FBI is investigating Montebello's finances

June 30, 2011 | 6:26 pm

 

Federal prosecutors and the FBI have launched an investigation into potential misuse of funds and fraud involving federal housing money in Montebello, adding to the growing list of agencies looking into the city’s stewardship of public dollars.

Sources told The Times that the FBI is leading an investigation looking specifically into how the city used federal funds over the last few years. The probe comes after the federal Housing and Urban Development agency in April took the highly unusual step of suspending all funding to the city.

HUD officials suggested that Montebello misspent some of the money and demanded $4 million be repaid.

Acting City Administrator Larry Kosmont confirmed that the city received a subpoena from the U.S. attorney’s office for records pertaining to HUD money. City Councilwoman Christina Cortez said she talked with FBI investigators, who showed up unannounced to a meeting she called with HUD officials. The FBI agents asked her questions about the city’s financial decisions, she said.

The federal inquiry is on top of a Los Angeles County district attorney’s office probe into mysterious “off the books” city bank accounts discovered earlier this year. State Controller John Chiang has also launched a wide-ranging audit of the city and its redevelopment agency.

Montebello, a bedroom community about 10 miles east of downtown L.A., faces a major financial crisis, with officials saying they face possible insolvency later this year. Kosmont is part of a new team of city administrators and council members who are grappling with how to clean up the city’s finances.

A central issue in the federal probe is what happened with $1.3 million in HUD funds that the city paid to a developer in 2008 to build affordable apartments on Whittier Boulevard.

The project was never built, but city officials recorded it as completed in a HUD database. 

This prompted HUD to issue Montebello a reprimand.

Submitted by Jim Alex