A man who bought a cannabis permit in Baldwin Park now claims corrupt city officials helped the seller, a shell company tied to a former city attorney, dump the permit for more than $150,000 in profits in a scheme that left the new owner in trouble. debt.
The company’s owner, David Yu, entered into an agreement to purchase the hemp development contract previously awarded by the city council to a company identified as Tier One Consulting in late 2018, even though a city ordinance at the time prohibited permit holders from transferring any ownership rights. To David Torres-Siegrist, Yu’s attorney.
Nevertheless, Torres-Siegrist alleges in the damages suit that city officials, including then-City Attorney Robert Tafoya, approved amendments to the development agreement in April 2019 that replaced the former owners with Yu, in apparent violation of the city’s own laws. . According to Torres-Siegrist’s recent lawsuit against Baldwin Park, the amendments signed by then-Mayor Manny Lozano and Tafoya were never presented to the council for approval.
“Ultimately, Mr. Zhu discovered that he had in fact purchased nothing more than a never-ending cycle of debt secretly ‘negotiated’ between the current city attorney and the soon-to-be city attorney, which was set up to fail from the start. ” Torres-Siegrist wrote in the lawsuit.
The claim, which is usually a precursor to a lawsuit, states that damages exceed $25,000 and will be proven at trial.
Years after the sale to Yu, Tafoya hired a listed first-tier principal, attorney Anthony Willow II, as an assistant city attorney.
Saddled with debt
Development agreements include annual “coverage fees” ranging from $235,000 in the first year to $330,000 in the third year and beyond. These fees must be paid even if the company is not operating, making it difficult to catch up, according to Torres-Siegrist.
Ju company DJCBP Corp. finally opened its doors earlier this year, but owes the city more than $600,000 in abatement fees. Yu had experience with liquor licensing fees and didn’t expect to have to pay until he was ready to work, Torres-Siegrist said.
“They’re creating a system here that is an endless cycle of debt,” he said. “These owner operators will never be able to get rid of this debt.”
Zhu’s lawsuit alleges that city officials and those behind the first tier “acted in concert to orchestrate the fraud of an elderly man dying of cancer who invested his life savings” in the purchase after he was convinced that they will find “green gold”.
Tafoya and one of the others involved, former Compton Councilman Isaac Galvan — a middleman who made $50,000 from the sale — were recently accused of corruption in a plea agreement signed by former Baldwin Park Councilman Ricardo Pacheco, a former official who admitted to has taken bribes to support cannabis development contracts.
In his plea agreement, Pacheco alleges that Tafoya, identified as Person 1, attended several meetings where Galvan, identified as Person 10, and Pacheco discussed illegal payments.
According to federal prosecutors, Pacheco later voted in favor of an unidentified company’s “marijuana cultivation and production development agreement” on July 18, 2018, as part of a deal with Galvan. Tier One was one of three companies awarded this type of development contract at the same meeting.
Additionally, the filing alleges that Galvan and Tafoya were “doing business together” and seeking a marijuana license in the City of Commerce. Public records also show Tafoya’s wife was hired as an administrative analyst in Compton in 2017, at which time emails showed she was initially recommended as Galvan’s community liaison.
Tier One owner Anthony Willoughby Sr., Willoughby II’s father, used to be Galvan’s personal attorney. Galvan could not be reached for comment.
“Consultants” act as mediators
Pacheco’s plea agreement alleges that Tafoya came up with the idea for Pacheco to find an intermediary to act as a “consultant for companies seeking development contracts” and proposed the intermediary’s request for specifically $150,000 in exchange for a promise to perform, the plea agreement said.
Pacheco ended up following a very similar plan before he was captured.
Now both he and his go-between, former San Bernardino County Planning Commissioner Gabriel Chavez, have agreed to plead guilty to bribery charges and cooperate with investigators in the ongoing, far-reaching probe into cannabis corruption throughout Southern California. Pacheco allegedly provided a template for a consulting agreement that Pachecho could use in the scheme.
