Shell Game

Santa Ana Mayor Miguel Pulido voted several times to aid a controversial vending-truck business in which his father was involved

Minutes before six on a late December morning, the first rays of sunlight break over the horizon to cast a pinkish hue on the vine-covered, nine-foot-tall concrete wall that protects a 40,000-square-foot industrial warehouse at 2520 S. Birch St. in a seedy industrial section of Santa Ana. Two rotting palm trees flank the property, home to Abel Food Services Inc., which distributes food and supplies to the city’s mobile taco vending trucks. Men, some wearing straw cowboy hats, yell in Spanish at each other while they load boxes of food and drinks into the vehicles. From its perch on a telephone wire, a lone black crow watches over the activity; two dozen seagulls circle overhead, land to grab discarded food and, before departing, leave evidence of their presence with ubiquitous grayish-white excrement.

OC Weekly photo illustration
Mayor Miguel Pulido at OC's 2009 gala for House Speaker Nancy Pelosi
Christopher Victorio
Mayor Miguel Pulido at OC's 2009 gala for House Speaker Nancy Pelosi
A portion of the September 2008 agreement showing that the mayor's father would take control of Abel Food Services' daily revenue
A portion of the September 2008 agreement showing that the mayor's father would take control of Abel Food Services' daily revenue
A portion of a 2008 court declaration by businessman Hamid Hojati linked Mayor Pulido to the  vending-truck business
A portion of a 2008 court declaration by businessman Hamid Hojati linked Mayor Pulido to the vending-truck business
Abel Food Services' warehouse
Abel Food Services' warehouse

The air smells of nauseating, ripe trash. Fences are topped with rusty barbed wire. Ground zero for the city’s murders and robberies is a few blocks away. A lanky, homeless man who looks to be in his 30s walks by pushing a noisy red Target shopping cart loaded with his possessions stuffed in 13 plastic trash bags. The crumbling street is littered with broken Bud Light bottles, cigarette butts, dozens of flattened fast-food drink containers, a used condom, a beef-and-bean chimichanga wrapper, broken CDs, faded newspapers, a fifth of someone’s MasterCard, insect-infested pizza boxes and a large, shattered mirror. A second grime-covered homeless man in his 30s or 40s walks by. He’s pushing a warped mattress on top of a shopping cart. A disgusting, old, green toothbrush protrudes from his right rear pocket.

At this point in the morning, Miguel Pulido, Santa Ana’s natty eight-term Democratic mayor, is probably asleep four miles away—on a much nicer mattress—in the city’s Floral Park neighborhood. The exclusive enclave is the home of numerous old-money families who have their own luxury planes or yachts and vacation homes in places like Aspen. Pulido entered politics two decades ago while living in a $300-a-month apartment. Nowadays, he lives in a 1.7-acre multihouse compound where the land alone is worth more than $1 million.

Yet this is the spot where Pulido and two other rich and powerful men met without fanfare in the spring of 2007 to do some business. According to documents obtained by the Weekly—including court filings—they dreamed that their arrangement would win big profits from the city’s Latino population, which traditionally supports a brisk business in food and drinks from vending trucks. Part of their plan included controlling close to half of all the licensed food trucks in the city.

Despite disclosure laws designed to expose public officials’ potential conflicts of interest, Pulido’s role in Abel Food Services Inc. was a secret.

Even with Pulido’s assistance, the business failed messily. Depending on who is talking, anywhere from $450,000 to somewhat more than $1 million went missing. Although no criminal charges were filed over the dispuite, civil court records bristle with angry cries of gross mismanagement, fraud and embezzlement. At one point in 2008, hostilities grew so intense at the warehouse that Santa Ana police manned a four-hour watch at the business to prevent violence. Later, Mohammad R. “Hamid” Hojati—one of the involved businessmen—declared in court and under penalty of perjury that he’d been duped after the mayor convinced him to commit almost $1.9 million to Abel Food.

Why did he make that investment? An exasperated Hojati wrote, “I trusted Mayor Pulido.”

