Sunday, January 23, 2005

Rabbi Daniel Lapin - what was the real story with the Pacific Jewish Center, Venice Beach, California?


At 5:34 AM, Blogger jewishwhistleblower said...

by David Margolis
The Jerusalem Report Magazine
January 3, 1991

Controversial Orthodox congregationa cult or a miracle?

A model community for the newly Orthodox? Or a cult-like community with an authoritarian rabbi as its leader and a sprinkling of show-biz types for fundraising purposes? It depends who's talking about the Pacific Jewish Center, a synagogue on the boardwalk of Venice beach, in sunny Southern California. PJC has long been a source of controversy, and among its fiercest detractors are former members. Most recently, it was in the news as co-sponsor of Armand Hammer's planned bar mitzvah, which became a memorial service when the billionaire industrialist died Dec. 10 (See facing page).

An island of Orthodox Judaism on the carnival-like ocean boardwalk in Venice, a 20-minute drive from the heavily Jewish neighborhoods of Los Angeles, PJC counts many celebrities among its members and supporters.

Barbra Streisand's son had his bar mitzvah there, and her ex-husband Elliot Gould remains a supporter. A string of stars were "honorary co-chairs" at the Hammer memorial. To its supporters, PJC seems not a cult but a miracle. Where 13 years ago there was a dying synagogue whose elderly caretakers could barely raise a minyan, today there is a vibrant, energetic community of about 150 families. Many stories are told of how its spiritual leader, Rabbi Daniel Lapin, a former South African, has deeply affected his congregants' lives drawing them into Judaism, setting them up in professions, finding them spouses, "making mensches of them," as one member put it.

PJC provides a wide range of services to its members, including a growing elementary school, a private food market, a wide range of classes and a highly visible outreach program. It's a cohesive community whose members like and care deeply for each other. When a woman gives birth or becomes ill, other members prepare meals for her family. If a member's business fails, other community members offer anonymous loans to help him get back on his feet. The community takes care of itself "like an extended family," says one member. But some say that there is a darker side to life at PJC. Former members, claiming that they were protecting social or business ties, were generally unwilling to speak for attribution. But some unorthodox practices generally associated with cults turn up in account after account of life at PJC: PJC's structure gives virtually all communal authority to Rabbi Lapin, (who runs a private business in second mortgages and trust deeds on the side) and congregational president Michael Medved, an author and film critic. There are no elections of lay leaders, and no mechanism by which the communal leadership is held accountable to the membership, either financially or organizationally. Rabbi Lapin has told his congregants that this represents "normative" Jewish community structure and the "classical model" of Jewish life.

Disagreement with the rabbi is unacceptable - "chutzpah," Lapin once called it. The traditional Jewish stricture against lashon hara (spiteful gossip) has been used to silence criticism.

Members of the community are carefully chosen. PJC works hard to attract potential new members, but they are invited to join only if the leadership feels they would be an asset; those who don't fit are discouraged from continuing their association with PJC, or asked to leave.

Some former members charge that friendships are subordinated to group loyalty. They claim that, when they left the community after disagreement with its leadership, longterm friendships with community members ended overnight.

Some former members speak of PJC's "ruthless territoriality," pointing to the unsuccessful attempt to prevent another Orthodox synagogue from establishing itself in the area in 1983.

Three years ago, Rabbi Bentzion Kravitz, director of a local anti-cult and anti-missionary group, Jews for Judaism, questioned publicly if at PJC Torah was being "twisted in order to limit people's ability to think for themselves." Among Orthodox rabbis, Kravitz is in the minority. Most laud Lapin for his success in "bringing Jews back to Judaism."

Kravitz's view does find agreement among some former members. "Lapin is threatened by divergent opinions and doesn't make room for them," says a psychologist who left the community and requested that she not be identified.

"But people, at least those who want to be influenced, believe Lapin's line because his teaching is brilliant."

"You can't say anything against Daniel Lapin, or even disagree with him in public," adds a young professional whose former "close friends" at PJC refuse to speak to him since his public disagreement with Lapin.

A mid-1988 Los Angeles financial scandal put PJC in the news. Businessman Alexander Spitzer, a Holocaust survivor, was caught in a scam that allegedly involved frequent reselling of slum properties back and forth among investors or hired brokers to avoid legally mandated repairs, or to artificially inflate their value and increase the amount that could be borrowed against them.

Spitzer's daughter and son-in-law, Mark Abraham, active members of PJC, have been named as defendants in some of the suits resulting from the collapse of the Spitzer companies. Among those hurt financially were many PJC members. Rabbi Lapin has not been linked to any wrongdoing. However, within PJC, says one member who considers herself "on the outs" with the community, he "endorsed" investment in Spitzer's companies.

In the last year, PJC has seen a small but steady exodus of members, including some from its inner circles. Says an academic who also asked not be identified: "There's something ugly there, in how people are treated. If anyone wanted to go to another synagogue, they were considered traitors. "All forms of Judaism are seen as somehow inferior to the 'Torah-true' Judaism of Lapin's community. They constantly denigrate the intellectuals, college professors or psychologists, and make them feel uncomfortable." But is it a cult? One man who knows the community well says yes - on the basis of its "subordination of people to make them dependent on the group and obedient to it." Nonetheless, he praises Lapin for creating an emphasis on Torah learning and an atmosphere that allows people to develop religiously at their own pace. "The environment has a lot of negative aspects," echoes a woman who lost heavily in the investment failure, "but there's a lot of goodness and a lot of hesed (acts of kindness) there, too."

At 5:56 AM, Blogger jewishwhistleblower said...

Hundreds of L.A. Investors Involved
Key Figure in Slum Suit in Default on Major Loans
Los Angeles Times
July 22, 1989
by LAURIE BECKLUND; Times Staff WriterMetro Desk

An Inglewood lender who is a central figure in a landmark Los Angeles lawsuit aimed at the financiers of some of the city's worst slums has defaulted on about $90 million in loans from banks and has stopped making payments to investors in his companies, an attorney for the businessman confirmed Friday.

The defaults by Alexander Spitzer have shocked hundreds of private note holders and limited partners, including prominent Jewish scholars, rabbis and Soviet emigres who have deposited savings with Spitzer. Spitzer, 70, is a Holocaust survivor who has been a respected figure in Los Angeles Jewish circles for 30 years, and has recruited most of his investors from the city's Jewish community.

The attorney estimated the total of private investments in Spitzer's entities at more than $38 million.

Spitzer was one of 142 defendants in a civil suit brought by the Los Angeles city attorney and public-interest lawyers, which charged racketeering and fraud in the financing of city slum buildings. Last week, Spitzer reached a partial out-of-court settlement with the city attorney, but remains a defendant in a lawsuit.

"This is a remarkably complicated situation," said Joseph Eisenberg, a bankruptcy attorney who represents Spitzer's A&B Loan Co. and two of his other business entities. "I've represented New York Stock Exchange companies that have been less complicated and involve less debt than this."

Still unclear is the cause of Spitzer's sudden financial setback. Spitzer and his supporters--including many investors whose capital may now be at risk--blame his problems on the filing of the city's lawsuit on March 28. Others, principally attorneys who have examined his records, are questioning the underlying legitimacy of his many interlocking business entities.

One of Spitzer's holding companies, Linmark Investments, was forced to seek protection from its creditors in Chapter 11 bankruptcy proceedings in June. In its filing, it listed at least $54 million in debt to Bank of America alone. That figure is now estimated to be higher.

Bankruptcy filings also have been prepared--though not filed--for A&B Loan Co. and California Pacific Funding Ltd., two of Spitzer's largest business entities, Eisenberg added. "I hope we don't have to file them," he said. "It is Mr. Spitzer's contention that that doesn't have to happen."

Spitzer vowed in a brief interview to make good on debts.

'Not Going to Lose a Dime'

"Everyone will be paid back," he said. "They're not going to lose a dime."

In one meeting of more than 150 investors Thursday, Eisenberg, who represents Linmark, A&B Loan Co. and California Pacific Funding Ltd., urged patience by private creditors.

"I've not come here to tell you all is well and good, that you're all going to get your money back," he said. "There is pessimism here and if you're not picking it up, you're not listening."

He estimated total bank debt at about $90 million.

"The B of A (Bank of America) has decided it has to take a haircut on a roughly $60-million debt," Eisenberg told the group. Because investors had borrowed from one of Spitzer's entities in many cases to get money to invest in another, he said, he could not estimate the exact amount of money invested by private individuals.

Investors were encouraged to form private creditor groups to work with Spitzer to avoid what Eisenberg called a "feedfest" for attorneys if investors begin filing lawsuits to recover their money.

Investors Go Along

At the lengthy meeting, most investors appeared willing to go along with Spitzer's plan. He moved through the crowd easily, shaking hands and reassuring many longtime associates.

"Only one man can bring this back and that is Alex Spitzer," said Norm Brill, who said he has invested $261,000 with Spitzer's entities. "He's still here. He's not running."

Spitzer did not address the investors' group himself. But in a brief interview after the meeting, he blamed his problems "entirely" on the the city of Los Angeles, which in the civil suit accused him and several of his associates and business entities of racketeering in its loan practices on slum buildings. Banks declared him in default on about $90 million in loans in April.

"I guess I'm not surprised that they're in financial trouble, based on our knowledge of what we alleged to have been their lending practices," City Atty. James K. Hahn responded Friday. "But I don't think it was because I sued them. . . . Their lending practices were a prescription for financial trouble."

Nonetheless, he added, "it was certainly not our intent to have investors lose money."

Prominent Investors

Among the investors are Dr. Norman Lamm, president of Yeshiva University in New York, and his brother, Maurice, former rabbi of Beverly Hills' Beth Jacob Congregation and a past president of the Southern California Board of Rabbis, and film critic Michael Medved, president of Pacific Jewish Center, an Orthodox congregation in Venice.

"This has struck Alex Spitzer very hard," said Rabbi Daniel Lapin of Pacific Jewish Center, where 23 member families are note holders or limited partners in Spitzer entities.

"You're talking about a broken man, a shadow of his former self. . . . People aren't panicking because this isn't a man with flashy offices and flashy cars. This is an honorable man."

Medved, who has invested more than $100,000 in Spitzer's First Pacific Loan Co., said in an interview that the city's lawsuit and the subsequent financial problems have been "shocking," particularly in Orthodox Jewish communities where Spitzer is best known.

"You have on this (investor) list a blue-ribbon array of some of the most prominent names in local traditional Judaism," he said.

'An Honorable Man'

"This has all come as a shock. I believe the charges against him (Spitzer) are probably in error. I maintain a belief to the contrary that Alex--Mr. Spitzer--is an honorable man. . . . I think it is not only right, but prudent, to allow him to work through his current difficulties--with our support."

