Eber: Lennar: False Claims Act Filed Against Largest U.S. Builder: $1 Billion Abuse Claimed

CalPers, while going after numerous firms that ripped them off, did not request repayment of one billion dollars, taken from the retirees of CalPERS by famed builders Lennar.  A False Claims Act was served on Lennar on April 17, 2018.

“It is stated in the False Claims Act suit that Lennar engaged in massive fraud in the inducement of the CalPERS funds in addition to the 1.5 billion they borrowed in a loan syndicate arranged by Barclay’s Bank. It is alleged that Lennar transferred 1.4 billion dollars to themselves and a sister company LNR and caused the bankruptcy of LandSource.  Principal assets of LandSource included Newhall Ranch in Valencia, CA. and a massive development on the former military base on Mare Island in Vallejo

The suit contends after LandSource went under, Lennar allegedly manipulated the bankruptcy process and ended up buying back these two properties at pennies on the dollar from the bankruptcy court in Delaware.  These entities are controlled to this day by LandSource’s successor Five Point Holdings.

The California False Claims Act suit was filed by famed attorneys Robert E. Barnes and Brian Mahany on behalf of Citizens Against Corporate Crime LLC and the State of California. .  The False Claims Act is designed to assist the State of California in recovering funds stolen from state agencies like CalPERS.”

Rich Eber, the author, has written more than 25 articles involving Lennar, its lobbyists, its affiliates, it funding elected officials—with one, Assemblyman Tim Grayson forced to give back the $15,000.  This over a three year period.  This False Claims Act is a massive effort to return money to California retirees—apparently OVER the objections of CalPERS.

Full disclosure:  I am part of the Team on this effort.

SACRAMENTO, CA - JULY 21:   A sign stands in front of California Public Employees' Retirement System building July 21, 2009 in Sacramento, California. CalPERS, the state's public employees retirement fund, reported a loss of 23.4%, its largest annual loss. (Photo by Max Whittaker/Getty Images)

Trolling thru the murky world of Lennar by Richard Eber

Richard Eber, California Political News and Views, 4/23/18

At first glance, Lennar Corporation might look like an ideal stock to purchase. Being considered to be the largest home builder in the United States after its merger with Cal-Atlantic last year, and many financial analysts including the Wall Street Journal and Baron’s have recently predicted Lennar to experience positive growth in the near future.

Guess again!  This company under the leadership of Stuart Miller and Jonathan Jaffe has a dark underbelly that threatens not only the recent$ 54.00 dollar per share stock price; but even the long term future for this 9 billion dollar plus concern.

This week Lennar was served with a California False Claims Act lawsuit in Sacramento pertaining to an alleged swindle of the giant California Public Employees Retirement System – CalPERS.  Lennar entered into a contribution agreement with CalPERS through a controlled entity called LandSource. LandSource filed bankruptcy 9 years ago, and the pension fund lost almost a billion dollars.

It is stated in the False Claims Act suit that Lennar engaged in massive fraud in the inducement of the CalPERS funds in addition to the 1.5 billion they borrowed in a loan syndicate arranged by Barclay’s Bank. It is alleged that Lennar transferred 1.4 billion dollars to themselves and a sister company LNR and caused the bankruptcy of LandSource.  Principal assets of LandSource included Newhall Ranch in Valencia, CA. and a massive development on the former military base on Mare Island in Vallejo

The suit contends after LandSource went under, Lennar allegedly manipulated the bankruptcy process and ended up buying back these two properties at pennies on the dollar from the bankruptcy court in Delaware.  These entities are controlled to this day by LandSource’s successor Five Point Holdings.

The California False Claims Act suit was filed by famed attorneys Robert E. Barnes and Brian Mahany on behalf of Citizens Against Corporate Crime LLC and the State of California. .  The False Claims Act is designed to assist the State of California in recovering funds stolen from state agencies like CalPERS.

With such serious allegations, the discovery process involving Lennar and CalPERS should be pretty interesting. At the time of the alleged contribution agreement and fraudulently obtained loan, Fred Buenrostro, now serving time in Federal prison on corruption charges, was at the helm of the pension fund.

 

 

Also to be investigated is the possible involvement of former CalPERS board member Alfred Villalobos who was accused of siphoning off pension funds to private equity firms he represented. Villalobos (who was filmed by undercover agents transferring shopping bags full of cash to Buenrostro) was never prosecuted because he conveniently committed suicide before a trial date could be set.

If either of these characters is linked to the CalPERS loan, Lennar will have a lot of explaining to do.  This is not the only shady dealings Lennar and their subsidiaries have been accused of.

Laurence Pelosi, Nephew by marriage to House Minority Leader Nancy Pelosi, was involved in a ring of questionable business transactions involving Lennar (for whom he once worked for) in gaining contracts for them with the city of San Francisco.  He also has had dealings with CalPERS, which might come to light in the False Claims litigation.

Lennar was also indirectly linked to the Federal investigation that lead to jail terms for former San Francisco legislator Leland Yee, Mobster Raymond  “Shrimp Boy” Chow and Political Fixer Keith Jackson. It was Jackson, who at the time he was arranging pay-offs and bribes on Leland Yee’s behalf, was also working as a consultant for Lennar in San Francisco earning almost $ 500,000 in this capacity.

When Jackson, who also had close ties to Lennar insider Willie Brown, was sentenced to prison, the nature of his work for the builder was never fully explained. Then Lennar Vice President Kofi Bonner said he had no idea what kind of activities his former consultant was involved with despite the significant retainers Lennar paid to Jackson,

And then there is San Francisco’s former Mayor and California State Assembly leader Willie Brown who has close business ties with his former employee and friend Kofi Bonner. Over the past decade Brown, though his company Golden Gate Global, he helped arrange nearly one half billion dollars in loans to Lennar projects via EB-5 programs.