*     *     *

Private vending-truck operations are undoubtedly a multimillion-dollar annual business in Santa Ana. What isn’t certain is who owns what. Bureaucrats working under Pulido have taken the preposterous position that vending licenses granted by the city government are secret documents. As one clerk told the Weekly twice during the reporting of this story, “You don’t need to know.”

But other documents reveal that a man named Abel Salazar has a city-approved warehouse food license and a county health department certificate. He launched Abel Food Services Inc. in 2004 after getting a $430,000 federal government-backed Small Business Administration (SBA) loan through Fullerton Community Bank. He then signed a $26,000-a-month lease for that 40,000-square-foot portion of the 140,000-square-foot warehouse property on South Birch Street. First Standard Real Estate LLC owns the property. Businessman George Gemayel—a longtime Pulido pal—owns First Standard.

Salazar and Abel Food planned to offer one-stop shopping for vending-truck operators needing daily supplies of food, drinks, truck fuel, cooking fuel, mechanical assistance, cleaning services and overnight parking. According to documents obtained by the Weekly, vendors signed contracts promising Abel Food the right to be the exclusive provider of all services and products. Some vendors were required to pay $35 per day for overnight parking and buy $150 worth of food or supplies. Others had to purchase $250 worth of supplies each day and pay $25 to park. At one point, nearly 100 of the city’s 240 or so vendors pumped cash—as much as $450,000 per month, according to court documents—into Abel Food coffers. Even so, hundreds of thousands of dollars in rent, utilities and food supplies went unpaid. In 2008, Gemayel, the landlord, threatened to break the lease and run his own vending-truck operation from the location.

Based on various court documents and interviews, Mayor Pulido objected to Gemayel interfering with Abel Food. Perhaps it was mere coincidence, but part of the vending company’s revenue may have regularly landed inside the mayor’s home compound. According to revelations made in court, Miguel Pulido, Sr., the mayor’s 83-year-old father, had a financial interest in the business. The extent of that interest is unclear, but court documents assert that he performed at least one very specific task. According to a Sept. 29, 2008 court declaration from Reza Hojati, Hamid Hojati’s wife and one of the managers at the warehouse, “Miguel Pulido Sr. would take the monies [from the warehouse] and deposit them in the bank.”

But the mayor never publicly announced his or his father’s ties to Abel Salazar, their longtime friend, or Abel Food. He didn’t reveal that the company’s $550-an-hour lawyer, Ronald Rus, had been appointed by Pulido’s City Council to a city commission. Or that the company’s accountant, Jim Pleman, was the same man the mayor uses in his private business dealings. Or that he sat on the board of directors of the Fullerton Community Bank that gave Abel Food the critical SBA start-up loan. Underscoring these direct ties was the fact that on two occasions—April 18, 2005, and June 5, 2006—Pulido voted four times on Santa Ana City Council ordinances that specifically singled out Abel Food for concessions that enhanced the company’s profitability.

At the April 2005 meeting, Salazar got Latham & Watkins lawyer/lobbyist Jerry A. King to seek City Council permission for overnight parking of the vending trucks at the South Birch Street warehouse. The move would allow Abel Food to charge for the service. Councilmembers Lisa Bist and Jose Solorio asked for a public hearing on the issue. But Councilman Carlos Bustamante and the mayor blocked the suggestion, going on to push for immediate approval of Salazar’s request in a 4-3 vote.

In June 2006, Salazar returned to the City Council, this time wanting a second variance of his conditional use permit: the right to wash and clean “all types of vending vehicles” at night. This time, Councilwomen Bist and Claudia Alvarez asked to continue the item for two weeks for additional study. Pulido got four of his colleagues to block that move and then immediately granted Salazar’s request.

In the view of Charles E. McClung Jr., Pulido’s Laguna Beach-based lawyer, those votes aren’t questionable because the mayor’s financial interest in Abel Food has been “zero.”

If that assertion is correct, the mayor may have observed the letter of the law but violated its spirit, according to Robert Stern, president of the nonpartisan Center for Government Studies in Los Angeles, an expert in political ethics and the man who helped write California’s conflict-of-interest code in 1974.