Several investors said they were surprised to know that their funds had been used to give money to slum owners. "All we knew is we were investing in short-term trust deeds," one investor said. "I wouldn't have invested if I had known they were going to slums."

Spitzer has denied knowingly investing in slum properties. However, records show that some of his borrowers have been among the city's most highly publicized slum owners. The March 28 lawsuit accused several of Spitzer's companies of issuing loans on slum buildings in excess of their true value to reap short-term gains in high loan fees and high interest rates.

The settlement reached July 12 with the city prohibits the signatory companies from giving any loan that would bring the total of all mortgages against slum buildings to over 80% of their value. That value must be determined by an independent appraiser, and credit reviews must be done to determine whether the potential borrower is credit-worthy. Borrowers who refuse to repair substandard buildings must be declared in default under the agreement.

Based in Inglewood

However, Spitzer's numerous loan companies, based at 160 S. La Brea Ave. in Inglewood, are not currently giving out loans, Eisenberg said. He said he hopes that the companies may resume lending in a year if the current "liquidity problem" is solved.

Lists of investors prepared by California Pacific Funding Ltd. show about $38 million in investor capital as of March 31. Another company, First Pacific Loan Company, showed $10 million in investor capital. There are many others.

"What you have here is a big mess," said one attorney who asked not to be identified. "Everybody's afraid the house of cards is going to come down."

Eisenberg said Friday that an independent accountant has been brought in to analyze records, and a former official specializing in trustee work is now overseeing operations and analyzing the 900 to 1,000 loans that make up the assets of the Spitzer financial groups.

The loans have a face value of $150 million, Eisenberg said in an interview. But, he added, there has been a "certain attrition" of their value since the March 28 suit was filed.

He said banks have "tentatively agreed to forgive interest (and) some are expecting to lose principal."

Bank Declines Explanation

The Bank of America, the largest creditor, declined to comment on exactly why it had declared Spitzer's loans in default, how it had monitored its investment, or how it plans to handle the debt.

"At this point, we haven't received any proposal or business plan," said bank spokesman Ron Owens. "We are, however, very interested in entertaining any reasonable and prudent plan that will provide an equitable outcome for all parties involved in this situation."

However, some investor representatives and attorneys were skeptical.

"Where did millions of dollars raised by (these entities) go?" asked attorney Cliff Fridkis, who said his client invested "six figures" in Spitzer companies.

"How does a legitimate real estate business lose millions of dollars in a real estate boom? Why so many intermingled entities? Were state and federal securities laws followed, or was information concerning problems that the companies were having concealed from investors? The initial explanation was that this was all the city's doing. But they really haven't given much of an explanation beyond that."

City Charges 2 Loan Firms With Slum Housing Fraud
Los Angeles Times
March 29, 1989
by LAURIE BECKLUND; Times Staff WriterMetro Desk

Two lending institutions have been secretly controlling Los Angeles' worst slum buildings for nearly a decade through improper lending practices involving dozens of shell companies and front men, the city attorney claimed in a massive lawsuit Tuesday.

The scheme, based on falsely inflated property values, has resulted in hundreds of thousands of dollars in rents being siphoned into lenders' coffers instead of paying for court-ordered building repairs, the suit alleges.

The elaborate arrangement of financial and ownership transactions has thwarted slum cleanup campaigns by turning efforts to prosecute slumlords into costly and time-consuming court battles, City Atty. James K. Hahn said at a press conference Tuesday.

The 95-page suit was filed in Los Angeles Superior Court by the city, the Legal Aid Foundation of Los Angeles and a private law firm, Litt & Stormer. The plaintiffs charge Highland Federal Savings & Loan, A & B Loan Co. and 138 other defendants with racketeering, fraud and other civil violations in connection with the financing and ownership of 11 slum buildings.

Most of the buildings are in the inner-city's poorest neighborhoods and are inhabited by recent immigrants.

Standing outside one of the buildings, in Hollywood, Hahn said: "In this lawsuit, we seek to hold responsible those lenders that, through irresponsible and often fraudulent conduct, have reaped enormous profits off the backs of the city's poor and underprivileged."

In essence, the suit claims that the two institutions--along with a West Side real estate consultant named William Leyton, who has ties to both--have systematically driven up the paper value of the slum buildings. They have done this by frequently changing owners in order to generate new, bigger loans and to increase mortgage payments.

The lenders are thus able to siphon off tenants' rent to ever-higher payments and fees on the new loans, leaving no money to maintain the buildings, the suit contends. The plaintiffs allege that the owners of record are in many cases simply managing the buildings for the real owners, the lenders.

Ben Karmelich, president of the Highland Park-based Highland Federal, denied the allegations in an interview Tuesday. He is also named personally as a defendant and accused of facilitating "numerous transfers" of ownership to "uncreditworthy" buyers and shell corporations "solely for the purpose of taking out large loans in an attempt to inflate the value of the property, thereby falsely inflating Highland's assets."

"All these allegations are untrue. . . . We wouldn't do anything wrong," Karmelich said. "The lawyers tell me to deny everything and to say everything is not true, and to say that we are an honest, moral company."

Representatives of A & B Loan, an Inglewood-based company that has financed seven of the 11 slum buildings, according to the lawsuit, did not return a reporter's calls. Alexander Spitzer and Larry Blumenstein, identified as co-owners of A & B Loan, also are charged personally in the lawsuit.

Leyton is a convicted slumlord who has owned or financed eight of the 11 slum buildings, some of them held in shell companies, according to the suit. He did not return a reporter's calls.

New Legal Approach

The suit does not lay out in detail the personal relationships among the 140 defendants. Rather it seeks to break new legal ground by proving through extensive study of public records that the lenders are in fact the true owners controlling the property.

The huge suit is expected to result in years of court procedures. If successful, it could not only turn around the slum conditions in the 11 buildings but also prevent lenders from making unwise loans to unqualified buyers.

The suit is the outgrowth of years of frustration by deputy city attorneys, Legal Aid Foundation attorneys, and private attorneys who have repeatedly brought slumlords into court only to find that the properties had been suddenly transferred to new owners. The process then starts all over again, with new, time-consuming building inspections and new lawsuits.

It also marks the first time that the city attorney has joined forces with outside counsel to pursue slumlords, officials said. Deputy City Atty. Stephanie Sautner, who supervises the city's slum task force, said she joined forces with Legal Aid attorney Deborah Dentler two years ago when each found the other investigating the lending institutions.

Attorney Barrett S. Litt, whose firm has represented tenants in several major slum-related lawsuits, is also a plaintiff in the case.

Based on Public Records

The suit does not contend that all the 140 defendants know each other, or that they are involved in a single conspiracy. The plaintiffs said the basis for the suit is more than 1,000 public records showing questionable transfers of property that they contend indicate that the lenders are in fact controlling the owners of record.

Among the 15 laws the majority of the defendants are accused of breaking is the federal Civil Racketeer Influenced and Corrupt Organizations Act.

In the suit, defendants are divided into three categories: lenders, "lender-related defendants" that include alleged shell corporations set up to hold slum properties for brief periods and the owners of record.

The owners of record include some of the city's most notorious slumlords, among them fugitive Vijaynand Sharma, who fled the country last year after being sentenced to 20 months in jail for code violations at five of the buildings named in the suit. Another is Neil Bleuler, who has been convicted of 85 counts of code violations arising from slum conditions at several buildings.

"While the predatory lenders were reaping the profits," plaintiff Litt said, "the tenants languished in buildings which lacked heat or hot water, had broken doors and windows, leaked because of roof and plumbing defects, were riddled with rodents and vermin, were plagued by criminal elements, and had innumerable other slum-related problems."

Among the questionable practices, the suit charges, are that the lenders repeatedly have loaned money to clearly unqualified buyers, and failed to call in the notes when the buyers went bankrupt or stopped making mortgage payments.

"Our lawsuit also alleges that these practices were for the purpose of the lender showing falsely inflated assets and performing loans for their books," Hahn said.

"Our evidence will show many instances of fraud and insider dealing in transfers that were designed to falsely inflate the value of property and subvert criminal prosecutions . . . These are exactly the kinds of practices that S&Ls have gotten into trouble for across the country."

The 11 buildings have been transferred more than 100 times since 1981, when the city attorney's slum task force began keeping a target list of the worst of the worst slums in town.

The buildings have been the subject of more than 50 criminal prosecutions by the city attorney for such slum violations as rats, lack of heating and running water, and fire danger. Some of the buildings have undergone court-ordered repairs. Others remain classified as uninhabitable, although tenants live in them.

Highland Federal is a lender to six of the 11 buildings, while A & B is a lender to seven. Since 1981, the two have represented about 25% of the buildings on the task force, Sautner said.

Changed Hands Often

One building, the 167-unit Cameo Hotel at 504 South Bonnie Brae St., has changed hands six times in four years. One owner turned out to be a dog, the suit claims. During that time, loans on the property increased from $405,000 to a current $2.6 million--"all as a result of repeated loans granted to uncreditworthy owners which drove up the paper value of the property," the city attorney's office said.

Contending that the defendants conspired to breach the right of tenants to live in habitable apartments with functioning utilities, the three plaintiffs are seeking civil damages and an injunction that would prevent similar lending practices in the future.

The suit seeks, among other damages, more than $1 million in civil penalties for violations of the California Business and Professions Code.

The tenants are seeking punitive damages for more than 1,500 tenants, including $100 per day for each tenant who lived without water, electricity or other utilities that are required by law.

Attorneys stressed that the lawsuit is not intended to make all lenders responsible for properties upon which they hold mortgages, which could lead to increased mortgage financing difficulties in poor areas of the city. The lawsuit targets the lenders in the suit, because the attorneys believe they conspired with the owners of record to reap profits from tenants, plaintiffs said.

Contributing to this story was Times Staff Writer Douglas Frantz


These are the 11 slum buildings listed in the city's lawsuit:

2616 Idell St.
1917 S. Central Ave.
4020 S. San Pedro St.
5426 Virginia Ave.
807 S. Fedora Ave.
504 S. Bonnie Brae St.
526 S. Union Ave.
1616 W. 11th St.
1000 Echo Park Ave.
553 Ceres Ave.
823 S. Bonnie Brae Ave.

PHOTO: City Atty. James K. Hahn in front of apartment house involved in lawsuit filed against Los Angeles slum housing.


Washington Post
April 1, 1989
by United Press International

A savings and loan and 136 other companies and individuals were accused this week in a far-ranging lawsuit of conspiring with some of the city's worst slumlords to maintain a permanent network of 11 slum buildings

Named as the primary defendant in the Superior Court lawsuit was Highland Federal Savings & Loan.