Under Golden Gate’s deal with Bonner, Brown’s company sold Green Cards for 1 million dollars per family to immigrants primarily from China. The proceeds were used to create construction jobs on work done by Lennar in San Francisco

Even after commissions were paid off, the profit margin for Brown’s company were enormous as only a small proportion of the money they took in was needed to finance the loans.

Brown was not afraid to assist his buddy Bonner expand his firms interests outside of San Francisco.  In 2016 he helped Lennar gain the lucrative Master Developer contract with the City of Concord to transform the closed down Concord Naval Weapons Depot to be turned into housing and commercial development where over 40,000 people might one day reside.

To do so Willie Brown not only publicly endorsed Lennar, but also through one of his protégées Mary Joe Rossi, arranged to give free political consultations with then Concord Mayor Tim Grayson, who was running for the State Assembly. If this was not enough, Brown’s partner in Golden Gate Development, attorney Steven Kay arranged to donate the maximum contribution to Grayson’s campaign.  By mere coincidence, other Lennar vendors chipped in large sums which came to over $ 14,000.00 for the cause.

Grayson, who later won the general election, denied he ever receiving anything but free political advice from Brown, while returned all the questionable contributions to donors he claimed to not have known.

Things got murky following the mysterious suicide of Concord City Attorney Mark Coon, who at the time of his death was being pressured by Grayson’s campaign manager Mary Jo Rossi and his attorney Jim Sutton to absolve Lennar of wrong doing. Email records show the two were anxious to move forward with voting on choosing the Naval Weapons Master Developer.

Concord also had difficulties with the Brown Act when it was revealed that the City Manager Valerie Barone inadvertently broke the law when she tried to work with three other City Council members to suppress the staff report that recommended Catellus had a superior proposal for the Navy contract and should be awarded the developer contract.

In the aftermath of these happenings, the City hired respected attorney Michael Jenkins to investigate what had transpired and make recommendations to the City Council on corrective actions they might take.

After several months, the Jenkins Report was issued that condemned the way Lennar conducted itself in the bidding process.  In compiling information about what transpired with Lennar’s actions, Willie Brown, Kofi Bonner, Mary Jo Rossi, and Steve Kay, all in effect took the 5th in refused to cooperate with his investigation

Despite these transgressions of Lennar outlined in Jenkins’ findings, the company was still allowed to compete in becoming the Master Developer for the Naval Base. This resulted in the other finalist, Catellus Corp, to withdraw from the bidding process just prior to when the final vote was supposed to take place.  It was no secret that their President Ted Antenucci felt because of what he considered to be rampant corruption on the part of the City Council and City Manager, his company did not want to work with this group.

The Concord City Council ended up awarding Lennar the Base contract choosing not to reopen the bidding process to provide competition for this multi-billion dollar contract. Ironically, Lennar had to agree to the terms of what was considered to be the superior proposal of Catellus to gain approval of the Concord City Council.

Recently another problem has cropped up for Lennar.  Their successor company to the bankrupted LandSource, Five Point Holdings has struggled in San Francisco.  Their management team led by President Kofi Bonner and CEO Emile Haddad (who held an executive position with the old firm) has been stymied of late at Hunters Point.

It has been revealed the Navy’s toxic waste removal contractor Tetra Tech has been falsifying soil samples for years possibly causing some of Lennar’s construction to have occurred on contaminated soil. Currently all land sales where the fraud has occurred have been halted while the Navy sorts things out.  There are also similar concerns in another Lennar development at Treasure Island.

While Lennar is not directly involved with the Tetra Tech scandal at this juncture, this may change when several investigations inevitably will take place.  It should be noted that the two companies have a close relationship which includes Tetra Tech doing soil clean-up for Five Point on the Newhall Ranch property…

In addition, Five Point is working with the Navy and Tetra Tech to clean up contaminated soil in Concord prior to when land can be turned over to the city. At several community meetings, those in attendance questioned why the discredited soil cleanup company was still working for the Navy. This same conclusion has been reached by many local groups throughout the Bay Area who worry about toxic waste being built on in their town.

The issues listed above are but a tip of the Lennar iceberg of questionable business activities in California and throughout the entire country.  In the past, Lennar has turned to Daniel Petrocelli, most notable for being the attorney of Jeffrey Skilling of Enron fame, to help extricate them from legal peril. No matter who they use in the False Claims suit, Lennar will undoubtedly mount a strong defense,

The question to be determined is how much damage will be done as the CalPERS story unfolds during the discovery phase of litigation?

Will Lennar’s brand of “transparency” triumph once again?

 

 

 

About Stephen Frank

Stephen Frank is the publisher and editor of California Political News and Views. He speaks all over California and appears as a guest on several radio shows each week. He has also served as a guest host on radio talk shows. He is a fulltime political consultant.

Comments

  1. How Think Tanks Amplify Corporate America’s Influence – The New …
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    Aug 7, 2016 – WASHINGTON — As Lennar Corporation, one of the nation’s largest home builders, pushed ahead with an $8 billion plan to revitalize a barren swath of San Francisco, it found a trusted voice to vouch for its work: the Brookings Institution, the most prestigious think tank in the world. “This can become a …

  2. Really??? says

    If even half of this is true, people are going to jail.

    I’ll bet the trail leads back to some very highly placed current or former Democrats.

  3. This sounds like business as usual. When is it gonna’ be the taxpayers turn??

  4. CaliExpat says

    It’s Chinatown, Jake…

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