Local Developer Plagued by Fire, Lawsuits and Criminal Charges

Monday, June 29, 2009
Will Carless

A local developer that operates four affordable housing projects in San Diego County has been plagued by a series of recent controversies around the state, including criminal charges, a fire at one of its projects that killed four people, and the accusation that it's been running a "living hell" at a building in Los Angeles. San Diego-based The Amerland Group, which specializes in building and renovating affordable housing projects, recently agreed to pay more than $500,000 to a group of tenants from one of its buildings in downtown Los Angeles. The tenants accused the company of cutting off water to elderly renters, neglecting to keep elevators running and allowing human waste to back up in blocked toilets, while at the same time systematically squeezing out low-income and African-American renters.

The company and its principals also pleaded no contest to 36 criminal charges brought by the Los Angeles city attorney last year for failing to maintain fire protection equipment at two downtown Los Angeles buildings. And, last October, an Amerland project in the Bay Area city of Vallejo was gutted by a fire that killed four of the building's elderly tenants and has drawn the interest of the local district attorney.

The company's troubles were already brewing in January 2008 when the San Diego Housing Authority approved Amerland's plans to buy and renovate the Bay Vista Apartments, a 268-unit project in Encanto. The Housing Authority allowed the developers to borrow the money using its tax-exempt status, thereby easing the developers' financing costs.

Though the Los Angeles lawsuit was filed a month before the tax-free bonds were issued, it wasn't mentioned at the Housing Authority meeting where the bonds were authorized. Nor was there any reference to the company's troubles from the city's Housing Commission, a body tasked with vetting affordable housing projects proposed by developers, which had also approved issuing the bonds.

Scrutiny of the company was less stringent because the city was merely providing access to financing for Amerland and not agreeing to give or lend the developer any public money, said Cissy Fisher, the commission's assistant vice president.

Amerland's work at Bay Vista has been lauded by City Councilman Tony Young, who said he hopes the project will become a model for the redevelopment of southeastern San Diego. But lawyers, tenants and activists who have butted heads with Amerland over the last couple of years speak with clear distaste about the company and its leaders, and said San Diego should approach future deals with the company with significant caution.

"Given the level of legal action against them, it seems we should take a break from giving these guys public money or public financing until they've established a track record," said Becky Dennison, co-director of the Los Angeles Community Action Network, a nonprofit that works with the homeless and low-income community in downtown Los Angeles.

Amerland's chief executive, Jules Arthur, said he considers the company's trials over the last couple of years a combination of bad luck, political naivete and a few errors of judgment by the 7-year-old company.

The company exclusively works on affordable housing projects. It specializes in "acquisition rehabilitation" -- taking existing affordable housing projects, renovating them extensively and working to extend their affordability restrictions.

In its line of work, Amerland has tackled some of the most challenging redevelopment projects in the state, Arthur said. The company has thrived on those challenges, he said, and has been willing to take on projects that most companies would have balked at.

"We've cut our teeth on the toughest deals in the worst neighborhoods," he said.

There has been little or no public controversy to date surrounding the four affordable housing projects the company owns in San Diego: The Bay Vista project (now called Sea Breeze), Bella Vista Apartments and Golden Age Garden, all in southeastern San Diego; and the Carlton Villas in Santee.

Young said the renovation at Bay Vista, in particular, has been a resounding success.

"I'm keeping my eye on it, but we were there a couple of weeks ago and I thought it looked fantastic," Young said. "It's so much better than it used to be."

Trouble on Skid Row
In 2006, The Amerland Group secured $35 million in tax-free financing and a promise of $11.9 million in funding from the city of Los Angeles to turn the historic Alexandria Hotel, built in 1906 in downtown Los Angeles, into a renovated affordable housing complex.

Arthur said the building was infested with criminals, drug abusers, sex offenders and gangs. As well as its significant development challenges, the Alexandria Hotel soon became a flashpoint in a broader battle over the development of downtown Los Angeles, he said.