The lawsuit seeks at least $1 million in civil penalties and was filed by the City Attorney's Office, the Legal Aid Foundation and the public interest law firm of Litt & Stormer.

"In this lawsuit, we seek to hold responsible those lenders that, through irresponsible and often fraudulent conduct, have reaped enormous profits off the backs of the city's poor and underprivileged," City Attorney James Hahn said at a news conference outside one of the properties in Hollywood.

Besides Highland Federal, other lenders named as defendants are Northeast Investment Corp., Interreal of California Inc. and Interreal Pacific Properties of Santa Monica.

Also named is A & B Loan Co. Inc. and its president and chief executive, Alexander Spitzer, and five other companies in which A & B Loan is the managing general partner. Other defendants include Highland Park's president and chief executive, Ben Karmelich.

Hahn said the lawsuit stems from a city-wide network of 11 apartment buildings and residential hotels that have been plagued by slum conditions for at least the past eight years.

The properties were all financed by the lenders named in the lawsuit and have changed ownership more than 100 times. All have been the subject of more than 50 criminal prosecutions by Hahn's office for slum conditions.

Hahn said at least some of the properties were owned by nine convicted slumlords, including the reputed worst slumlord in Los Angeles, fugitive Vijaynand Sharma.

"Our complaint alleges that these institutions ... have engaged in banking practices ... for the purpose of extracting maximum profits in the form of rents that were used to pay interest and principal and left no money for repairs," Hahn said.

These "lending practices not only failed to insure that the buildings would be maintained in conformity with the law, but seemed designed to keep the buildings operating as slums," he added.

Along with civil penalties, the suit also seeks punitive damages for more than 1,500 tenants. Additionally, it seeks permanent injunctions requiring the defendants to repair the buildings and court orders ending the alleged unfair banking practices.

The lawsuit alleged that Highland Federal management consistently violated banking practices by allowing and often facilitating the frequent transfer of slum building titles to and between uncreditworthy and disreputable buyers.

The lender's management also allegedly permitted such transactions to take place with inadequate or no appraisals, and allegedly allowed long delays to occur prior to foreclosing on deeds of trust and defaults.

The lawsuit accuses the defendants of unfair business practices and of a number of California Civil Code violations committed against tenants. These violations include fraud, conspiracy, failure to abate a nuisance and negligent maintenance.

Some of the defendants also are accused of violating federal racketeering laws by engaging in mail and wire fraud.

Hahn said the suit is the result of a lengthy investigation conducted by his housing enforcement unit, which noticed that year after year there remained a "hard core" group of buildings that continued to deteriorate despite constant prosecutions.

Hahn said his attorneys, frustrated by constant changes in ownership that thwarted the city's efforts to upgrade the buildings, began to look behind the scene for a "common thread."

What they found was that all the problem buildings were financed by the lenders named in the lawsuit, Hahn said

Accused Firm Asks Shift of Slum Case to Federal Court
Los Angeles Times
April 6, 1989
by CHARISSE JONES; Times Staff WriterMetro Desk

A & B Loan Co., accused of racketeering in connection with financing some of Los Angeles' worst slum buildings, filed a motion Wednesday to have the lawsuit against it and more than 130 other defendants moved from Superior Court to federal court.

Max Greenberg, an attorney for the Inglewood-based lending institution, and its co-owner, Alexander Spitzer, said a notice of removal was filed in U.S. District Court in Los Angeles. He declined to elaborate on why the motion was filed, saying only that it was an "appropriate step to take in the litigation."

The lawsuit--in which A & B Loan Co., some of its officers and 137 other defendants have been accused of conspiring to siphon profits from 11 slum buildings--was filed last week in Los Angeles Superior Court by the city attorney's office, the Legal Aid Foundation and a private law firm.

Variety of Charges

Among the 15 laws allegedly broken by the defendants is the federal Civil Racketeer Influenced and Corrupt Organizations Act (RICO). The suit contends that A & B, Highland Federal Savings & Loan, and a host of building owners were able to profit from and control the city's worst slum buildings through fraud, racketeering and numerous civil violations.

Deputy City Atty. Stephanie Sautner said that Wednesday's removal filing was expected " . . . because RICO is traditionally a federal claim. . . . This is a tactic to try to split up the case, causing us more work."

However, Greenberg contended that the violations of state law alleged in the suit could also be tried in federal court.

'Not an End'

"In this case I think the state court matters will go over to federal court. . . . (The filing) is not an end to the state causes of action."

The plaintiffs' attorneys have not yet decided whether they will file a motion to have the case moved back to Superior Court.

"The merits of the case remain the same in Superior Court or federal court," said attorney Barrett S. Litt.

The lawyer added that federal court officials still must rule on whether the case will be heard at that level.

Lenders Agree to Force Slumlords to Fix Buildings
Los Angeles Times
July 13, 1989
by LAURIE BECKLUND; Times Staff WriterMetro Desk

A group of Inglewood loan companies signed an unprecedented agreement with Los Angeles on Wednesday in which they promised to change their lending policies and force borrowers to repair slum buildings--or face losing them.

The agreement marks a partial settlement of a landmark civil lawsuit filed by the city in March that accused 146 defendants of fraud and racketeering in connection with their investments in 11 of the city's worst slum properties. The lawsuit charges that some lenders have secretly controlled slum buildings from behind the scenes by piling enormous debts onto old buildings.

Under terms of the 22-page agreement, Alexander Spitzer, his A & B Loan Co. and nine related defendants will insert a slum clause into their loan contracts that will force borrowers to begin repairs on any substandard buildings within 30 days of getting loans. It also limits the size of loans that can be issued on a single property.

"This agreement could break the cycle of slum transfers," said Stephanie Sautner, deputy city attorney in charge of the city's Housing Enforcement Unit, which brought the suit. "It says that if your building is a slum, you had better repair it or you're going to lose it. And it makes the lender the enforcer."

In essence, the agreement forces the little-regulated industrial loan companies--commonly known as "hard money lenders"--to follow lending guidelines similar to those now required of the more regulated savings and loan associations, as well as monitoring the buildings' maintenance.

If a borrower fails to bring his building up to code, according to the agreement, he will be considered in default and the loan company must foreclose. If a lender breaches the agreement, he is subject to being taken back to court by the city. The settlement also contains a provision for a retired judge to resolve any disputes that may arise between the city and the lenders.

Spitzer declined comment. In a brief statement, Marc Marmaro, one of his attorneys, said his client was "pleased to enter into the agreement."

"There is no admission of wrongdoing," Marmaro said. "And we will vigorously defend the remaining sections of the lawsuit."

Still unsettled are claims by the Legal Aid Foundation of Los Angeles and Litt & Stormer, a private law firm, which filed the lawsuit jointly with the city. At stake in the class-action suit are damages sought by hundreds of tenant families that claim they have been victimized by fraudulent lending practices carried out by Spitzer and several of his Inglewood companies.

"This is undoubtedly the largest slum tenant lawsuit in the country . . . and it involves potentially a lot of money," attorney Barry Litt said. "We think this settlement is in the best interests of the lenders as well because it holds them to higher lending standards. But as far as the tenants are concerned, we will proceed."

However, he said, it will take months before he will even be able to learn the names of all of the tenants who have lived in the building, let alone contact them and determine the details of their situations.

Legal Aid attorney Kim Savage said tenants have lived for years at a time with rats, mice and roach infestations while owners who are not credit-worthy pass buildings to each other. Tenants have lived for nearly three years in the Cameo Hotel at 520 S. Bonnie Brae, she said, with broken windows, no fire safety equipment, broken plumbing and pest infestations while the building was passed from one "uncredit-worthy owner" to the next.

That building and several other of the 11 buildings on which Spitzer's loan companies have held mortgages are now being fixed up, Sautner said.

City Atty. James K. H a hn issued a statement calling the settlement a "major breakthrough" that has achieved, after 13 weeks, a settlement that is similar to the request for injunctions the city had sought in its suit.

"We have a unique settlement in a unique lawsuit," he said. "This is what we sought from this litigation and it is what we will be continuing to demand of the remaining lending defendants. This settlement agreement is a blueprint for the type of lending practices that we consider responsible in the Los Angles rental housing market."

Other Lending Firms

It is unclear just how many buildings will be affected by Wednesday's agreement. According to the 22-page document, signed Wednesday, all new loans and refinancings issued by A & B Loan Co., Golden West Loan Co., California Pacific Funding Inc., World Finance of Orange County, West Coast Loan Co., Manchester Associates and Bengal Discount Corp. will have to insert slum clauses into their mortgages. All of those companies have either current or past ties to Spitzer.

Also signatory to the agreement are Spitzer associates Larry Blumenstein, Peter Gluck, Eugene Ephrat and Howard Bardach. Bardach, who signed for World Finance Co. of Orange County, is not a defendant in the suit.

Specifically, the agreement prohibits the signatory companies from giving any loan that would bring the total of all mortgages against slum buildings to more 80% of their value. That value must be determined by an independent appraiser, and credit reviews must be done to determine whether the potential borrower is credit-worthy.

It also goes beyond the requirements of such traditional lenders by forcing borrowers to make repairs needed to bring substandard buildings up to code. Any time a borrower transfers his slum property, the lenders are required to foreclose and take the property back unless the new borrower agrees to the terms of the city's settlement.

Special exceptions to the 80% limit are made for loans to borrowers who ask for additional money to make the repairs. In those cases, the agreement calls for the lenders to retain separate accounts to pay licensed contractors directly for repairs.

One prominent lender, Highland Federal Savings & Loan Assn., remains a defendant in the suit. Highland's attorney, Michael Berk, issued a brief statement saying it is not in settlement negotiations with the city and will continue to "vigorously defend" itself in the suit.

"A & B is a different type of lender than Highland Federal," Berk said. "Highland Federal Savings will continue to make loans in the central city in compliance with the rules and regulations of the Federal Home Loan Bank Board governing its lending practices."

The Money Behind the L.A. Slums
Los Angeles Times
July 31, 1989
by LAURIE BECKLUND; Times Staff WriterMetro Desk

For more than a decade, many of Los Angeles' worst old slum apartment buildings have been commodities on an insider's trading block.

While immigrant tenants live in squalor in the aging structures, behind-the-scenes investors have developed sophisticated financial devices that drain the buildings of thousands of dollars in cash rents and virtually condemn them to further decay.

Those who stand to make the greatest profits do not need to step inside the door. Often, they do not own the properties, at least not in their own names. They own the mortgages on them.

Exceed Property Value

In a two-month examination of Los Angeles slum real estate, The Times found that some lenders have heaped old buildings with high-interest mortgages that often exceed the value of the properties. That leaves the titular owners to run the buildings on little cash, face creditors, and assume the liability for slum code violations.