“If he hasn’t taken any money from the business, then it’s not a legal conflict of interest,” Stern said. “But it’s certainly a moral conflict. He’s had a clear, ethical obligation to at least disclose his father’s connection to a business whose matters went before the City Council.”

*     *     *

Miguel Angel Pulido is a Mexico City native who arrived here in 1961 unable to speak a word of English. He initially gained his political strength from the largest per-capita concentration of Mexican-Americans (and illegal immigrants) in the United States. In Santa Ana, it’s not uncommon to encounter large groups of people who don’t speak English, live in dire poverty and/or proudly hoist the Mexican national flag, not Old Glory, over their front porches. But any assumptions one might make based upon those facts about the 54-year-old vegetarian’s stances on policy issues would likely be wrong.

Pulido’s interest in politics was sparked in storybook fashion in the 1980s: Unknown little guy, whose father owns an Ace Muffler shop on First Street, fights powerful city hall efforts to wreck the business in a redevelopment scheme and wins.

Capitalizing on his newfound reputation as a defender of the common man, Pulido won a seat on the City Council in 1986. He teamed up with police and made his name synonymous with anti-crime efforts. In 1994, Pulido managed to garner support from poor residents, historical preservationists, homeowner associations and the chamber of commerce to become the city’s first Latino mayor.

Both major political parties like to push minority politicians to the forefront as badges of honor. But Pulido has never ascended. Some residents and political observers have labeled him a DINO (Democrat in name only). He may count former Vice President Al Gore and Sen. Dianne Feinstein as friends, but he refused to endorse fellow Orange County Democrat Loretta Sanchez in 1996 because she challenged his longtime pal, Republican Congressman Robert K. Dornan, at the time one of the lions of national right-wing politics.

Mark Petracca, associate professor of political science at UC Irvine, sees Pulido as generally loyal to his party, but believes the mayor “also seems to be more pragmatic, sometimes even more opportunistic in ways which might veer from ideology.”

As lukewarm as he might seem about being a Democrat, he seems to thoroughly enjoy being mayor. He has served 14 years in that office and another eight as a city councilman. Your chances of spotting him comfortably hobnobbing with wealthy real-estate developers are excellent. Your chances of seeing him dining in a posh Newport Beach or Irvine restaurant are damn good. Your chances of witnessing him participate in a populist rally anywhere are slim to none.

Indeed, when Pulido had the chance to stand up against Republican Gov. Pete Wilson’s controversial Proposition 187, a thinly veiled 1994 election wedge issue that took punitive aim at the children of illegal immigrants by prohibiting them from education and emergency health care, he waffled. Just before that election, Pulido pretended to befriend both sides. He told Mexican-American activists that he shared their hostility to the measure. Then, this wily politician (who loves to play tennis and speak French) assured conservative businessmen that he only opposed the proposition because it wasn’t punitive enough.

As Pulido’s political base solidified and critics began calling him “mayor for life,” he developed a mantra: It’s “inverse discrimination” to ask him why he doesn’t share the concerns of immigrants or the poor. So, for example, he doesn’t want to field questions about why he’s been accused of working to block the improvement of low-income housing or ignoring Third-World-type, pothole-ridden streets in less-affluent neighborhoods. In a 2007 interview with the Los Angeles Times, he said that questions about his political loyalties “really get to me” because “I’m an American first.” Then he described himself as “very Mexican” and “very American.”

Whatever the label, Pulido’s discomfort with divisive social issues morphs into pleasure at the whiff of business opportunities. According to the mayor’s public-disclosure forms, he maintains an interest in the family’s old muffler shop, does consulting for RTP Controls in Georgia and Firm Green Inc., in Newport Beach. His Sol Distributing International has exported catalytic converters to Mexico. Because the state’s disclosure rules allow politicians to blur actual income, he could reap as little as $30,000 or as much as $300,000 per year from each of those sources. He receives $200 a month for the part-time mayor’s job.

