In its heyday, Montebello was known as the Beverly Hills of the Eastside.

Perched on the rolling hills above the 60 Freeway, it was the move-up community for working-class East L.A. and Boyle Heights, with a municipal golf course, shopping mall and manicured parks.

Now tree trimming in the parks has been cut back. The city is seeking a short-term loan to avoid running out of cash in its general fund. State audits have found that officials mishandled millions, some of it on fancy meals and golf outings. The FBI also is investigating the city’s use of federal housing funds.

Former Police Chief Garry Couso-Vasquez summed up the sentiments of many in the suburb east of downtown Los Angeles: It’s not clear whether any crimes were committed by city officials, he said, but “it is a truly a crime what has happened to that once-great city.”


Montebello’s fall is a story of a political and financial breakdown marked by recall elections; bizarre lawsuits; missing and falsified records; and allegations of sweetheart deals. The cast of characters includes a powerful developer who received millions of dollars for redevelopment projects and a political consultant known to some in town as the mysterious Englishman.

It’s a sign of how bad things are that city officials openly admit that incompetence has fueled many of the problems but insist that Montebello is not mired in corruption.

“Montebello is not Bell (not a deliberate and consistent march to corruption),” Darrell Heacock, the interim city manager, wrote in a recent presentation to the City Council.

“It’s embarrassing,” said Heacock, the former president of the Montebello Chamber of Commerce whose family has lived in the city for generations. He said he spent a recent morning with other business people, eating doughnuts and lamenting the state of the municipality. “I can’t begin to explain it.”


The 1990s

Montebello’s struggles can be traced to the recession of the early 1990s, which hit both the city’s coffers and local businesses hard.

Whittier Boulevard, the city’s once-vibrant main street, needed sprucing up. As did many other cities, Montebello responded with a variety of redevelopment projects, including several along the 60 Freeway, and the City Council awarded tens of millions of dollars worth of work to close personal friends and top campaign donors.

One prominent beneficiary was Hank Attina, a friend of former Mayor Art Payan and former councilman and current City Atty. Arnold Glasman. Companies tied to Attina got about $30 million for a restaurant and three senior citizens housing projects.


All four projects were funded by the redevelopment agency.

The money for the housing was in the form of loans that would be forgiven if the developer completed the work as promised, a standard practice for building affordable housing.

The city originally envisioned the restaurant as a Latin-themed Hard Rock Cafe-style establishment that would be a regional draw. But when that plan got bogged down in a lawsuit, an Applebee’s was built instead.

The city also partnered with another large campaign donor, Brad Perrin, a partner in companies that manage a hotel, the Hilton Garden Inn, and another company that manages the banquet facility on the grounds of the city’s golf course.


City officials now say Montebello isn’t making much money on the Perrin deals and is trying to determine why.

Both Attina and Perrin defended the arrangements, saying that they delivered on their contracts and that the projects benefited the city. “We did what redevelopment is supposed to do,” Attina said of his projects. “Bring in jobs, property tax.”

Perrin added that he has boosted the fortunes of the properties he manages. “We turned it around,” he said.

Heacock, of the Chamber of Commerce, said those living in the senior housing units “feel very blessed to have these places.”


But the developers’ ties to city officials sparked suspicion, with some critics questioning whether the redevelopment money could have been better used to bring more businesses to the city. “It was very lopsided,” said former City Treasurer Gerri Guzman. “It left us short of the resources to draw on.”

Payan and several other longtime council members stepped down or lost their seats in the late 1990s and early 2000s. With the old power brokers gone, Montebello politics descended into a wild and ugly place that kept the city inflamed in a cycle of recalls; nasty mailers; and police and district attorney complaints for years.

By 2005, a new council majority had come to power. They fired the city manager, Glasman and the economic development director.

“We wanted a fresh start,” recalled former Councilman Jeff Siccama, who was elected in 2005 and ousted two years later in a recall election. “There were too many sweetheart deals.”


But the new council members failed to generate much economic development for the city. When they publicly discussed dissolving the Fire Department, the council members were driven out of office in 2007.

Attina, the developer who was so close to Payan and Glasman, was one of the biggest contributors in the effort to oust the council and elect a new slate. The new majority promptly rehired Glasman as city attorney and the previously fired city manager.

Lacking stability

But the return of old allies did not bring stability. Instead, politics and city management took an even more toxic and soap opera-like turn.


One councilman, Robert Urteaga, was later revealed to have a criminal record he failed to disclose.

Then there was the case of long-time Councilwoman Kathy Salazar. During a period when she was not on the City Council, the police chief had removed her from a volunteer patrol group, saying she had written an opinion piece for a local newspaper that revealed details of a police investigation.

She responded by suing the city. She said she offered to settle for $25,000 but could not get the deal to come together. But once she got back on the council in 2007, the city agreed to $130,000 settlement that included attorneys fees.

In an interview, Salazar said the settlement had nothing to do with her return to the council and that she did not vote on the matter. “You have to remember that my rights were violated,” she said.


Around this time, a British campaign consultant for two of the new council members entered this rough-and-tumble world. John Edwards was accused in 2008 by a rival campaign consultant of assaulting him at a council meeting.

Edwards said in an interview that that and other experiences in the city left him with a bad taste in his mouth.

“Do you know what they want to do in Montebello? he said. “Just shout at each other. Just say wicked things about each other.”

The political instability led to turmoil in vital city departments.


In 2009, 13 police officers sued the city for $30 million, accusing city officials of a backroom deal with the head of the police union.

During this period, the City Council also entered into a number of economic development deals that have now collapsed into lawsuits and a federal criminal investigation.

The most notorious of these involved $1.3 million in federal housing dollars for a developer who was supposed to build affordable housing along fading Whittier Boulevard.

The project was not built, although the city recorded it as completed in a federal database. The federal Department of Housing and Urban Renewal has demanded that the money be paid back, and the city is suing developer Danny Ku in an attempt to recover the funds. Federal officials found that the money was given without council approval and a document that supposedly authorized the deal had signatures that appeared to have been cut and pasted improperly from another document.


There were other issues with the city’s handling of housing dollars. Earlier this year, HUD listed 31 “serious regulatory violations” of federal rules. Many of the findings had to do with faulty record-keeping, but HUD also charged that the city had failed to determine whether people who got grants intended for low-income homeowners were truly needy.

For instance, the city did not take into account the fact that one applicant owned four pieces of property in Hawaii.

By 2009, the new council was under attack. Independent trash haulers were outraged when the city signed a multiyear contract with Athens Waste Services to pick up the city’s trash and poured money into a campaign to unseat the council majority, the second recall election in less than five years.

A new slate of elected officials was swept into office in 2010, pledging reform. They arrived just as the city’s finances were going over cliff.


Years of lax controls and hidden deficit spending, combined with the severe economic downturn, led some city officials to publicly worry that the city could go bankrupt.

Larry Kosmont, the new interim city manager, insists it won’t come to that. He admits the city has a long road ahead but says Montebello’s woes are overstated.

On Friday, he issued a long rebuttal to the state audits and said the city’s cash flow problems are temporary.

“The city has hit the skids,” Kosmont conceded. But “the future of Montebello has hope.”


jessica.garrison@latimes.com

abby.sewell@latimes.com

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(BEGIN TEXT OF INFOBOX)


Montebello

at a glance

The 8.25-square-mile city was incorporated Oct. 16, 1920.

Population:


62,500

Median age:

34.7

Average household income:


$51,449 (2009 est.)

Median home sales price, 2010:

$345,000

Sources: City of Montebello,


U.S. Census, DataQuick