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City moves to block payments

Concern is that attorneys for ADI executives not be paid with money that could be tainted.

March 02, 2011|By Melanie Hicken,

CITY HALL — Glendale officials this week moved to block the affordable-housing firm that allegedly bilked the city out of millions from paying for the criminal defense attorneys hired to represent its executives.

Advanced Development & Investment Inc., the developer behind several affordable-housing projects in Glendale, is under federal investigation for allegedly transferring millions of dollars to personal accounts and submitting fraudulent bills to cities across the state.

The allegations became public last fall as part of a report by David Pasternak, the receiver who was appointed in the divorce proceeding involving the company's former president, Salim Karimi, and Jannki Mithaiwala, the daughter of company founder Ajit Mithaiwala.


In Glendale — where the City Council committed more than $33 million for four ADI affordable-housing developments — the alleged fraud is estimated to reach into the millions. In court documents, Pasternak alleged that of the $24.7 million in construction costs reported by ADI on one Glendale project, Vassar City Lights, about $6.5 million was fraudulent.

Last year, the City Council approved legislative subpoenas for ADI's financial records and documents held by Pasternak to better assess the alleged fraud, and Mayor Ara Najarian indicated the city may pursue litigation to recoup the funds.

After city officials learned that Pasternak had authorized payments to cover legal representation for ADI executives, the City Council, acting on Tuesday as the Glendale Housing Authority, directed city attorneys to attempt to stop the payments if they are coming from funds that may have been obtained illegally.

Pasternak has authorized payments of up to $100,000 per month for Karimi’s and Mithaiwala’s legal representation, said Chief Assistant City Atty. Mike Garcia.

City attorneys on Wednesday contacted Pasternak to indicate that if the payments continue, the city may pursue legal action to stop them.

“From a more principled view, if ADI and its principals benefited from the fraud, they shouldn’t get the additional benefit of being able to pay their criminal defense from the gotten gains,” Garcia said.

Pasternak said in an e-mail that he has simply followed court orders.

“I have done so pursuant to the court's receivership orders, which direct me to pay the party's reasonable attorneys fees and living expenses,” he said.

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