Slum traders often "sell" buildings to their own dummy corporations, giving themselves new "loans" each time and inflating the apparent value of the buildings. They then sell the buildings to paid front men, or to unsophisticated buyers who often do not realize their lenders are related to each other. Because each transaction taken alone appears to be standard, government agencies are unlikely to spot abuses.

And, there are abuses:

--The titular president of two slum trading corporations, Grover Black, apparently is a dog once owned by Westside real estate agent William Leyton, according to associates. Public records show that Grover Black has had two offices, hired at least two attorneys, signed court records, and claimed an interest in at least two major slum buildings.

Leyton declined an interview. His attorney, Milton Simon, who filed a federal bankruptcy petition signed by Grover Black, said he "preferred not to comment" on the identity of Grover Black.

--One of Los Angeles' busiest and most flamboyant slumlords in recent years was a one-time Boston bank robber named Joe Fitzpatrick who financed his empire of several dozen apartment buildings through numerous loans from friendly bankers to what he himself described as "straws" and "shell" companies. One was named MLUS Inc., an anagram of SLUM. A close associate of Leyton, he has been accused in court of naming his dog president of one of his companies. Fitzpatrick claimed that the company president, "Teluce Black," actually was his gardener.

Fitzpatrick, who acknowledged in a court case last year that he had been convicted of bank robbery about 20 years ago, left town last year after declaring bankruptcy. But he managed to get back at least one of his old apartment buildings by lying to the court about his relationship with his real estate agent, Leyton, records show. He could not be reached for comment in Las Vegas, where he has recently incorporated new companies.

--Inglewood lender Alexander Spitzer has financed many of the city's most infamous slumlords for more than a decade, buying and selling slum trust deeds among his own companies. While his companies have taken in profits from high-interest loan payments, his staff has treated some of his borrowers--the slum owners of record--as "managers," charges one borrower who is currently suing him for fraud.

Asked about the frequent property transfers, an attorney for Spitzer said they were "for business purposes." Through the attorney, Spitzer declined an interview. Several of Spitzer's business entities have recently begun defaulting on more than $90 million in bank loans and halted payments to investors. One has petitioned to reorganize under Chapter 11 of federal bankruptcy procedures.

Massive Civil Suit

Leyton, Fitzpatrick and Spitzer are among 142 defendants in a massive civil lawsuit filed last March by the city attorney, the Legal Aid Foundation and Litt & Stormer, a private law firm that is representing thousands of tenants. On July 12, the city settled its claims with 11 companies and individuals related to Spitzer with an unprecedented agreement that requires them to alter their lending practices and force their borrowers to make repairs on substandard buildings. They are still being sued by the tenants.

The suit alleges fraud, conspiracy and racketeering by the defendants in connection with their ownership roles in 11 selected slum buildings over the last decade. It argues that lenders, through imprudent or insider loans, have so much control over Los Angeles slum properties that they are de facto owners and should therefore be held accountable for living conditions in the buildings.

"At first we saw a conspiracy among record owners," said City Atty. James K. Hahn. "Then there was a whole other level underneath it that we were completely unaware of, and that was the lenders. . . . The lenders were essentially using these people as fronts . . . uncredit-worthy people who could come in the back door and get exorbitant loans you and I could never get."

Unanswered Questions

There are a number of questions surrounding the alleged schemes that Hahn and the other plaintiffs hope will be answered in court: How many of the defendants know each other? To what extent do slum lenders violate existing law, if at all? Why is it that some buildings seem to travel a slum circuit, passing from one trader to the next and falling deeper into disrepair with each new sale?

A review of hundreds of real estate records, as well as other public documents and interviews, indicates numerous links between certain slum traders. Many use the same attorneys, the same notary publics and, in some cases, the same offices. This story focuses on one "owner" and his financiers.

Robert Rooks is a small film company owner who got into the slum trade as many owners do, hoping to profit from an investment that required little money down. In 1986, he bought a 47-unit slum apartment building at 3972 W. 9th St. from a man who had defaulted on his loans and was headed into foreclosure. He said he got the property with no cash down in exchange for agreeing to assume the existing loans.

"I thought I'd buy this property and fix it up," Rooks said in an interview. "I didn't know what I was getting into."

Like many owners of slum properties who think they are getting a good deal, he did not order a title check. That, he now acknowledges, was a "big mistake." The $1-million loan he had agreed to pay turned out to be a "wraparound" trust deed, which contained payments to several other note-holders whose identities were not disclosed to him at the time, he said. Over the next year, he said, new notes on the property kept surfacing until there were "about 11."

Note Is Sold

At first, he made his mortgage payments to William Leyton, who controlled a real estate investment company called Zimo 5 Inc., at an office just south of Beverly Hills.

Then, he said, Leyton told him he had sold the notes to his longtime business associate, Alexander Spitzer, who owned several industrial loan companies at 160 S. La Brea. Over time, Rooks said, he developed a relationship with Spitzer and his staff that was so close he spoke with Spitzer's staff daily and consulted them on major repairs he was making.

"Spitzer told me he liked me because I was 'workable' and I could deal with Hispanics," Rooks said. "(He told me) how blacks weren't good to have (as tenants) because they knew their rights more than Hispanics who don't have their green cards, and pay on time."

Black women "with lots of kids in their apartments (who) had welfare checks . . . and no husbands so they couldn't just move out" were also acceptable tenants, he said he was told.

Debts Increase

To help repair the apartment building, he took out two new loans and put up his $300,000 Monterey Park home as collateral. Spitzer told him that other buildings would become available from time to time if he wanted to take them over.

Meanwhile, his debts increased and he couldn't keep up with all the repairs on the building.

"There was a pipe under the building with about 20 patches on it," he said. "It would have been cheaper in the long run to put in a new pipe." But, he said, he couldn't get enough cash to do so.

"I asked to lower the (mortgage payment) to fix the building and put it back into shape. But they wouldn't do it," Rooks said.

The city began prosecuting Rooks for slum violations. He installed new fire sprinklers required by the city, he claimed. Then, he said, one of Spitzer's business entities foreclosed and took back the building, claiming he was in default.

Suit Alleges fraud

Rooks is now in court, suing several companies owned by Spitzer and Leyton for fraud in what he claims was an illegal foreclosure. In court records, Spitzer's attorneys argue that the case is a straightforward example of a lender foreclosing on a borrower who didn't pay his debt.

"Finally I figured it all out. . . . I was an employee rather than an owner," Rooks said in an interview. "They run the loans up to the market value of the property. You collect the money and give it all to them. You take all the punishment. Mr. Spitzer didn't take the (slum) violations, I took 29 counts--and then after you fix it up, they take it back."

In all, Rooks said, he paid $10,000 in fines for his slum-related violations, lost his building and nearly lost the home he put up for collateral. His old building is now owned by another major slum investor who has taken over many of the buildings financed by Spitzer's A & B Loan Co.

'Wonderful Dog'

The president of one of the companies holding a $1-million note on Rooks' property was one Grover Black. Several sources, including Michael Medved, a television talk show co-host, said Grover Black was Leyton's dog.

"Grover was a really wonderful dog," Medved said in an interview. "A black dog."

Grover Black's corporate address was a rental post office box on Wilshire Boulevard.

According to the California Department of Motor Vehicles, there is no Grover Black licensed to drive in the Los Angeles area. And there is no registered voter named Grover Black in the area. Asked how to reach Grover Black, Leyton's attorney, Milton Simon, said: "That's a very good question. I don't know." Asked to describe him, he answered, "I'd prefer not to." Asked point blank if Grover is a dog, he answered: "I never met a dog. I don't think I can talk about this."

Complicated History

Grover Black is still listed as president of Zimo 5 Inc., an active California corporation. Zimo 5 transferred one trust deed on the Rooks apartment building three times in less than one minute, according to attorney Abrams, who said the real estate history of Rooks' property was the most complicated he had ever seen.

"The way they tossed this note (loan) around . . . is amazing," Abrams said. "You never knew from day to day who owned it. . . . They set up companies on the left hand so they could turn money over to the right hand."

Such transfers are known in the slum trade as "churning."

"There are maybe 300 or 500 unreinforced brick buildings (in Los Angeles) that are constantly churning," said Louis Scalise, a major investor in such properties until the mid-1980s, when he said he left the business.

Clouded Titles

Churning is not real estate as most people know it. Properties get traded often, sometimes every few months. Occasionally, in a series of preplanned maneuvers, properties change hands several times within a minute. The mortgages, too, are sold often, and sometimes used as collateral on other buildings. Run-down old hotels that would appear to be worth next to nothing wind up with six, eight, or 10 mortgages. One slum hotel was weighed down with 14 trust deeds.

Title to the buildings becomes so clouded that only the most gullible--or the most savvy--of investors will touch them.

Meanwhile, the owners of record, including "straws" who are paid or duped into taking title, are slapped with code violations, utility bills and taxes. The noteholder avoids the responsibility and takes in the cash, foreclosing whenever he wants a new "owner."

A foreclosure sale wipes the slate clean of all debt, and the cycle can start all over again.

Likened to Insider Trading

"Churning is the real estate equivalent of insider trading, a method of creating tax-free dollars," asserted Bill Wakeland, a former slum task force member who witnessed it first-hand after he went to work as a consultant fixing up old buildings.

"They buy distressed property and begin to manipulate its value by selling it back and forth to each other. After a while, nobody makes payments. It gets ready to go to foreclosure. Then the lender takes it back and resells it to the same people under a different name."

Since 1980, when the city attorney's office formed its "slum task force" to work with fire, health, and building inspectors, officials have seen frequent transfers of slum buildings.

"Initially when we saw properties changing hands, we thought they were transfers in avoidance of prosecution (for code violations)," said Deputy City Atty. Stephanie Sautner, current head of the task force. "Later we realized the transactions were a means of making a few people a lot of money, that they were designed to inflate the property and take out all possible equity."

Cash Attraction

For both the record owner and his financier, the main attraction is cash--up to $50,000 a month from old buildings that are crammed with immigrants.

There are probably as many different variations on churning as there are investors. Most are extremely complicated.

By selling a building often, its value rises artificially, giving investors a larger tax base to use for depreciating the property and writing off their large profits.

Scalise said some rents are collected in cash, permitting a further tax dodge.

"You can also say to the IRS that you're taking in $5,000 (a month) and you're really taking in $20,000, so on paper you have a net loss," Scalise said. "I never did it. And I really took a lot of money home from these buildings anyway--every month."

Pecking Order

When the person in control of the building decides it is time for profit-taking, the record owner is usually so delinquent on his many loans that the financier can foreclose at will. His companies may hold the first note, the third and the seventh. If he uses the third note to foreclose, the people who own the fourth, fifth and sixth notes lose their money.