Almost as soon as work on the building began, the company came under fire from tenant advocacy groups and organizations representing the local homeless and low-income population, who accused Amerland of evicting elderly and poor tenants in order to attract younger, wealthier renters who would be more profitable for the company.

Angry that Amerland had received millions of dollars of public money and access to tax-free financing, a group of tenants backed by the Los Angeles Community Action Network filed a lawsuit against Amerland, Los Angeles city officials and the Los Angeles Community Redevelopment Agency.

The lawsuit alleged that tenants were illegally evicted and weren't paid relocation expenses, as required by law. It also claimed Amerland discriminated against elderly, disabled and African-American tenants and that the company squeezed out more than 80 tenants it didn't want by denying them safe and habitable apartments.

For example, the lawsuit states that one of the tenants, 72-year-old Joseph Bell, who suffers from a number of disabilities including frequent seizures, was hospitalized three times because the management company wouldn't allow his in-home support worker access to his apartment. Bell's support worker was also threatened and detained by security staff when she gained access to the building, the lawsuit claims.

Amerland and its co-defendants settled the lawsuit in January for $1 million. The developer agreed to pay $550,000 to tenants it had displaced, the rest was paid by the city of Los Angeles.

Arthur said the settlement was not an admission of guilt. He maintains that if the company had fought the lawsuit in court, it would have won. He said Amerland's insurers decided to settle the case because it would have cost more in legal fees to fight it.

Arthur said the lawsuit is all about politics.

He said Amerland unknowingly dove into a highly charged political atmosphere in downtown Los Angeles, where interest groups with very different philosophies about how to redevelop the area were in almost constant battle with each other. Tenant and homeless advocacy groups were fighting to oppose the conversion of single room occupancy hotels into affordable units, he said, and Amerland became a whipping boy for those opposed to renovating Skid Row's historic buildings.

"We were a little green and we walked into a very politically complex city," Arthur said. "We were from San Diego, we were unknown and we were tying up some of the biggest deals in town."

But Dennison pointed out that, before the settlement, the plaintiffs had been making strides in their case. They had already won two initial stages of the lawsuit: a temporary restraining order and a preliminary injunction against the developers.

Criminal Charges
Angry tenants and their attorneys weren't the only people focusing their aim on Amerland in Los Angeles over the last couple of years.

In April 2008, Los Angeles City Attorney Rocky Delgadillo charged Amerland Group, LLC and four of its principals with 36 criminal counts relating to the fire code violations.

Months before, the Los Angeles Fire Department uncovered a host of fire code violations during routine inspections at The Alexandria and another Amerland building in downtown Los Angeles, The Rosslyn Lofts. The LAFD had re-inspected The Rosslyn Lofts and found that Amerland had allowed the fire equipment to fall into a state of disrepair and had failed to properly staff the fire watch.

Tina Hess, a supervising deputy city attorney who headed the eventual prosecution of Amerland for the fire code violations, said the inspection findings were fairly typical for historic buildings undergoing renovation. What was unusual was how Amerland reacted to orders from the fire department to fix the problems at its two buildings, she said.

"They were warned about it and they didn't change it," Hess said. "We were clearly of the opinion that they were blowing us off."

Arthur said Hess's claims about his company's reluctance to work with the fire department are "a complete fabrication."

"She's just blatantly lying," he said.

Faced with "impossible deadlines," Amerland actually did everything within its power to pull the two buildings into compliance while working hand-in-hand with the fire department, Arthur said. His staff held a meeting with several senior LAFD officials in March, he said.

"We agreed on a game plan for a finishing line, knowing full well we couldn't meet the official deadlines," Arthur said. After that meeting, Amerland staff was in constant communication with the Fire Department, sending weekly memos to fire inspectors reporting on their progress, he said.

