It has been nearly seven years since El Monte ditched the proposed El Monte Transit Village — once heralded as one of the largest mixed-use projects in development in Southern California.

But the project’s developers have hardly faded from the city’s attention.

Instead, El Monte’s dispute with John Leung and Jean Lang continues to cost the city more than $1 million a year.

El Monte has spent the last five years in a complicated legal battle with the former developers and their companies TV, LLC and JT, LLC, racking up more than $5.4 million in legal fees.

The battle has taken the city’s attorneys in and out of civil court, bankruptcy court and now complex litigation court, juggling multiple lawsuits and countersuits.

And the end is still at least a year away, with a trial date set for March 2017.

Attorneys representing the city say there were forced into the costly litigation and say Leung and Lang have been “very aggressive” in their legal efforts, despite multiple decisions against them.

“John and Jean refused to let go of this project,” attorney Isabel Birrueta said. “Just when we think we have cut off the monster’s head, another one comes back.”

But the developers argue that the city could have long ago stopped the legal spiral from happening.

Neither Leung nor Lang were willing to discuss the case, but both said El Monte’s troubles are the result of “self-inflicted damages.”

The city’s case

The Transit Village project began to unravel in 2009.

The demise started when Leung and Lang’s business partner Jack Chang went to El Monte Police alleging his partners had forged his signature on various loan documents related to another redevelopment project they were working on with the city’s help, according to El Monte officials.

“He said they committed fraud,” El Monte’s attorney Lynn Fiorentino said.

Responding to Chang’s allegation, Leung and Lang were arrested in June 2009.

But seven years later, they have never been charged with a crime.

Still, the city maintains the developers did, indeed, commit fraud — forging signatures on documents related to a $4 million loan the city helped it get from the U.S. Department of Housing and Urban Development for the Pacific Place redevelopment project at 10525 Valley Boulevard.

Not only did they commit fraud to receive the loan, the city alleges Leung, Lang and their partners conspired to reduce the city’s ability to collect on the loan in the future.

And, making the fraud worse yet, the city says the developers submitted “false and fraudulent claims” to El Monte officials for costs related to the disbursement of the loan, as well as a $500,000 grant the city also gave the developer for the same project. Under the loan and grant arrangement, the developers were expected to hire, and pay, engineers, architects, consultants and other vendors to do the work related to the Pacific Place Project. The developers then brought the invoices to the city for reimbursement, which the city provided. However, El Monte officials later learned some of those vendors were never actually paid and allege some of the invoices were fabricated.

After the arrests, Lang and Leung’s remaining partners at TV, LLC and JT, LLC said they could not move forward with either the Pacific Place Project or the Transit Village Project, according to the city. And they started missing payments on the $4 million HUD loan.

So the city halted the projects and, ultimately, decided to develop the property around the El Monte bus station with the help of other developers.

‘Self-inflicted damages’

The disgraced developers see the demise differently.

They blame city staff for the arrests and accuse city leaders of “conspiring to take over the Transit Village Project to pursue it on their own,” according to court documents filed by Lang.

They allege city staff “intentionally worked against” them so they “could be blamed for losing $4 million City/HUD money,” according to court documents.

The conspiracy against them begins with the El Monte Police Officers Association, according to court documents filed by Lang.

In 2009, the POA was fighting with the City Council over the city’s budget deficit, which had resulted in funding cuts to the police department. POA leadership met with Leung at the time to ask him to put his redevelopment projects on hold, so that city redevelopment funds reserved for the projects could instead be lent to the general fund and, ultimately, directed to the police department, according to court docs filed by Lang.

Leung declined the POA’s request. Shortly thereafter, he and Lang were arrested by two police detectives, who also happened to be the chairman and vice chairman of the POA.

As the developers sat in jail for several days, their arrests landed them on the front page of this newspaper.

“As a result of such publicity, Leung and Lang lost all credibility and ability to do business,” according to court documents filed by Lang.

In the wake of the arrest, city staff took various steps that crippled the future of both development projects, according to Leung and Lang, including barring them from maintaining their leadership positions in TV, LLC and JT,LLC and filing an involuntary bankruptcy against JT, LLC, according to court documents.

Before the arrest, JT, LLC was only behind one payment of about $165,000, according to Lang.

City staff also refused to provide a temporary certificate of occupancy for the building at 10525 Valley Blvd., which was 95 percent complete, so the developers could seek a permanent loan for the building, Leung and Lang allege.

“Leung and Lang continued to try very hard to rescue the HUD collateral buildings and protect the HUD loan. It was the actions of City Staff that finally lead to the failure of the loans,” according to court documents filed by Lang.

Lawsuits and countersuits

Leung and Lang took the first legal shot in early 2011, when they filed an $18 million lawsuit against the city alleging breach of contract.

El Monte then responded with a countersuit.

Around the same time, TV, LLC declared bankruptcy.

That landed the entire dispute in bankruptcy court — a costly outcome.

“We had to hire special bankruptcy counsel to maneuver through bankruptcy laws,” Birrueta said.

It was all part of their strategy, the city alleges.

“They moved the case from Superior Court to Bankruptcy Court as a strategy to delay the litigation, to make it more expensive and more complex, to try to force the city to give up and let them back into the game,” she said.

And, during that process, Leung and Lang were represented by a “very aggressive attorney,” Birrueta said.

“Every time we won a motion, they would go file something new. They were relentless,” she said.

A federal judge finally dismissed TV, LLC’s lawsuit in 2012. And the bankruptcy proceedings ended about a year ago.

Now the focus is on the city’s countersuit against Leung and Lang, seeking reimbursement for the $4 million loan, which has grown to more than $6 million in principal, interest and fees.

But the city’s lawsuit has proven no less complicated. More than a dozen people and companies are named as defendants and the litigation has been moved to complex court.

And Leung and Lang continue to fight aggressively. Just a few months ago, Leung countersued El Monte, though that lawsuit was ultimately tossed.

Birrueta says she understands the community might be concerned about the amount of legal spending.

“I would flip out — I’d ask ‘why is there so much money being spent on this?’ But I would also flip out if the city just let this fraud happen,” she said. “If community members understood the shenanigans — they are relentless, so what choice does the city have but to defend itself?”

Maintaining credibility

They city’s legal battle isn’t just about collecting on the loan and grant, Birrueta and Fiorentino said.

To demonstrate its credibility to HUD, El Monte has to show it isn’t letting the alleged fraud go on, unpunished.

“They have to show HUD they are committed to stopping fraud and recouping the damages. They don’t want to jeopardize any future HUD funds,” Birrueta said. “You want to be in the good graces of HUD. You don’t want them to think we are complicit.”

El Monte also wants to demonstrate the same to the U.S. Attorney’s office, which continues to investigate the alleged fraud, the attorneys said.

“We want to hand them their case on a silver platter,” Birrueta said.