INDUSTRY (AP) — The city of Industry paid more than $326 million to companies owned by a former mayor and his family over the last 20 years, and invoices suggest they may have received massive overpayments, according to an audit report.
The audit of Industry city finances found former Mayor Dave Perez, his brother and their company Zerep Management Corporation also cost the city more than $7 million from a sexual harassment lawsuit and state water regulators fine, the Los Angeles Daily News reported.
Messages left by The Associated Press seeking comment from Perez’s attorney and Zerep were not immediately returned.
An investigation by the L.A. County District Attorney’s Office closed in 2011 determined Perez abstained from votes related to his business interests and that the contracts were in place before he joined the City Council, meaning there was no conflict of interest.
Located about 20 miles east of Los Angeles, Industry has around 400 residents and $140 million in annual revenue. The Perez family has owned companies with contracts to provide city services since the 1970s. Family members have also served in the City Council, planning commission and other agencies.
Dave Perez stepped down from his post as mayor in 2012 after 11 years, citing health issues. In 2014, the city sued Perez and his various companies for nearly $10 million, and in September Industry cut a contract with Zerep to provide general maintenance to city facilities.
The audit by outside firm KPMG raised doubts about the veracity of invoices and cost of services provided. It noted that Industry paid Zerep nearly seven times more for monthly citywide street sweeping and parking lot maintenance than it pays the current service providers — about $133,000 a month compared to $20,000. Based on the average number of hours Zerep billed the city for labor each year, Industry paid the company the equivalent of hiring 50 full-time employees for maintenance of the 12-square-mile city.
Also, for the price Zerep billed for vehicle and equipment rental, the city “could have purchased and owned a fleet of the same or similar vehicle and equipment several times over,” the report said.
Industry city manager Kevin Radecki and Mayor Tim Spohn wouldn’t say whether they thought Zerep overcharged the city, according to the Daily News.
City attorney Michele Vadon said the audit was done to ensure ending the Zerep contract was “on solid legal ground.”
Douglas Johnson, a fellow at the Rose Institute of State and Local Government at Claremont McKenna College, called the findings “crony capitalism at its worst.”
“This isn’t why cities exist,” Johnson said. “They exist to provide service and structure, not for the benefit of one family conglomerate.”
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