But, as the Weekly’s Gustavo Arellano reported on our Navel Gazing blog last year, Pulido’s prized business is La Farga Group Inc. It’s a consulting business that lists him as “president.” There’s no known physical office. The address he uses belongs to his accountant—the same person who did the books for Abel Food. On public-disclosure forms, Pulido claims La Farga Group pays him an annual salary of between $10,000 and $100,000.

The mayor has faced questions about concealing improper dealings under these maddeningly vague disclosure rules. In 2003, he was found guilty of hiding money he’d taken from Kris Kakkar, a venture capitalist with numerous business interests at Orange County city halls. It was an innocent mistake, Pulido explained afterwards. He also promised to be more diligent about keeping the public informed.

Throughout this decade, however, Pulido’s bond with Newport Beach businessman Michael Harrah has worried even the mayor’s allies. If Gordon Gekko, ZZ Top and Milburn Drysdale could have produced an offspring, it would be the greedy, physical giant that is Harrah, who owns huge swaths of Santa Ana commercial and residential real estate, including the building that houses the Orange County District Attorney’s office.

“It’s an open secret that Miguel will give Harrah and a couple of other real-estate developers whatever they want,” one of the mayor’s longtime associates reluctantly confided on condition of anonymity. “Some people say that he’s a shameless political whore. Others might say he’s used these business connections to do great things for Santa Ana. I have feet in both camps.”

The city’s current biggest and most controversial development project, One Broadway Plaza—the proposed tallest building in the county at 37 stories—is Harrah’s brainchild. On this key issue, Pulido has worked feverishly behind the scenes lobbying on Harrah’s behalf but has abstained from voting on the issue. Generally, elected officials are banned from voting on matters tied directly to a company that has paid them money.

The FBI’s Santa Ana field office has made clear it will pounce if it catches a politician cheating. The agency’s 1998 sting operation captured two Santa Ana City Council members, including Ted Moreno. An undercover agent posed as a gas station owner wanting favorable city action and willing to pay $46,000 in cash bribes to make it happen. Moreno took the bait and was arrested, convicted and sentenced to four years in federal prison.

*     *     *

By early 2007, conditions at Abel Food prompted the mayor to act. The company was hemorrhaging money because of “unexpected costs,” even though Abel Salazar had convinced four of his relatives to invest $900,000 collectively one year earlier, according to court documents. Whatever differences Pulido and landlord George Gemayel had about the vending-truck operation, they both agreed on one point: It needed another huge cash infusion. Abel Food owed Gemayel 26 months of back rent.

Court records indicate that Pulido developed a list of potential benefactors, including Hamid Hojati, a generous contributor to Democrats, the owner of Insurance Collision Center—a successful automotive-repair business in Santa Ana, and the resident of a 20,000-square-foot, 12-room Laguna Hills estate worth about $3 million. Earlier in the decade, Gemayel—who, in 2003, paid Pulido’s La Farga Group between $10,000 and $100,000 for consulting, according to state disclosure records—had introduced the men. Hojati declined to talk to the Weekly on the record but said in a court declaration that Gemayel told him “he was a close friend of Mayor Pulido and that working with the mayor would provide me with benefits as a Santa Ana businessman.” Hojati also recalled Gemayel saying it helps “to have the mayor on your side.” Afterward, Hojati claims he paid both Pulido and Gemayel tens of thousands of dollars for consulting and “has the checks to prove it.”

“I had a long-standing business relationship with Mr. Pulido whereby he provided me with business advice and acted for me as a paid consultant,” Hojati recounted in a sworn court declaration filed in 2009. “One of the services he performed was to assist me in finding business opportunities and to help with issues related to the City of Santa Ana.”

Pulido’s mandatory disclosure statements reveal no such payments. The court files include copies of checks from Hojati to Gemayel, but none to Pulido.

In late April or early May 2007, Pulido contacted Hojati. “Miguel wanted me to agree to invest money and to talk with George [Gemayel] and get George to back off [threats to take over Abel Food Services],” Hojati recounted in court filings. He also privately discussed the catering business with Gemayel. “While [Gemayel] was very interested in taking over the business for himself, he did not want to anger the mayor whose father was one of the owners,” said Hojati.

