Warning signs within the numbers

City Manager Jim Starbird acknowledged this week that there were signs that not all was as it seemed with Advanced Development & Investment Inc. — the affordable-housing firm embroiled in a federal fraud investigation that, in the past five years, has received nearly $34 million in city assistance.

Starbird said he was "tremendously concerned" by allegations that ADI executives fraudulently transferred up to $80 million in company assets to personal accounts, and potentially gave improper gifts or donations to public officials. But he acknowledged that in hindsight, there were potential warning signs, namely spiking costs for the firm's most recent projects.

"Yeah, you start to ask, why are the numbers going up so dramatically?" he said.

The fraud allegations stem from a report by David Pasternak, a receiver appointed by a Los Angeles County Superior Court judge as part of a divorce proceeding involving the company's former president, Salim Karimi, and Jannki Mithaiwala, the daughter of company founder Ajit Mithaiwala.

During the last 20 years, ADI has built more than 50 affordable-housing projects across the state, including in Los Angeles, Glendale, Anaheim, Fresno, Long Beach, Sacramento and San Diego.

In his report to the court, Pasternak alleged that the firm significantly inflated budget estimates and submitted fraudulent invoices and other doctored documents for their housing projects. He cited the nearly completed Vassar City Lights on San Fernando Road in Glendale as an example.

He also alleged that the firm's top employees transferred up to $80 million in company assets to personal accounts, and may have engaged in quid pro quo with public officials, although none were named, and investigators have declined to comment on the matter.

Karimi and Mithaiwala have both been removed from the company, and ADI's interim chief financial officer declined to comment on Friday.

At a court hearing on Tuesday, Pasternak asked the court's permission to comply with subpoenas for records from a federal grand jury, but a U.S. attorney's office spokesman on Friday declined to comment, saying he could not confirm or deny an investigation unless charges were filed.

"If these accusations, or some of them, or parts of them are true, it is a huge concern to the city and a major disappointment," said City Councilman John Drayman.

Councilman Dave Weaver also said he was "shocked" by the news.