Meanwhile, the buildings fall further and further into decay. The aging, 47-unit building owned by Rooks is an example.

A Leyton-related company submitted into the court record a balance sheet for one month that it had owned Rooks' building. According to that sheet, the company took in $13,524 in rents, paid virtually no maintenance costs, and still listed a net loss.

According to the sheet, $136 was spent for elevator work, $80 for pest control and zero for "maintenance." More than $9,300 was spent on mortgage payments. About $2,200 went for overhead fees: "management," "legal," "sales" and "wages and commissions." With utility costs, the result was a net loss of $949.

Writing Off Losses

Innocent investors write their losses off on their income taxes. And, because the slum trader may have defaulted on a note held by one of his own companies, he is probably in a position to write his "loss" off as well.

There is nothing illegal about creating one new company after another.

"There's nothing wrong with creating 100 new companies or 1,000 new companies," said Jim Reber, spokesman for the state Franchise Tax Board. "That's perfectly legal. But if you don't file tax forms, they will be suspended."

Many of Leyton's companies are suspended for failing to file state income tax returns, the public record shows.

Numerous Leyton-related corporations have filed for bankruptcy. In an apparent violation of bankruptcy regulations, records show, Leyton failed to disclose to the court on more than one occasion that he held a major interest in several companies that previously filed for bankruptcy.

Flash in the Pan

One such corporation, PHC Finance Inc., was extremely short-lived.

According to state records, PHC Finance was incorporated on Jan. 24, 1985. According to federal bankruptcy records, however, it "duly held and convened" a meeting of its board of directors on Jan. 23, 1985--the day before it came into existence. On that day, it decided to declare bankruptcy.

That means it went bankrupt before it was created.

On Jan. 25, it filed for bankruptcy, listing about $250,000 in debts on an apartment building. Its president, the busy Grover Black, listed as his "principal place of business" 1800 S. Robertson Blvd., Suite 384.

The "suite" is a rented post office box in a convenience store.

For the Record
Los Angeles Times
August 1, 1989
Metro DeskBy Metro Desk

Alexander Spitzer--The Times reported incorrectly Monday that Inglewood lender Alexander Spitzer controls several industrial loan companies. The appropriate term for Spitzer's firms is not industrial loan companies, but finance companies. Finance companies, or "hard-money lenders," are less regulated than thrift and loans, which take deposits from the public in the form of investment certificates. Both are licensed by the state.

Big Gain for Slum Traders in Coliseum Deal Revealed
Los Angeles Times
August 14, 1989

While the Los Angeles city attorney was secretly investigating slum traders last year, another public agency, the Los Angeles Memorial Coliseum Commission, paid some of the same traders $1.6 million for a dilapidated, fire-damaged apartment house, according to records.

The rationale for the May, 1988, purchase was expansion of parking facilities near the Coliseum, but officials say they primarily wanted to get rid of gang members who inhabited the building.

The Coliseum Commission, anxious to raze the building at 3981 S. Menlo Ave., did not order a written appraisal and may have paid more than market value for the property, The Times found. At the end of 1985, when the property was legally habitable, it sold for about $1.1 million--about a third less than the $1.6-million sale price.

"I couldn't believe the price when I heard it, I was so flabbergasted," said insurance broker Benton O. Shannon, who handled insurance for the building until the former owner, fugitive slumlord V. J. Sharma, stopped paying his bills. "It just wasn't worth that. I heard about it from (one of Sharma's associates) and he just smiled. It was one of those sly, shake-your-head smiles."

Coliseum officials said that they have no regrets about purchasing the building, which has been torn down and converted into a parking lot. "If we'd paid $3 million for it, we would have thought it was a bargain," Joel Ralph, general manager of the Coliseum and Sports Arena, said last week in an interview. "We had parking lots no one would park on because they were scared to death to walk by that building."

Almost all the principals involved in the building over the previous three years--including the real estate firm that got a $97,500 commission from the sellers in the deal--are now defendants in a civil racketeering suit filed March 28 by the city attorney, the Legal Aid Foundation of Los Angeles, and Litt & Stormer, a private firm representing tenants.

The lesson to be learned from the deal, according to Kim Savage, an attorney with the Legal Aid Foundation, is that the slumlords "won."

"They run it (a building) down until someone is willing to just knock it down," Savage said. "They win. They get what they are interested in, which is profit from real estate. Then there is the most obvious loss: the loss of affordable housing."

The lawsuit alleges that 142 financiers, investors and companies conspired to drain 11 sample slum buildings of thousands of dollars in cash rents through sham sales and inflated loans while leaving the buildings to fall into disrepair.

The 3981 S. Menlo Ave. building was to have been the 12th example in the lawsuit, and will still be used as evidence at trial, according to Deputy City Atty. Stephanie Sautner, who heads the city's slum task force.

"This building fits the pattern of all the others with respect to the same players, the same rapid transfers, the same slum housing violations and the same lenders and brokers involved," she said. "Many of the sham transfers are aimed at falsely inflating the value of the property."

Sautner said she could not comment on whether the $1.6-million sales price was appropriate.

The story of 3981 S. Menlo Ave. shows how closely the management of a building can be tied to crime in a neighborhood, and how costly a building's decline can be in both human and financial terms.

Housed Immigrants

The building, called the El Portal Apartments, was erected in 1926 across the street from what is now the Los Angeles Swimming Stadium in Exposition Park. In recent years, the building housed immigrant families and other low-income tenants.

In December, 1985, the building was purchased by Los Angeles real estate agent William Leyton's Interreal Pacific Properties for about $1.1 million.

Recorded documents and interviews indicate the paper value of the property rose steadily as its physical condition deteriorated. They also show how critical a role lenders played in establishing that paper value.

On Dec. 30, 1985, records show, Interreal Pacific Properties got virtually 100% financing on his purchase from A & B Loan Co. of Inglewood, which issued three separate loans for about $1.1 million on the property--loans that would ultimately be paid off in the Coliseum sale.

"They got this highly questionable loan," said Harold Gibbons, one of the sellers. "And the place was just like a jungle within a matter of weeks after we sold it. It just turned my stomach even to drive by it."

Generally, lenders require 20% down, and often much more for apartment buildings or old structures. Therefore, anyone looking at the recorded loans against the property would think it was worth considerably more than its actual market value. That impression would be enhanced by the fact that the loans were transferred--one seven times in 24 months--to different loan companies apparently eager to buy them. And new loans would be added.

However, Sautner alleged, such deals are not "arm's length transactions." Many of the transactions on this and the other slum buildings listed in the city's lawsuit were among close associates.

Leyton, according to his resume, appraised "major loan applicants" for A & B. And most of the loan companies that bought the notes on the properties have corporate ties to A & B, most sharing the same address. Attorneys representing Alexander Spitzer, owner of A & B, declined to discuss the company's loan transactions.

A holding company for A & B recently filed for reorganization under Chapter 11 bankruptcy proceedings, listing more than $130 million in debts.

On his resume, Leyton lists the building as a "restoration" project "completed" in 1986. However, records show the building not up to code during his ownership.

Leyton deeded the property four months after its purchase to V. J. Sharma, an occasional business associate.

Sharma Convicted

By November, 1987, Sharma was convicted of 112 criminal slum violations on five of his buildings--the largest criminal conviction of a slumlord ever in Los Angeles. That same month, he was also cited by the Los Angeles Fire Department for 48 "life-threatening" code violations at the Menlo building. Dozens of plumbing, electrical and building code violations also accumulated. One city inspector called it the worst building he had ever entered.

During Sharma's ownership, some tenants moved out as gang members moved in, squatting in empty units. The Coliseum Commission began placing an armed guard outside the building on event nights after a spectator was murdered in 1986 behind the building.

Before dawn on Dec. 1, 1987, an arson fire broke out in an empty unit in the Menlo building. Five units were destroyed and several others damaged. No one was injured, but officials estimated the damage at about $230,000 and ordered the building evacuated.

"That was our opportunity," said Margaret Farnum, commission secretary and acting chief administrative officer. But, she said, the commission was unaware that the building was a target of the city's slum task force--even though City Atty. James K. Hahn held a press conference outside it the day after the fire.

Richard Ullman, general manager of Five Star Parking, which operates the Coliseum's parking lots, negotiated the deal. "The parking was secondary compared to (getting rid of) the problems the gang created," he said.

Ullman said he had difficulty even contacting the owners. Sharma, sentenced to 20 months in jail, had fled the country. Leyton, the former owner, emerged as the real estate agent representing the new owner, an Encino-based company called Ty Properties that is also a defendant in the city's civil racketeering suit.

Leyton's attorney said in an interview that his client's involvement in this deal was strictly that of a real estate agent contacted by the Coliseum officials. He declined to allow Leyton--a defendant in the city attorney's suit--to be interviewed directly.

Once a price of about $1.6 million was negotiated, Paul Conn, a partner in the Charles Dunn Co. who specializes in low-income real estate, was asked to advise the commission on whether to go ahead with the sale. He provided his services without charge.

Conn said he did no written appraisal, and was not aware of the extent of fire damage or of the code violations outstanding on the vacant building.

He said he assessed the building on the basis of a per-unit value to a potential investor who could operate it as an apartment building. "I said, 'That's a good value, jump on it.' "

No Written Appraisal

Since there was no written appraisal outlining the condition of the building, it is debatable whether the price was appropriate. Records show that three other lots, one already a parking lot, sold for $300,000 a block away, but outside the area identified for public use in Exposition Park's master plan.

Gibbons, the co-owner of the apartment building until December, 1985, said he was amazed to learn what the property later sold for after it had deteriorated.

"We would have expected the property to be worth maybe $1.5 million by then . . . in decent shape, with paying tenants in it," he said.

The final sales price of $1,625,000 was financed primarily by parking fees. The property went into escrow on March 24, 1988.

The commission's negotiator, Ullman, said he told Leyton that the Coliseum wanted all encumbrances on the property removed. "The only thing the Coliseum was interested in," Ullman said, "was that they deliver clear title without liens or anything against the property. How they cleaned everything up, they did all that through escrow."

It was cleaned up through an unusual foreclosure auction in the middle of the escrow, according to records. The effect of the sale was to transfer the property from one corporate name to another in the same office while wiping out nearly $100,000 in liens to more than a dozen creditors.

The sale transferred ownership of the property from Ty Properties to Canadian Pacific Inc., both of which occupy the same Encino office. According to the city attorney's office, the companies are run by the same people, including Mordehai Ben-Horin and Dan Tepper, both defendants in the city lawsuit.

Proposed Price

Records suggest that the proposed purchase price was about $100,000 less than the $1,625,000 the Coliseum had agreed to pay.