Next, Pulido—not Salazar, the official owner of Abel Food and the onetime proprietor of the city’s bankrupt Bodega Club—conducted a meeting about the company’s future without Salazar’s presence. Hojati was offered 51 percent of the business if he would pay $1.18 million and assume the $430,000 note to Fullerton Community Bank, as well as guarantee about $365,000 in Abel Food’s unpaid rent to Gemayel. Because of his trust in Pulido and Gemayel, Hojati claims in court documents that he accepted the arrangement and, with all three men happily discussing the potential for future vending profits, created A&G Quality Food Services Inc. to replace Abel Food Service.

But the deal began to falter from the outset. Gemayel, whom Hojati considered a dear friend, announced that Abel Food actually owed him $775,000 in unpaid rent—a whopping $410,000 more than Salazar had reported. Gemayel demanded that Hojati pay the higher amount for Abel Food, but neither Gemayel nor Salazar produced records at the time to back up their numbers, according to court documents.

Hojati and Salazar weren’t compatible either. While awaiting escrow for A&G to takeover, Hojati assumed control over the company’s accounting. The men fought continually about decisions, even though by January 2008, their arrangement was finally able to consistently pay about $28,000 in monthly rent. According to Patrick Carroll, Hojati’s attorney, Gemayel attempted to take an ownership position in the vending operation after Hojati’s cash infusion and the business began to become profitable.

But escrow never closed. After the purchase agreement collapsed, Salazar tried to remove Hojati from the warehouse, accused him of committing “substantial fraudulent activity” and demanded the return of missing Abel Food accounting records that Hojati had stored at his auto-repair business. By September 2008, Salazar had hired an armed security guard in an effort to block Hojati’s access. He even hired GlassRatner, a forensic accounting firm, which determined that—according to a detailed report filed in court—“Hojati and A&G embezzled at least $458,383.”

Gemayel, who declined to be interviewed for this story, still hadn’t been paid all of Abel Food’s back rent and was frustrated. At one point, he brought in Orange County Democratic Party boss Frank Barbaro, a lawyer, to negotiate peace. That move failed, too.

Hojati wasn’t happy either. He claimed he’d been tricked into making a “substantial” investment in Abel Food and was now being pushed out. He said Salazar’s group didn’t know anything about smart business practices, hadn’t put a dollar into the effort in a year despite taking paychecks and were, he said in a court complaint, “clearly using the monies to pay personal non-venture expenses.” He demanded back $800,000 he said he’d invested after Pulido had brought him into the deal.

In late 2008, the battle landed in Orange County’s central courthouse. Salazar and Hojati and Gemayel filed civil complaints against one another. The filings claim embezzlement, fraud and gross mismanagement. Gemayel sued both in hopes of getting his unpaid back rent. But key portions of the proceedings hit a legal roadblock when Abel Food filed Chapter 11 bankruptcy in federal court in September 2008 and, later, the parties agreed to take their cases off calendar until corporate reorganization wins judicial approval. In a separate move, Hojati and Gemayel reached a settlement but made the terms permanently confidential.

*     *     *

When asked to comment about his involvement with Abel Food and if he had any idea who might have embezzled hundreds of thousands of missing dollars, Mayor Pulido called those potential questions “legal matters,” and had Charles McClung, his personal lawyer, respond. According to McClung, there is no story here. He says Pulido got involved in this “convoluted . . . complicated” situation solely because he’s a mayor concerned about enhancing local business opportunities.

“The mayor and his father have known Abel Salazar for years and years and years,” said McClung. “Miguel, the dad, is a business partner of Salazar’s. Miguel [the mayor] got involved in this in his consulting capacity. He’s worked with all the parties so that they have good business relations. Miguel is friends with everyone. He didn’t want them to fight.”

But did Pulido, who this year is asking voters for a ninth term as mayor, cross any ethical lines?

“Miguel has no stake in any of this stuff,” McClung said. “The mayor’s a glue type of person. He brings people together. He’s good at making peace and solving problems. That’s good for commerce and Santa Ana.”

rscottmoxley@ocweekly.com

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