The city of Montebello will get back $1.3 million from Ku and Associates as part of a settlement agreement reached with the development firm over an affordable housing project that was never built.
The settlement was reached just days before a trial was scheduled to begin on Jan. 16 in Los Angeles Superior Court.
As previously reported by EGP, Montebello was ordered by the U.S. Department of Housing and Urban Development (HUD) to pay back $1.3 million after the federal agency learned the city had not built an affordable housing project that it had reported to HUD as completed.
The discovery and demand by HUD came at the same time the city was going through other inquiries into its handling of city funds, including by state auditors and the FBI. Questions about the city’s financial dealings had spurred a recall election that saw the election of new members to the city council.
With several new members on the council, Montebello filed a lawsuit against developer Danny C. Ku of Ku and Associates in June 2013 in hopes of recovering the $1.3 million in HOME funds the city had loaned him to help finance the development of a 62-unit mixed-use project on parcels located at 112 and 114 South Sixth St.
The city accused Ku of fraud, and inflating the value of a piece of property on West Whittier Boulevard that was used to secure the loan to offset any loss in profits from the developer’s deal, which included designating ten of the project’s units as very low to low-income housing.
The city also claimed that the loan was never approved by the city council as required, a point challenged by Ku who maintained that the deal was fully disclosed in valid agreement executed between the city of Montebello and the developer: The agreement had been signed by then City Administrator Richard Torres, City Clerk Robert King, and Matt Gorman, a city attorney representing Alvarez-Glasman and Colvin Law Firm.
Ku also denied any responsibility for repaying the city.
According to Montebello officials, the settlement agreement was reached without any admission of liability by either the development firm or the city.
Ku and Associates chose to payback the city as a form of cooperation and good will towards the city, the city stated in a press release.
“KU is glad to have resolved this matter in an amicable fashion so all parties can move forward,” the developer stated.
Montebello City Administrator Francesca Tucker-Schuyler said the settlement was mutually satisfactory for all parties involved and both parties hope that settling this matter will allow them to focus on creating other affordable housing opportunities.