At the time of the foreclosure sale, according to the preliminary title report, there were 31 liens, mortgages and court judgments against the property, including many debts incurred by Sharma.

Several lien-holders contacted by The Times, ranging from a fire sprinkler company to the city of Inglewood, lost their money. "I finally wrote it off on my taxes," said Kami Boudai, president of California Technology Systems Inc., a sprinkler company to which Sharma owed $11,000.

No State Record

The new owner, Canadian Pacific, agreed to Ty Properties' original terms of sale to the Coliseum and the deal closed May 11, 1988. The deed was signed over to the Coliseum by a "vice president" and a corporate "secretary" who Sautner said were, in fact, clerical workers in the office of Tepper and Ben-Horin.

"The way this transfer took place and the manner in which they've placed minor clerical workers as officers of the corporation is similar to all the . . . transfers" in the slumlords lawsuit, Sautner said.

Two weeks after the building was sold, the same two clerical workers signed notes for more than $500,000 using the Menlo building as collateral. The notes were made out to "N. V. Boehmite, a California corporation." The secretary of state's office says it has no record of such a company.

Tepper did not return a reporter's phone calls. Ben-Horin declined comment on his financial transactions on the Menlo building. "This is business and it's none of your business," he said.

Asked whether the sales price was fair, Ben-Horin said: "It doesn't matter to me if somebody overpaid. . . . I didn't force anybody to pay."

The property was the first ever purchased by the Coliseum. Commission secretary Margaret Farnum said the commission has new procedures requiring written appraisals before to property acquisitions. "Our first time around, you could maybe say we were a little naive," she said. "You could consider us novices who took most things at face value."

GRAPHIC-MAP: Coliseum Commission paid $1.6 million for a fire-damaged slum building on S. Menlo Ave, PATRICK LYNCH / Los Angeles Times

PHOTO: The Coliseum Commission got the parking lot it wanted on the site of a former dilapidated slum building, and slum traders made a big profit on the deal. Coliseum is seen in background.


Slum Financing Figure Files Bankruptcy
Investment: A federal examiner questions the ability of his companies to pay an estimated $110 million in debts. But Alexander Spitzer says the creditors should not be alarmed.
Los Angeles Times
December 2, 1989

The financier behind some of Los Angeles' worst slums has filed for bankruptcy protection from creditors, and a federal bankruptcy examiner has questioned the ability of his companies to fully pay an estimated $110 million in debts to investors and creditors.

Alexander Spitzer, a central figure in the city's landmark lawsuit this year against slumlords and their lenders, filed Monday for protection under Chapter 11 of the U.S. Bankruptcy Code.

Two of Spitzer's largest business entities also sought Chapter 11 protection. A & B Loan Co., a California corporation headed by Spitzer, and California Pacific Funding Ltd., a California limited partnership controlled by Spitzer, filed last Friday.

A bankruptcy examiner's report last month concluded that significant amounts of loans extended by A & B Loan and California Pacific could be "uncollectable."

However, Spitzer, 69, who estimated that about $80 million is owed to banks and $30 million to individuals, said he disagrees with the report.

"I am absolutely convinced we are coming out of this mess whole," he said.

Spitzer said that investors should not be alarmed by his bankruptcy filings. "As far as the investors are concerned, it is a constructive move. It is for their protection."

The investors have included prominent Jewish scholars, rabbis and Soviet emigres. Spitzer, a Holocaust survivor, has been a prominent member of the city's Jewish community for many years.

The new filings brought to three the number of Inglewood-based business entities associated with Spitzer to file in the U.S. Bankruptcy Court central district office in Los Angeles. Linmark Investments, a holding company which Spitzer also heads, filed last June.

James M. Crosser, senior partner of the accounting firm of Touche Ross & Co., had been appointed bankruptcy examiner in the Linmark case by Davis von Wittenburg, the U.S. trustee in Los Angeles.

After reviewing the financial records of Linmark, A & B Loan, California Pacific and other business entities associated with Spitzer, Crosser recommended in early November that a trustee be appointed to take control of Linmark, A & B Loan and California Pacific.

Crosser also suggested that a trustee investigate past practices of the companies and determine whether Linmark's "identification of assets and liabilities . . . truly represents the assets and liabilities."

Chapter 11 filings allow a debtor to suspend obligations to creditors while attempting to reorganize and to restructure debts. Normally the debtor retains control, unless a trustee is appointed to oversee the reorganization.

In order for a trustee to be appointed, either the U.S. trustee, creditors or another "interested party" must file a motion in bankruptcy court.

Trustees are appointed in only about 5% of the 2,500 Chapter 11 bankruptcy filings each year in the Los Angeles office, Von Wittenburg said.

Examiners are appointed in only a few cases each year. In the Linmark case, Von Wittenburg said, "We wanted answers to some of the problems, particularly the relationships between the various entities."

Von Wittenburg said Spitzer's multiple Chapter 11 filings are "significant" because of their potential effect on individual investors.

The civil lawsuit brought by the Los Angeles city attorney and public-interest lawyers last March accused Spitzer, A & B Loan, California Pacific and 139 other defendants with fraud and racketeering in connection with their investments in 11 slum properties.

In a settlement reached with the city attorney in July, Spitzer and his loan companies promised to change their lending policies. They remain defendants in the class-action part of the suit, however, in which damages are being sought by hundreds of tenant families.

Spitzer said he had problems with his creditors as a result of the lawsuit: "It created conditions that required a certain protection the law is giving us, to continue the business and reorganize."

He filed personally for Chapter 11 protection, he noted, because "I am a guarantor to all these creditors."

Spitzer said he and his entities are "absolutely not" broke.

"The liabilities of those companies will be met," he said. "The assets are there, absolutely, and the overall net worth of the companies is also there."

The examiner's report said that Linmark, A & B Loan and California Pacific "operated with little regard of maintaining the separateness of the individual corporate or business entities."

The entities seemed dependent on each other for their financial viability, the report said, so "deficiencies in net worth" of some companies put the value of others in question.

For example, even though Linmark reported $5.3 million in equity on its June 30 financial statement, the examiner found that as much as $9.4 million of Linmark's listed receivables from two other entities had no value. The examiner also found that about half of Linmark's $21-million investment in A & B Loan--"its only other asset of significance"--might not be recovered.

A high number of the loans A & B Loan had issued were in default 90 days or more, the report noted. "This loss of recoverable value would further exacerbate the adjusted deficiency in assets of Linmark . . . increasing such deficiency to approximately $15 million," the examiner wrote.

In an interview, Spitzer disputed the examiner's conclusions. "The loan portfolio was somewhat impacted by the publicity connected with the (city's) lawsuit," he said, explaining that some people temporarily stopped making payments on loans from his companies.

That is not a problem now, he added. "All the debtors are in a mode of paying."

Peter Magnani, a spokesman for Bank of America, one of Spitzer's largest creditors, with a listed claim of $54.5 million, said: "We're in a sort of wait-and-see situation, monitoring developments to see what steps the bank will take to protect its position."

Some investors contacted this week said they were not sure how to react.

William Shusset, a retired electrician from West Hills who has invested more than $100,000, said, "We are not getting enough information. . . . This is a nightmare."

Four investors in Spitzer companies have lawsuits pending to recover their investments, in amounts ranging from $60,000 to $171,000.

But others still expressed confidence. "I haven't the slightest doubt I'm going to be paid ultimately," said Sidney P. Schreiber, a Los Angeles businessman who is one of the 20 largest unsecured creditors.

Melvin Greenstadt, a Los Angeles doctor, expressed similar sentiments, adding that Spitzer is "an old friend. I have certain confidence in what he is telling us. I'm going to be as patient as possible."

A summary of Southern California-related business litigation developments during the week of March 26:
Los Angeles Times
April 2, 1990
by From United Press International Financial Desk

B of A, Arthur Andersen Sued: Bank of America and the accounting firm of Arthur Andersen & Co. were named as defendants in a multimillion-dollar lawsuit filed in Los Angeles Superior Court claiming that they allowed fraud in the sale of about $60 million in securities backed by questionable mortgages. The four investors' suit claims that they lost thousands of dollars in limited partnership units or promissory notes issued by a group of companies controlled by Alexander Spitzer. He has filed for personal bankruptcy and is the subject of a city attorney lawsuit alleging racketeering and fraud in connection with ownership of 11 Los Angeles slum buildings. (Filed March 26, Case No. 04001225)

City Can't Sue Thrift in Slum Case
Courts: Decision to dismiss charges against Highland is seen as blow to landmark civil racketeering suit against owners of 11 buildings.
Los Angeles Times
January 24, 1991

In a ruling that dealt a severe setback to a landmark civil racketeering suit against slumlords and their lenders, a Superior Court judge said Wednesday that a Los Angeles federal savings and loan cannot be sued by the Los Angeles city attorney for its lending practices on slum properties.

Judge Barnet M. Cooperman granted a motion by the principal defendant, Highland Federal Savings & Loan, to be dismissed from the lawsuit, brought nearly two years ago by the city and two public-interest law firms against slum owners and their lenders. He also dismissed allegations of racketeering against property owners and loan brokers.

Highland Federal, a 22-year-old savings and loan based in Highland Park, was one of 142 defendants in a March, 1989, suit that alleged fraud, conspiracy and racketeering in connection with their ownership roles in 11 slum buildings.

The lending institution had financed loans on eight of the 11 buildings, and was the best known of the defendants.

Cooperman said the federal Office of Thrift Supervision regulates Highland's lending activities and preempts any local entity from filing suit. "It may be that Highland has violated federal law that governs it," he said, "but if such is the case . . . that relief must be sought under federal law."

"It is a big victory for Highland Federal bank," said Michael D. Berk, attorney for the thrift. "The case against Highland was improper from the very concept."

Stephanie Sautner, head of the city attorney's slum task force, said her office probably will appeal, arguing that the decision "says local authorities can't touch a federal savings and loan, no matter what they do. We feel strongly a savings and loan cannot commit acts that severely impact the public health and safety of the poor people that live in the city and then hide behind federal regulations."

Cooperman also said the plaintiffs had failed to show that the defendants had engaged in racketeering activity, as defined under the 1970 federal law known as the Racketeer Influenced and Corrupt Organizations Act, or RICO.

The allegations of conspiracy between owners and lenders were part of what made this suit different from other suits against slumlords. Cooperman said the city attorney, along with the Legal Aid Foundation of Los Angeles and the private law firm, Litt & Stormer, had failed to support the contentions.

After rejecting the racketeering allegations, the judge left open the possibility that the case could proceed against individual property owners and other state-regulated lenders, if the plaintiffs amended their complaint in 30 days.

