Glendale files suit against ADI

CITY HALL — Glendale officials have filed a lawsuit seeking repayment from a Los Angeles-based affordable housing developer that allegedly bilked the city out of millions in construction overcharges.

Glendale paid the developer, Advanced Development & Investment Inc., roughly $34 million since 2005 for four projects in south Glendale. But in the lawsuit filed last week in Los Angeles County Superior Court, the city claims some of that money was appropriated due to “fraudulent and inflated budgets, invoices, certifications and draws, as well as falsified accounting records, waivers and other loan documents.”

ADI, which is also under federal fraud investigation, built 55 projects across the state. Glendale officials have yet to determine the full extent of the alleged fraud, but are suing ADI to force the firm to account for all the money it received from the city, and how it was spent.

“Assuming the lawsuit uncovers what we believe, which is that a great deal of the money of the city of Glendale was stolen by this company … then we are absolutely going to use the fullest extent of the law to recover the funds,” said Glendale Mayor Laura Friedman.

Los Angeles has also filed a lawsuit against ADI seeking millions of dollars in alleged fraud compensation.

And roughly a dozen investors and subcontractors — including Glendale-based companies National Fire Systems and Services and Precise Air Systems Inc. — are suing ADI or its construction arm, Pacific Housing Diversified Inc., for financial damages.

In Glendale, the alleged fraud is estimated to stretch into the millions, according to reports by attorney David Pasternak, the receiver who was appointed by a judge to guard the corporation's interests while its former president, Salim Karimi, and Jannki Mithaiwala, the daughter of company founder Ajit Mithaiwala, waded through a divorce.

In one court filing, Pasternak reported that of the $24.7 million in construction costs reported by ADI for a single Glendale housing project, Vassar City Lights, about $6.5 million was fraudulent.

Ajit Mithaiwala, Karimi, other firm principals and a former company accountant are named as defendants in the Glendale lawsuit, which cites Pasternak’s allegations that they siphoned off millions of the funds into personal accounts.

Defense attorneys on Monday refuted the allegations.