Tafoya, Galvan and Chavez were simultaneously investigated by the FBI in November 2020, but neither Tafoya nor Galvan have been charged.
Torres-Siegrist claims that his client is a victim of corruption. Torres-Siegrist represents seven hemp operators in Baldwin Park and claims that “everyone has their own little bull story — it happened.”
Tafoya resigned in October after Pacheco’s plea agreement became public. In a statement, his attorney, Mark Werksman, said Tafoya “denies any involvement in this transaction and was unaware of the matters alleged in this lawsuit.” The former city attorney has previously denied being involved in Pacheco’s corruption. Baldwin Park is now moving to hire the firm of Best, Best and Krieger to represent it.
In a statement, Willoughby II said he remains with Tafoya’s law firm on a limited basis. He referred all questions about the finances of Tier One or Galvan’s stake to his father and denied that he had any role in the sale other than signing on Tier One’s behalf. He is listed as the “seller” in the purchase agreement.
In an email, Tier One owner Willoughby Sr. accused Yu of “buyer’s remorse.” He wrote that Tafoya was not involved in the talks between Willoughby and Yu.
“Mr. Like many cannabis investors he was euphoric about getting rich and when his dream went south he is now trying to capitalize on Mr. Tafoya’s misfortune,” Willoughby wrote.
If Yu believes the “baseless slanderous allegation” that he was defrauded, “he should file a criminal complaint,” Willoughby said.
Willoughby said he paid rent for the space for nearly a year while waiting for approval from the city and decided to cut his losses after realizing the idea was “fool’s gold” as state and local governments structure their licensing processes. He declined to say how much he made from the sale of the development contract to Yu.
Documents filed by Torres-Siegrist indicated Willoughby may have spent less than $4,000 in total.
In response to questions about the transfer, Willoughby cited “caveat emptor,” a common law doctrine that obligates buyers to reasonably investigate their purchases beforehand. The Latin phrase translates to “let buy beware”.
“Looking at the Baldwin Park development agreement, it would take even a blind person to show that there is no money to be made from this scheme,” Willoughby said.
Role of Compton Councillor
Torres-Siegrist alleges that Galvan brokered and brokered the sale between Yu and the Willoughbys. The purchase agreement said $50,000 of the $150,000 payment would go to Galvan to “repay the loan.”
In his emails, Willoughby initially stated that Galvan was “not involved in the sale” between Tier One and Yu, but later admitted that “Gavan was paid from the proceeds.” He did not respond to a follow-up question asking him to clarify the former Compton councilman’s role.
Although called Tier One Consulting in all city documents, Willoughby registered Tier 1 Consulting & Advocacy LLC with the state in 2015, but the company failed to file subsequent disclosures, was found delinquent in 2017, and was suspended until April. According to the Secretary of State’s website, in 2018
However, even though the company did not have an active business license at the time of negotiations, Tafoya and Community Development Director Gustavo Romo recommended a development agreement with the LLC on June 20, 2018, according to a staff report. The City Council unanimously approved a recommendation to reach an agreement on the first level on June 20, with Pacheco moving to second.
The LLC’s business license was renewed on June 21, 2018, although the company would later fail to file a disclosure statement and would be suspended again until later that year, according to the secretary of state’s website.
The company, which had just two employees, received a development contract from the city and then sold it to Yu within six months.
The mayor is trying to fix things
Mayor Emmanuel Estrada then joined the city council. He said the city is still trying to correct past mistakes and wants to find a system that is fair to all cannabis businesses.
“I think we all recognize that it’s complicated, that there’s a lot of controversy surrounding the program, but we’re definitely committed to making it work, not just for us, but for everybody,” he said.
Estrada has vowed to push the investigation into the cannabis distribution to determine if the corruption Pacheco is accused of involving other city officials or employees.
“I’m going to try to make sure the city knows what’s going on and who was involved,” he said. “And whoever was involved needs to be held accountable.”