Berk said, "I think it makes it a garden-variety civil lawsuit against the owners of the property, which is what it should have been in the first place."

But Ben Margolis, an attorney for Litt & Stormer, contended that many lenders are not federally regulated and may still be liable to suits for helping slumlords. "We think we are establishing the basic principle we set out to establish," he said.

Barbara Jones, staff attorney for Legal Aid, said, "We were very disappointed." She believed that "the federal government is not enforcing federal laws regarding savings and loan institutions."

A spokesman in the Office of Thrift Supervision in San Francisco would not discuss Highland, saying regulatory matters regarding individual savings and loans are not made public.

Sautner said the city attorney's office did not dispute the federal regulatory authority. "We felt Highland's acts fell far outside the scope of any normal lending activity, and that would be the basis of our appeal," Sautner said.

The suit had alleged that the condition of the 11 slum buildings, mostly inhabited by recent immigrants in the city's poorest neighborhoods, was an outgrowth of frequent transfers of ownership, often by front men and shell corporations. These transfers falsely inflated the property values, and as a result, the suit said, hundreds of thousands of dollars in rents were spent on ever-escalating mortgages instead of repairs.

The city attorney's office believed that the lenders, through their loan practices, had so much control over the properties that they were de facto owners and should be held accountable for living conditions in them, according to Sautner. She said the suit resulted from unsuccessful city efforts over a decade to make the owners of the buildings comply with health, safety and building codes.

One slum property, at 807 South Fedora St., had 10 owners on record between 1981 and 1989, and that during seven of those years, Highland had "increased the amounts of its loans 500%," according to the suit. It was also claimed that Highland lent money to a corporation headed by Teluce Black, alleged to be a black dog owned by a slumlord.

Some defendants, including Alexander Spitzer, an Inglewood financier, and nine lending companies controlled by him, settled with the city attorney in 1989 by agreeing to follow guidelines in future loans.

Spitzer and two of his lending firms also filed for bankruptcy protection from creditors.


On March 28, 1989, the Los Angeles city attorney, the Legal Aid Foundation and a private law firm filed an unprecedented suit alleging that the tenants of 11 local slum dwellings had been the victims of a racketeering conspiracy by two lending institutions and dozens of middlemen and dummy corporations. Among the 142 defendants were Highland Federal Savings & Loan, A & B Loan Co. and 137 "shell" corporations that allegedly conspired to siphon funds out of slum buildings while refusing to make repairs.

Tenants to Divide $1.7 Million in Settlement of Slumlord Suit
Los Angeles Times
June 27, 1992

Tenants living in 11 Los Angeles slum properties will receive $1.7 million in a partial settlement of a lawsuit brought by the city attorney and public interest lawyers against slumlords and their business associates.

The settlement is the third-largest damage award in a slum case in state history, Deputy City Atty. Stephanie Sautner said Friday. The city attorney filed the case three years ago, charging 137 defendants with conspiring to take profits from the properties without making repairs to keep them habitable.

A total of 40 defendants, including owners such as convicted slumlord Daniel Tepper of Encino, agreed to the settlement. Also agreeing to the settlement were various notaries public, as well as so-called "straw" owners, who held title for buildings on behalf of secret owners who controlled the properties.

Between 150 to 200 families who lived in the buildings between 1976 and 1991 will participate in the settlement, said attorney Barrett S. Litt, head of a public interest law firm, which along with the Legal Aid Foundation represented the tenants.

Attorney Phil Woog, who represented Tepper and landlord Mordehai Ben-Horin, Canadian-Pacific Inc. and Ty Properties, said his clients denied liability and settled only because "the litigation costs would have been prohibitive."

Litt said the settlement "gives substantial compensation to people in buildings, (who) without a novel approach like this wouldn't have gotten any compensation at all."

The case was unusual, he said, because it sought to cut through an alleged network of businesses and owners. "There were a lot more complexities than in our average case, where we know who the owner is," Litt said.

Raul Cruz, 60, a tenant for the past 11 years at 823 S. Bonnie Brae St., said he was "very happy."

Cruz, a baker, said that before the lawsuit was filed the building was "very bad . . . with cockroaches, rats, holes in the walls, ceilings and roof." Under different owners, conditions have been "much better," Cruz said, adding that he and his family will probably stay there once they receive their share of the award. He hopes to start a bakery.

In addition to the tenants' settlement, the defendants agreed to court-ordered restrictions on owning or operating substandard rental properties in the city.

"This puts a stop to the kinds of business practices these defendants were engaging in and which were perpetuating slums," Sautner said.

She cited defendants Richard and Elizabeth Portolan of Seal Beach as examples of straw owners. They acquired one slum property from a company called T.H.I.S., whose president, according to corporate records, was Teluce Black. Black, Sautner charged, was actually a dog owned by another defendant, Joseph Fitzpatrick, now deceased. Efforts to reach the Portolans or their attorney were unsuccessful.

The settlement was approved late Thursday by Los Angeles Superior Court Judge Barnet Cooperman. In 1991, Cooperman dismissed the principal defendant, Highland Federal Savings & Loan of Highland Park, from the case, saying the city attorney did not have the jurisdiction to sue a federal savings and loan. A city appeal of that ruling is pending.

Another major defendant in the case, Inglewood financier Alexander Spitzer, settled with the city attorney in 1989.

Lender Faces Trial in Slum Case
Courts: A ruling barring the city from suing Highland Federal Bank is overturned. The firm is accused of racketeering and fraud involving substandard buildings.
Los Angeles Times
January 29, 1993

A savings and loan firm accused of operating a network of slum buildings in Los Angeles will have to face trial on racketeering, fraud and other charges, a state appeals court has ruled.

Highland Federal Bank was a principal defendant in a landmark 1989 suit filed by the city attorney and public interest lawyers, contending that slum conditions in several inner-city buildings had been created by sham ownerships and fraudulent loans.

The 2nd District Court of Appeal ruling reverses a 1991 lower court decision that Highland was subject to federal regulations, which preempted the city from suing under state law.

"This is not a situation where the state seeks to regulate the conduct of all federal associations in California," according to the appeal court ruling, which was issued Tuesday and made public Thursday by City Atty. James K. Hahn. "Rather, the state merely seeks to protect its own interest in public safety and welfare against the wrongful contact of an entity . . . which just happens to be a federal association."

Highland Federal attorney Michael D. Berk said the savings and loan would appeal. "We disagree with the ruling," he said.

The ruling dramatically alters a case in which the city and lawyers representing the tenants in 11 buildings tried to move beyond conventional complaints against slum owners for substandard conditions. They sought to attack those they claimed made the money and secretly controlled the properties.

Hahn said Highland Federal was at the heart of "a conspiracy by a bunch of greedy financial institutions and other individuals that have deprived tenants in this city of decent living conditions." The varied building owners, he maintained at a press conference outside a Highland branch in Atwater, were "fronts for Highland. Highland was really the owner."

Allegations of conspiracy between slum owners and their lender was what set this suit apart. "Highland was at the core of the conspiracy," said Barry Litt, a tenants' attorney. "Reviving Highland revives the central thrust of the case."

Berk said the thrift, its president, Ben Karmelich, and vice president, Betty Pratt, "vigorously deny these allegations." All are named in the suit.

The Highland Park-based savings and loan had financed loans on eight of the 11 buildings listed in the lawsuit. The listed owner at one of the 11 buildings, at 504 S. Bonnie Brae St. in the Westlake area, was Teluce Black, a dog reportedly owned by a convicted slumlord. According to city regulators, Highland lent Teluce--a Labrador retriever--$200,000.

Another owner was Vijaynand Sharma, who fled the country and a 20-month jail term after he was convicted in the largest criminal case ever brought by the city against a landlord. He remains a fugitive.

In addition to ruling that the city and tenants could sue Highland, the appeal court also reversed a ruling that the savings and loan could not be tried for racketeering. In 1991, Superior Court Judge Barnet Cooperman said the plaintiffs had failed to show that the defendants had engaged in racketeering, or a scheme to defraud, as defined under the 1970 federal law known as the Racketeer Influenced and Corrupt Organizations Act, or RICO.

Other major defendants in the suit, which originally named 137 individuals or companies, have already settled. Inglewood financier Alexander Spitzer, who controlled A & B Loan Co., settled with the city attorney in 1989 after agreeing to follow strict lending rules. And last June, 40 other principals agreed to obey a number of restrictions imposed by the city and to pay tenants $1.7 million.

Litt, representing tenants in the class-action portion of the case, said "thousands" lived in the buildings--located in some of the city's poorest neighborhoods and inhabited largely by immigrants during the 1980s. "How many we'll be able to locate we don't know. We are already in touch with over 500." He will seek "millions of dollars" in rent refunds, emotional distress claims and punitive damages from Highland, he added.

Hahn said the city will seek more than $1 million in civil penalties and "injunctive relief, to make Highland change the way they do business."

According to Deputy City Atty. Richard Bobb, who supervises housing enforcement, the slum lenders named in the suit controlled properties by "recording false deeds, putting properties in the name of straw buyers and making loans contrary to federal law. They inflated appraisals and loaned more on the properties than the properties were worth."

Slum conditions followed, he said. "When you encumber a piece of property for more than it's worth, all the rental income has to go to pay the loan and there's no money left to maintain the properties."

The suit evolved out of frustrating efforts to enforce building, safety and fire regulations at the slum properties, Hahn said. "Over and over again as we tried to hold owners responsible, we would find the owners had changed. The only thing that hadn't changed was that Highland Federal continued to be the funding mechanism of these buildings."

Highland did not create slums but was instead one of the few institutions willing to finance inner-city properties, Berk said. "This is their so-called reward for doing that--attempting to tar them with difficult conditions." If the appellate ruling stands, he said, "It's going to seriously impact the willingness of any lender to become involved in inner-city properties."

Hahn said conditions in the 11 buildings have improved and since 1991 have met code requirements. Berk said that as far as he knew, Highland Federal was no longer financially involved in any of the properties.

PHOTO: This building at 504 S. Bonnie Brae St. is named in suit. Highland Federal Bank was accused of allowing slum conditions to develop.


At 6:20 AM, Blogger jewishwhistleblower said...

by Laurence Darmiento Daily News Staff Writer
September 26, 1995
Los Angeles Daily News

On the heels of its successful battle to retain its Medicare funding, Newhall Community Hospital is fighting off foreclosure in a nasty, complex legal action stemming from a 7-year-old pension loan.

Denying it wants to close Newhall Community, a Santa Monica lender in liquidation has forced an Oct. 9 sale of the small hospital. The action has prompted hospital owner Dr. Bienvenido Tan to seek an injunction and claim he is the victim of a shakedown.

