Audit Questions Why Tiny City of Industry Paid Ex-Mayor’s Companies $326 Million

Wednesday, April 29, 2015
Ex-Mayor Dave Perez

The City of Industry, in Los Angeles County’s San Gabriel Valley, is prosperous, with hundreds of businesses, employing 50,000 workers, and an enormous municipal budget of around $250 million a year. It is also stable, not having had a City Council election since 1998.

The City of Industry, which is actually a narrow, 12-mile-long strip paralleling State Route 60, has around 400 or so residents and the government has been controlled since its incorporation in 1957 by what might easily be described as an oligarchy.

This unusual feudal form of privatized governing came under scrutiny last year, and earlier this month KMPG Consultants turned in an audit of city finances that pointed out the perks of running a city like Industry, according to the San Gabriel Valley Tribune, which got a peek at it.

The audit concluded that former Mayor Dave Perez, his family and their business interests were paid $326 million over the past two decades. Much of it was poorly documented and could have included huge overpayments.

Perezes were among the city’s founders, part of the Puente Valley’s French, Basque and Spanish families that lived in what used to be countryside. They became a dominant power in the community in the 1970s, with reportedly 13 Perezes on the voter rolls in 2012. Perez family companies haul the garbage, recycle waste and do city maintenance, while family members are sprinkled throughout government.

Dave Perez was the mayor for 11 years before stepping down in 2012. The audit was ordered by city officials shortly afterward. Perez’ decision came the year after an investigation by the Los Angeles County District Attorney into conflict-of-interest allegations concluded that there had been no violation of the law. The investigation was begun in 2009 after the Los Angeles Times ran a series of stories detailing the Perez family holdings and government dealings.

Last year, the city sued him and three of his companies in Los Angeles County Superior Court for $9.6 million, alleging he used public land for his recycling business. In another sign of schism in city government, the city asked that Perez’s Zerep Management Inc. do something about the road they graded in neighboring Rowland Heights without permission to facilitate brush clearing.

Zerep, which is Perez spelled backward, was also singled out in the audit for questionable deals. The company billed the city $28 million for renting vehicles and equipment over 11 years, an amount that could have paid to buy “a fleet of the same or similar vehicles and equipment several times over.” The city already owned many of the same type of vehicles and equipment being rented, which made it look even odder when Zerep was caught charging $1,100 for a tractor rental after being observed using a city-owned tractor.

Zerep averaged 13 invoice submissions a month, an amount the auditor considered “inconsistent” with its contracts. The city severed ties with Zerep last year and its replacement charges one-sixth as much for street sweeping and maintenance.   

The Perez family also cost the city in other ways. A former city clerk sued Perez, his brother Manuel (Planning Commission chairman who died last month), another relative and a fourth guy (now running for City Council) for sexual harassment. She settled for $1 million. 

The City of Industry has not needed to have a City Council election for decades because there is always an orderly transition. Council members who leave do so in the middle of their terms and a successor is quietly appointed by the 5-member panel. They are never challenged, until this year.

Amid the upheaval in city government the past few years, the Perez faction has lost a measure of control. But that could change June 2. A Perez-backed slate of candidates are running for three open council seats, currently occupied by people who voted to sue Dave Perez. The lawsuit is still pending.  

–Ken Broder


To Learn More:

City of Industry Pays Former Mayor $326 Million in Contracts over Decades (by Rebecca Kimitch, Inland Valley Daily Bulletin and Steve Scauzillo, San Gabriel Valley Tribune)

Companies Tied to Industry Ex-Mayor Racked Up Fortune (by Frank Shyong and Ruben Vives, Los Angeles Times)

Industry to Have First City Council Election Since 1998 (by Jason Henry, San Gabriel Valley Tribune)

City of Industry: An Historical Precedent and Its Concrete Effects (by Christina A. Hernandez)

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