Two former top administrators in the City of Industry were shut out of discussions about a $20 million solar project after voicing concern about vague invoices submitted by the developer, who is now accused of embezzling as much as half of Industry’s investment, according to testimony this week.

Alex Gonzalez, the city’s then-director of development services and administration, and Susan Paragas, the then-finance director, refused to sign the invoices and stalled payments to the developer for months. Gonzalez tried to send someone from the city’s contracted engineering department to verify that work was being done, but the employee was blocked from entering the premises.

“It wasn’t clear to me what the consultants were doing,” Gonzalez testified.

Secretive agreement

Industry entered into a secretive lease agreement with the developer, San Gabriel Valley Water and Power, in May 2016, though the council did not publicly approve it until more than a year later. Under the agreement, Industry pledged to fund SGVWP’s efforts to develop a 450-megawatt solar farm on Tres Hermanos Ranch, a slice of rolling hills and pastures at the time owned by Industry’s former redevelopment agency on the edges of Los Angeles, Orange and San Bernardino counties.

The project was kept confidential, even from city employees, due to its controversial nature. Neither Diamond Bar nor Chino Hills, which had jurisdiction over the land, supported the idea and eventually sued in an effort to block it.

Paragas testified she learned of the project when the invoices began appearing on her desk. She went to then-City Manager Paul Philips, who is now accused of misappropriation of public funds for allegedly assisting in the scheme, and only then was provided with a copy of the lease agreement. Philips is going through a preliminary hearing in Los Angeles Superior Court to determine if he should stand trial on the charge.

“I was not happy with the agreement, or how it came about, or the invoices that were submitted,” Paragas testified Friday, March 25.

Fraud conspiracy

Those invoices are now at the core of the corruption scandal. Prosecutors from the Los Angeles County District Attorney’s Office have repeatedly alleged there was a conspiracy to defraud Industry, and that many of the invoices were altered, or faked, to inflate the developer’s costs. They have charged Philips, developer William Barkett, former state Sen. Frank Hill and attorney Anthony Bouza, for allegedly playing various roles in the scheme. Barkett is accused of spending more than $8 million of the city’s funding on personal items, including a $2 million wedding in France for his daughter.

While Philips is already in court, the other three men are not expected to appear for their preliminary hearing until May. Prosecutors have not yet clearly spelled out the allegations against Philips, specifically, but their questioning has suggested that the city manager ignored red flags surrounding the project and potentially signed off on payments that were not properly approved by the City Council.

Philips’ attorneys, however, have contested that idea and tried to paint him instead as a public employee who followed the direction of his City Council. Testimony has supported the idea that a solar project could have been viable on the land, though several witnesses have questioned the financial feasibility of San Gabriel Valley Water and Power’s specific proposal. An investigator from the District Attorney’s Office has testified that they do not have evidence that Philips received any of the city’s money.

Paragas and Gonzalez were hired by Philips as part of a new administration tasked with reforming Industry in light of a scathing state controller’s audit and pressure over spending on contractors. Yet, their concerns about the invoices for the solar project did not gain traction, according to the testimony.

‘Stay away’

Gonzalez said he was eventually told to “stay away” from the Tres Hermanos project following a heated meeting with Mayor Mark Radecki, in which Radecki “flew off the handle” over a request by Gonzalez to send someone to repair storm damage on the ranch property. According to Gonzalez, Radecki was close to Hill, the former state lawmaker and consultant now accused of playing both sides through his work with the Cordoba Corp., which served as the city’s contracted engineering department. Hill allegedly had an ownership stake in San Gabriel Valley Water and Power at the same time that he was supposed to be representing the city’s interests.

Philips told Gonzalez the City Council didn’t want him “going on the property” and to stay away from the project not long after the meeting with Radecki, according to the testimony.

In his testimony, Gonzalez, who considers Philips to be a mentor, said he believed the city manager was trying to protect him. The two men had worked together in Covina and Maywood prior to Industry.

During questioning from Philips’ attorney, Gonzalez said he had never been asked to do anything unethical by Philips. Gonzalez would later resign from Industry, following Philips’ own firing in 2018, and alleged that he did so after the mayor asked him to give a contract to a specific company without getting bids from others.

‘Deeply depressing’

In an interview after his testimony, Gonzalez said he never suspected the invoices were fraudulent and that his concerns was simply with the lack of detail. In hindsight, he was glad to have been distanced from the project, he said.

“I would have approved those invoices, that’s what makes that scary to me,” he said.

Gonzalez’s experience in Industry has led him to reevaluate his career and he is now studying to become a lawyer. He said his time in Industry made him never want to have to rely solely on the legal advice of others again.

“This is deeply depressing and upsetting to me, because we did do some good reforms there and its overshadowed by the actions of others,” he said.

Approvals circumvented

Even after Gonzalez was shut out of Tres Hermanos, Paragas continued to refuse to sign invoices and to push for more supporting documentation from San Gabriel Valley Water and Power. According to Gonzalez, Paragas received threatening phone calls from Barkett, the developer, where she was told she would be fired if she didn’t pay the invoices.

The City Council suddenly restructured the agreement with San Gabriel Valley Water and Power so the payments would instead be considered a loan. The loan required less scrutiny and the invoices began getting paid again.

This new clause was negotiated by Bouza, the city’s counsel for the Industry Public Utility Commission, according to an interview with Bouza at the time. Bouza described the new arrangement as a calculated risk, because the loan would need to be paid back only if the project got off the ground. Years later, it was discovered that a company owned by Bouza was reportedly owed $1.5 million by Barkett and that the attorney stood to benefit if the deal went in Barkett’s favor.

Closed meetings

Philips’ attorney, Joe Weimortz, declined to say what Philips did in response to the concerns brought to him by Paragas and Gonzalez. He said that information could violate a state law barring employees from talking about discussions in closed session.

The so-called closed-session privilege has become a key issue in the case, with attorneys representing Industry regularly objecting to any questions that might detail what the City Council did or did not do in the private meetings. In court, Weimortz has suggested the objections could lead to him pushing for a dismissal of the case because the state law would prevent his client from properly defending himself.

“I think there is going to be a point where the viability of this case is called into question,” Weimortz said.

So far, Los Angeles County Superior Court Judge Michael Pastor has declined to entertain the idea and has said there are other remedies if it becomes an issue.

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