The action comes just after federal health officials decided that the hospital in downtown Newhall had corrected deficiencies that had threatened its funding for Medicare patients. Tan had been accused by health inspectors of running a hospital with unsanitary operating rooms and poorly trained medical staff.

"In our opinion it is an out-and-out fraud," attorney Alvin Green said of the foreclosure action. "It is pure bravado, but they know it's expensive to fight this legally."

The lender, First Pacific Loan Co. of Santa Monica, did not return repeated telephone calls for comment, and its attorney referred all questions to documents submitted in North Valley Superior Court.

The origin of the dispute, according to papers filed by both sides, is a $250,000 loan that Tan obtained in September 1988 to fund a hospital pension plan. The San Fernando Road property was pledged as collateral.

Tan borrowed the money from A & B Loan Co., Inc. of Los Angeles after being persuaded by a vice president that it was a safe, well-managed company qualified to handle pension funds, he claims in his lawsuit.

Tan said he was then convinced to invest those loans in a sister company, California Pacific Funding, Ltd. He was guaranteed a minimum 10 percent return and says the loan was represented as being safe.

However, in 1989 both companies declared bankruptcy, and Tan claimed in a deposition he only received one or two checks out of the pension fund investment before the companies' financial problems intervened.

At the same time, Tan's lawsuit alleges that the two companies were basically one - led by a man named Alexander Spitzer - thus he never received the loan from A & B because the proceeds were passed on to California Pacific.

However, sometime before December 1989, the loan was taken over by First Pacific, which is headed by Mark Abraham, a son-in-law of Spitzer and vice president of A & B, according to records filed by both sides.

Tan's attorney Green claims all the loan transfers amounted to a "shell game" but according to court records filed by First Pacific attorney Linda Northrup, Tan made payments on the loan through 1990 indicating he believed it was valid.

Northrup also denies that the familial relationship indicates the companies operated as one and instead were only associated.

First Pacific claims he defaulted on the loan at that point. But Tan claims he made a $62,500 payment to close the loan, seeking to resolve the matter.

Tan submitted to the court a September 1990 letter from First Pacific that states the payment will end his obligation to the companies, but Northrup characterized it in a written replay as nothing more than a "settlement discussion."

Instead she points to deeds and other loan documents that Tan acknowledges he signed that state that the payoff amounts to nothing more than a "capital reduction." The documents also indicate Tan used his hospital property again as collateral.

In response, Tan claims in his court filings that he didn't realize what he was signing and thought it was a mere formality - based on the assurances of Larry Stusser, the original A & B vice president who sold him the loan. Stusser has since died.

Northrup scoffed at that claim in her papers, saying that Tan is a savvy businessman who is president of a hospital, his own development company and a member of the board of directors of a bank.

"(He has an) extremely shaky memory of nearly every element of the transaction except his purportedly clear memory of alleged statements made over seven years ago by a person who is now deceased and conveniently unavailable to refute his testimony," Northrup said.

First Pacific, which is liquidating, notified Tan it intended to collect on the loan earlier this year. Calculating fees and other costs it is seeking nearly $460,000.

The notification prompted Tan to file his lawsuit July 17 in Van Nuys. Efforts to reach an agreement between the two sides have failed.

In a recent interview, the doctor claimed the lawsuit was really just an effort to squeeze money out of him five years after he thought the matter had been resolved.

"They were paid off," Tan contended. "I am not going to give them a cent."

The two sides met last Friday before Judge William MacLaughlin, who must decide before Oct. 9 whether to grant Tan's request for an injunction, halting the planned auction of the property.

The judge hinted he was thinking about granting the relief, noting there appeared to be some issues of fraud that should be further examined.

Northrup contends in her final filing that even if the sale does go forward she would not expect the hospital to close, since the operation is profitable. Instead, Tan would simply have to make rental payments.

Photo; Caption: Photo: Dr. Bienvenido Tan, owner of Newhall Community Hospital, has filed a lawsuit with the hope of blocking the sale of the facility October 9. Shaun Dyer/Special to the Daily News

At 6:36 AM, Blogger jewishwhistleblower said...

Pacific Jewish Center website:*/

see history:

Also, can anyone post information as to the % of income that members used to be required to tithe to the Pacific Jewish Center as part of membership?

At 8:36 AM, Anonymous Anonymous said...


What is Medved's current position on this? Was he repaid? Were others from his community?


At 8:40 PM, Anonymous Anonymous said...

i was intrigued by your link about rabbi lapin;i knew the guy >25-30 years ago when he was my high school physics "teacher";i had not heard much about him until i saw your post.
well it seems that this is one of the things that occupies his time these days.

(mar`e mekomot:)


Rabbi Daniel Lapin, president of Toward Tradition and popular KVI radio host studied theology, physics, and mathematics in London and Jerusalem.

While living in his native South Africa, Rabbi Lapin taught theology and physics. This seemingly unlikely combination forms the bedrock of his convictions that no conflict exists between the physical and the spiritual and that religion is not a refuge from reality.

Rabbi Lapin, together with noted author, Michael Medved, established the Pacific Jewish Center, a now legendary Orthodox synagogue in Venice, California. He still serves as its founding rabbi, assisting the community in its mission of demonstrating the relevance of traditional Judaism to modern life. He also serves on the board of fellows of the Jewish Policy Center in Washington, D.C. In 1991, Rabbi Lapin formed Toward Tradition to:

1. Supply religious and intellectual ammunition to the conservative movement by linking it to its Judeo-Christian origins.
2. Build new political alliances between the Jewish and Christian conservatives.
3. Offer a pro-business defense of capitalism based on the intrinsic morality of the free market.

Toward Tradition opened Cascadia Business Institute in 1994. Cascadia�s seminars teach upper-level management of large and small corporations how Judeo- Christian principles can benefit both business and the nation. Cascadia�s credo is, "The more that things change, the more we need to depend on those things that never change."

Rabbi Lapin is a speaker for many national events, including those of CPAC, Acton Institute, Family Research Council, Focus on the Family, Human Life International, GOPAC, and the 1996 Republican National Convention. In addition, Rabbi Lapin is a noted writer, and his articles have appeared in the Wall Street Journal, National Review, Commentary, The American Enterprise, The Washington Times, Crisis, Midstream, and other publications. His radio talk show is syndicated nationally by Radio America.

Rabbi Lapin and his wife Susan live on Mercer Island, Washington where they home school their seven children.

At 6:54 AM, Anonymous Anonymous said...


At 8:15 AM, Blogger jewishwhistleblower said...

>What is Medved's current position on this? Was he repaid?
>Were others from his community?

Good questions. Any answers?


Rabbi Lapin is a major political force these days, the allegations made in Protocols several months ago in terms of alleged cult-like behavior is very serious.

Now that I've been able to find some documentation of these allegations (the 1991 article), I'd like to see these allegations more fully addressed/ I'm providing a forum to that end here.

See original Protocols/Luke Ford posts at:
Email: "What's the deal with R' Daniel Lapin. I have some relatives who adore him, but I've seen some posts hinting to some scandal involving him years ago in California. Is there basis to these claims?"

About 14 years ago while he lived in Venice, CA, Rabbi Daniel Lapin of the Pacific Jewish Center (started with Michael Medved) started a real estate trust. It went broke a couple of years later. Rabbi Lapin did nothing legally wrong. It was economic failure, not economic fraud.

Remember how the (Paul) Reichmans went bankrupt with Canary Wharf in London? That was failure, not fraud.

People tend to either love or hate Rabbi Daniel Lapin. He's a polarizer. I'm in the camp of those who adore him.

Author David Klinghoffer writes admiringly about Daniel Lapin in his book, Lord Will Gather Me in: My Journey to Jewish Orthodoxy.

Some of the anger at Rabbi Lapin is because he marches to the beat of his own drummer and heartily criticizes liberal Jews and their organizations. You can count me among those who adore the Rabbi Lapins (there are three rabbi brothers including David who heads a yeshiva in Washington DC and a brother who leads San Jose's Orthodox shul).

Rabbi Daniel tends to attract an intense following that many would describe as a cult (charismatic leader who exerts unusual control over his followers based on his religious and personal powers). For those who've moved out of it, it has been painful and many are bitter. I've heard a similar sort of bitterness from those who've moved out of Aish HaTorah (usually not by their choice).

Rabbi Daniel Lapin never took a salary while working for Pacific Jewish Center. He never told people to go sell flowers on the Venice Boardwalk to raise money. R. Lapin clashed with many rabbis because of his unique views and approach. He was beholden to nobody as he never took a salary from the Jewish community. He was friends with Jerry Falwell. He supported much of the Christian right. Obviously that is going to rub many rabbis the wrong way.

LL writes: "About the allegations against [R. Daniel] Lapin, check the LA Times, Bnei Brith Messenger (now defunct), and the Valley News and Greensheets from those years 1973-80."

Rabbi Lapin had ties to slum lord and Holocaust survivor Alexander Spitzer (LAT 3/29/89, 7/13/89, 7/22/89).

R. Lapin now runs

A poster claiming to be an ex-member of Rabbi Lapin's Pacific Jewish Center writes to Protocols:

Daniel Lapin was a cult leader at the Pacific Jewish Center (Venice Shul) You couldn't join the shul unless you "tithed a certain percentage of your income to the shul." Not a problem, BUT you had to attend AT LEAST 4 evenings of classes a week to retain membership (a true problem if you have a job with long hours to bring in those bucks).

What about family time? Oh thats right! Lapin believes that you leave your children to him and he will "teach them the true path of Torah." After all, he taught, he knows better. He is "the rabbi" and you are a seeking non-learned B'aal Tshuvah. Lapin must do the raising of the congregation's kids. All of these programming sessions, er a classes in torah were taught ONLY by Lapin. There was more Lapin torah going on than real torah.

If your donations OOPS TITHES went down, you had to be "reexamined" at length by Lapin - privately to see why you weren't on the right level spiritually. This took many days and hours.

The Young Israel of Santa Monica split with the Pacific Jewish center NOT because of the money issues, although there were money issues regarding the tithing, but because rational people with professional jobs and not stringing along lost souls realized that this was not true torah Judaism and Lapin scared the hell out of them.

Shall we now start talking about those from "his" community who spoke out against him - as it happenes in every shul? [A string of breathtaking allegations of illegality and gross immorality.]

Do some journalistic research. Contact the Beth Din of Los Angeles and find out why Lapin is banned from EVERY synagogue pulpit in California, actually the west coast but when scandal gets old, unless someone stays on top of it people get lax. Lapin was run out of town a step before the tar and feathers up to Seattle. The Seattle community will have nothing to do with him and he is exiled to Mercer Island with his top partner in crime Michael Medved. Where is the Awareness Center when you truly need them?


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