Tax dollars for a solar farm financed by the City of Industry instead funded the developer’s lavish lifestyle and went toward $9 million in unrelated expenses, including his daughter’s $2 million wedding in France, his mortgage, a timeshare in Aspen and purchases at Jaguar and Porsche dealerships, prosecutors allege.
The Los Angeles County District Attorney’s Office spent the first two days of a preliminary hearing for former Industry City Manager Paul Philips outlining how little of the $20 million Industry paid actually went to the project.
Philips is charged with a felony count of misappropriation of public funds, but, so far, prosecutors have yet to directly detail their case against him.
Last week, Deputy District Attorneys Joel Wilson and Ana Lopez largely focused on the bank records of the other defendants in the case, developer William Barkett and former state Sen. Frank Hill, who served as a consultant on behalf of Industry while secretly owning a stake in the solar company, San Gabriel Valley Water and Power.
Where’d the money go?
Bank records subpoenaed by a grand jury showed that roughly $19 million from Industry flowed into accounts controlled by Barkett for the purposes of developing a 450-megawatt solar farm on Tres Hermanos Ranch in Diamond Bar and Chino Hills. But only roughly $7 million of those funds made it to the subcontractors, consultants and other companies performing the actual work.
Here’s where prosecutors say the bulk of the remaining public funds went:
- $1.3 million in cash withdrawals.
- $120,000 to a bank in the Bahamas.
- $1.8 million for mortgage payments on a La Jolla mansion.
- $3.3 million to “foreign entities,” which largely included payments for an extravagant wedding for Barkett’s daughter in the French Riviera.
- $3 million in “general personal expenses.”
Court records in this case and a separate civil case allege Barkett spent roughly $2 million on his daughter’s wedding. Part of the money went to opera singer Andrea Bocelli and paid for the ceremony at the iconic Hotel du Cap Eden Roc, a renowned destination on the coast of South France that oft-served as a “home-away-from-home” for dignitaries and celebrities like Winston Churchill and John Lennon.
The personal expenses included payments to Jaguar and Porsche dealerships, Disneyland, a housekeeper, Barkett’s daughter’s law school, a timeshare in Aspen, Barkett’s personal attorney, and donations to political campaigns and nonprofits, among other high-lifestyle spending, according to a list shown in court.
Barkett previously denied the allegations and has stated that he will be vindicated when all of the facts come out.
Separately, Hill, who brought the idea for the solar farm to Industry officials, was paid nearly $700,000 by the city through the Cordoba Corp., a company hired to manage the project on Industry’s behalf.
Philips, however, did not appear to have received any funds from Barkett or Hill, according to testimony.
Focus so far not on Philips
Philips’ attorney, Joe Weimortz, who is partnered with former Los Angeles County District Attorney Steve Cooley on Philips’ defense team, seized on the prosecution’s focus on other defendants to challenge its forensic auditor and lead investigator about their investigation into Philips.
Under questioning, auditor Ngoc-Giao Phan testified she did not scrutinize Philips’ bank accounts as much as the other defendants. “That was not the focus of my review,” Phan said.
Asked if she knew of any evidence of payments from Barkett or Hill to Philips, Mary Cenovich, the now-retired lead investigator on the case, said she did not. “I do not recall seeing payments from those names to Mr. Philips,” she said.
Though the preliminary hearing is at the very start of an expected six weeks of testimony, prosecutors have begun to lay a foundation for their argument that Philips failed to carry out the appropriate due diligence when overseeing the project on Industry’s behalf.
Cenovich testified on the first day that Philips’ signed off on several requests for payment that were supported by obviously forged or altered invoices. Then, on the second day, prosecutors touched on Philips’ handling of “warrant registers,” a public accounting of payments that must be approved by the City Council, but were cut short before they could finish the line of questioning.
An analysis of the warrant registers from June 2016 to January 2018 suggests the direction prosecutors may take when they return for the next hearing Tuesday, Feb. 8. The records showed that while Industry paid the solar company, San Gabriel Valley Water and Power, $20 million toward its supposed work on the project, only about $11.5 million of those funds appeared on registers approved by the City Council.
Falsified invoices
The council did separately approve an amended lease agreement with San Gabriel Valley Water and Power that authorized advances of up to $20 million to reimburse the company for its costs on the public project. But under Industry’s Municipal Code, any demand for payment is required to be presented to the City Council for approval or rejection at the subsequent regular meeting and must include a “certification by the city manager, or his or her designated representative that the demands are accurate, proper and correct.” Approximately $8.5 million of the outflows seemingly did not comply with that requirement.
The demands also were far from “accurate, proper and correct,” at least according to prosecutors. Invoices submitted by San Gabriel Valley Water and Power dramatically overstated the company’s costs. In reality, prosecutors allege SGVWP was billed only $9 million by its subcontractors, yet presented $20 million in falsified and fraudulent invoices to justify receiving more money.
The charge, misappropriation of public funds, does not necessarily mean that prosecutors will allege that Philips took any of the money himself. The law can be used against an officer of a public agency in charge of safeguarding public funds who “without authority of law, appropriates the same, or any portion thereof, to his or her own use, or to the use of another.”
Cooley, Philips’ attorney, said he is not aware that any of the payments were missing from the warrant registers. Those registers, he said, would have been prepared by other staff members and Philips’ would have only given his stamp of approval at the end of a long chain of reviews. The City Council approved the project and Philips followed its decisions, he said.
False assumptions
“I think there’s nobody at fault here, but they’re trying to blame Paul for something he didn’t or couldn’t do,” Cooley said.
Cooley said the district attorney presented little against Philips in the first two days because “they don’t have anything.” He alleged prosecutors have relied on false assumptions about Philips’ involvement to come to “false conclusions.”
“There may have been false billings, but that’s not his fault,” he said of his client. “There may be a crime there, but Paul Philips is nowhere near it.”
Some of the discrepancies in the invoices were previously brought to the city’s attention by a reporter in 2017. At the time, at least $100,000 paid during 2016 had gone toward a retainer for a law firm called “Dongell Lawrence Finney LLP” that had stopped operating more than a year before the last invoice and its business license was suspended, according to public records and interviews at the time.
Former managing partner John Lawrence said in 2017 the firm did not do any work related to the City of Industry those years, but that Barkett had paid off outstanding bills that were “more than three years old.”
“It had absolutely nothing to do with the City of Industry,” Lawrence said. “The firm was not in operation after Oct. 31, 2015. So you can make what you want out of that.”
City officials and Wade Hall, the project manager at SGVWP, stated at the time that an accounting error had inadvertently led to the older firm being listed, as one of the other partners, Tal Finney, was consulting individually. A city spokesperson deferred questions at the time about how the city verified the work back to SGVWP.
Last week, Cenovich testified that Finney told her in an interview that he hadn’t submitted any invoices for his work on the project.
Source: Orange County Register
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