LAFD Assistant Chief Craig Fry, who was at the meeting in March, confirmed Amerland had been working hard to rectify the compliance issues at the buildings.

But Fry said making a game plan for completing work it should have already completed didn't let Amerland off the hook when it came to the legal requirements. The Fire Department was still required to inform the City Attorney's Office of the company's failure to meet deadlines in bringing its buildings up to code, which it did, he said.

Amerland pleaded no contest to the 36 counts in November. As part of a corporate plea and sentencing agreement, Amerland had to pay the city and the court almost $100,000. The charges against the company executives were dropped as part of the plea.

Tragedy in Vallejo
At about 3:00 a.m. on Aug. 15, 2008, Robert Bennett, an elderly recluse who was known to chain smoke cigars while drinking, either fell asleep or suffered a medical emergency while lying back in his recliner. He was smoking a cigar and drinking an alcoholic beverage in his apartment on the top floor of the Casa de Vallejo, a 136-unit residential complex for the elderly operated by Amerland since 2005, according to the Vallejo Fire Department's investigation report.

Bennett's cigar then started a fire that spread across the room and his body to an oxygen tank he had used to help him breathe.

The oxygen tank exploded, blowing out the window to Bennett's small apartment and creating a rapid influx of air that fed the fire. It then leapt out through the open window and began to lick into the attic space of the building, from which it spread to other parts of the building.

As the fire raged through the top floors of the building, residents, firefighters and staff went door-to-door in the complex helping the tenants evacuate the building. Four people died as a result of the fire.

No fire alarm ever sounded inside the Casa de Vallejo, according to the report. No flashing lights alerted the elderly, frail residents to the fire raging above their heads. The fire department report is clear about why the alarm didn't sound:

"Unbeknownst to the Vallejo Fire Department until after this fire, and without neither permission nor prior notification, since approximately June 2008 and up to and including this fire incident of August 15, 2008, the fire alarm contractor (SimplexGrinnell) had disabled the onsite horn and/or horn strobe devices."

Arthur said the day of the fire was the second-worst day of his life after the day his father died in a plane crash.

"It was just a horrible accident. Should the alarms have been working? Hell yes. We're as upset about this as anyone else," he said.

He said Amerland is currently in litigation with SimplexGrinnell over the fire alarm system.

Amerland has been sued by the families of the tenants who died in the fire, Arthur said. The company has also come under scrutiny from the local media in Vallejo and from the Solano County District Attorney's Office for its actions in the days and weeks after the fire.

A couple of weeks after the fire, a meeting was held with displaced tenants from the Casa de Vallejo at the Florence Douglas Senior Center in Vallejo. The meeting was set up to help speed up the process for getting the homeless seniors into new government-funded housing as soon as possible.

Bob Stalker, a lawyer with Legal Services of Northern California, a group that offers low-cost and pro-bono legal services, was at that meeting to help the former Casa de Vallejo tenants. He said representatives from Amerland were passing out documents titled "Early Termination of Lease Agreement." The documents, which Stalker said Amerland staff was asking the elderly tenants to sign, contained a clause that released the company that had been managing Casa de Vallejo from any liability due to the fire.

Stalker and a local blogger, Marc Garman, who was also at the meeting, said it was clear that Amerland employees were trying to trick residents into signing away any claims against the company for loss or damage to their property.

"We're talking about a very elderly, very unsophisticated group of people, and it appeared that this was an attempt to take advantage of them," Stalker said.

Arthur said the lease termination documents were "a complete mistake." He said they were designed to protect the company from any liability arising from tenants who wanted to enter their damaged homes and reclaim their property. The company wasn't trying to trick anyone, he said.

"As soon as we got wind that the city was unhappy, we rescinded those notices," Arthur said. "We completely backed off, but it looked terrible."

The Solana County District Attorney's office later called and asked questions about the notices, Arthur said. Stalker said he's also spoken to investigators from the District Attorney's Office.

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