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State Controller & District Attorney Investigating City of Industry for Corruption

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State Controller Betty T. Yee yesterday announced that her staff will conduct an investigation into the financial practices of the City of Industry after an outside, “limited-scope audit” raised questions about $326 million in payments to businesses owned by a former mayor David Perez and his family.

A previous audit ordered by the city and released in April by KPMG found that much of the money for lucrative contracts he and his family held with the city over the past 20 years were allegedly supported by vague or even erroneous invoices, according to the San Gabriel Valley Tribune, which first reported the story.

On Tuesday, the LA County Board of Supervisors voted to ask the Controller’s Office to audit the city and referred the audit details to the LA County District Attorney to evaluate any potential civil and criminal violations.

City of Industry officials confirmed on Friday they have been contacted by District Attorney Jackie Lacey to investigate “possible fraud, corruption and illegal activity on the part of the mayor and City Council of the City of Industry,” according to the Los Angeles Times.

One of the companies tied to Perez, Zerep Management Company, was also at the center of sexual harassment complaints that cost the city more than $7 million. “Zerep” is “Perez” spelled backwards.

Controller Yee sent a letter Friday morning to the City of Industry notifying city officials that her office will conduct the investigation into allegations of wrongdoing by city officials and any irregularities in local, state, and federal programs administered by the city. The initial investigation will initially focus on the fiscal years 2012-13 and 2013-14. But the investigation may be broadened to review other years and other agencies where the City of Industry is a participant.

“Our initial review shows significant discrepancies between the financial transaction reports submitted to my office and the city’s audited financial statements,” Controller Yee said. “As the state’s chief fiscal officer, I have the duty to bring my office’s expertise to bear to identify potential misuse of taxpayer dollars.”

Industry is a small city in southeastern Los Angeles County with only about 400 residents, yet as the Tribune notes, the business-centric town still manages to generate $140 million in revenue each year.

City Manager Kevin Radecki said on Thursday that his office has a May 18 meeting scheduled with Yee’s staff. He stated, “We will provide the information that they need so they can complete their report.”

The city canceled the maintenance and street sweeping contract with Zerep in September for unspecified “wrongdoing,” Radecki said, but it still has a contract with a company Perez partly owns for trash collection. That contract, which runs through 2025, is worth $13 million per year, Radecki said.


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