..~ .a . ~. -. ~.- , o o CON F IDE N T I A L I N T E R - 0 F F ICE M E M 0 DATE: May 27, 1988 FROM: KENNETH A. KUTCH /1 (j,L Assistant Chief Investigator District Attorney TO: DENNIS KOTTMEIER District Attorney SUBJECT: SAN BERNARDINO REDEVELOPMENT AGENCY CONFIDENTIAL INFORMATION DELETED o o CONFIDENTIAL INFORMATION DELETED At this point I find that none of the parties involved in the evaluated Redevelopment Agency transactions violated any criminal law. Although there are other interviews which could be conducted, I have no reasonable belief that evidence of a prosecutable criminal offense would be discovered. There is evidence of a violation of Government Code section 53601.5 or 53635.5 which requires that investments not purchased directly from the issuer shall be purchased either from an institution licensed by the State as a broker-dealer, or from a member of a federally regulated securities exchange. The Department of Corporations confirmed that neither Astor Wood Financial nor its managing director, Haral Nigolian, has been issued a broker's license. There is evidence of a violation of the Redevelopment Agency's .Statement of Investment Policy. adopted December 2l, 1987, which requires the RDA to choose only those investments that are . prudent and allowable. There is no evidence of any evaluatlon by the RDA, Hiller and Schroeder or Astor Wood Financial of the financial strength of any institution which received RDA money. r . o o Confidential Memo to D. Kottmeier 5/27/88 Page Three RDA's .Stateme~t of Investment Policy ~ncludes two requirements, (1) funds are invested to obtain the highest POssible yield and (2) funds will be invested in time certifcates of deposits issued by local banks. The investigation s~owed that PUrsuing the highest possible yield has resulted 1n bypassing investments in local banks. . Although no clear violation of law or policy, the relationship between Miller and Schroeder and Astor Wood FinanCial is questionable. Redeveloopmetn Agency paid Miller and Schroeder under contract approximately $65,000 to act as financial consultants, but Astor Wood also paid Miller and Schroeder a .co-brokers fee. in the amount of 25' of the net profit. This arrangement creates the appearance of a conflict of interest on the part of Miller and Schroeder.