FBI Probe Of Adelanto Graft Goes Beyond Circumscription Of Wright’s Action

By Mark Gutglueck
The team of FBI agents assigned to the High Desert have obtained evidence suggesting that the graft infesting the City of Adelanto’s move to a largely cannabis-based economy was not limited to former councilman Jermaine Wright, who has been charged with seeking and arranging bribes in conjunction with his efforts to act on behalf of marijuana-related ventures in the city, information available to the Sentinel indicates.
In many of the cases, federal agents needed to do little if any digging, as action taking place or statements made in public places implicate certain city officials. Moreover, assertions tantamount to a description, or even confession, of collusion involving public officials and cannabis industry interests are available in public documents.
Since late 2016, the presence of federal agents in Adelanto has been palpable. At that time a series of actions – primarily in the form of land use decisions – by the city council caught the attention of the FBI, agents with the Drug Enforcement Agency and the Securities and Exchange Commission. In particular, a November 29, 2016 decision by the Adelanto Planning Commission done at the behest of the Adelanto City Council to rezone a considerable amount of acreage within the city such that marijuana cultivation could legally take place there raised suspicions that something was amiss. This was accompanied by other zone changes that made commercial sales of marijuana possible in places where previously it was to be prohibited. This put members of the planning commission, the city council, the principals in the companies benefited by these decisions, and the city’s economic development director who was a consistent go-between linking the city council with those companies in the crosshairs of the federal task force.
Two cases in point for the FBI and Securities Exchange Commission were zone changes that attended land acquisitions by David Serrano and Industrial Integrity Solutions.
On October 3, 2016 in a seeming rush, David Serrano, an attorney whose brother Manny Serrano was the spokesman for the High Desert Cannabis Association, entered into escrow to purchase the Jet Room, a one-time cocktail lounge that sat dormant and dilapidating on a 2.25 acre lot located at 17499 Adelanto Road just south of Joshua Avenue from Dmitri Manucharyan for $450,000. Just a little more than six months earlier, on March 23, 2016, Manucharyan had bought the property for $239,000. The transaction was completed on October 11, 2016. Serrano, who purchased the property in conjunction with his wife, Julia, said he intended to convert it into a law office.
The broker on the deal was John Woodard, of Woodard Realty in Adelanto. Woodard is a member of the Adelanto City Council first elected to that post in 2014, and a key vote in the coalition of council members driving the cannabis liberalization phenomenon in Adelanto. Seven weeks after Serrano closed escrow on the Jet Room, the Adelanto City Council held a public workshop, the upshot from which was a tentative proposal to re-zone two areas within the city in a way that would make them eligible to host medical marijuana dispensaries. With the passage of Proposition 64 three-weeks earlier, that meant that the dispensaries would very likely at some future date be selling marijuana not just to those with medical prescriptions under the 1996 Proposition 215 Compassionate Use Act, but marijuana for recreational smoking purposes under 2016’s Proposition 64. Whoever had an inside track on setting up a pot shop in one of the proscribed areas stood a substantial opportunity to get rich. As it would turn out, one of those zones the council decided to designate was the area between Pearmain Street, Air Expressway, just west of Mesa Linda Road and Rancho Road. Contained within that area was the Jet Room.
Ultimately, David Serrano submitted plans to the city calling for the conversion of the Jet Room into a cannabis sales business.


The City of Adelanto has an interesting arrangement with its economic development director, Jessie Flores. Flores is not a city employee, per se, but rather a contractor. His contract calls for him to represent the city in its efforts to attract developers and businesses and economic development in general. His contract does not prohibit him from developing a relationship with, or working for, or accepting money from, those businesses he is seeking to attract to the city or in fact convinces to locate in the city. To hear it from city officials defending the arrangement with Flores, there is nothing at all wrong with any city, or Adelanto in particular, contracting with a vendor for services, and it is only incidental that for nearly the entire duration of Flores’ time with the city, Adelanto has been attracting cannabis-industry entrepreneurs. Up until the 2014 election – in which voters tossed out the three incumbents up for election, Mayor Cari Thomas and councilmen Steve Baisden and Charles Valvo, and put into office Mayor Rich Kerr, and councilmen John Woodard and Charlie Glasper – Adelanto prohibited marijuana, refusing to allow it to be sold in the city, even though under California’s 1996 Compassionate Use of Marijuana Act it could have allowed medical marijuana clinics to operate. It was only after Kerr and Woodard joined with Wright on the council that they, with the oftentimes reluctant support of Glasper, changed course in a gradualized set of stages to embrace marijuana liberalization. Initially, the city maintained its ban on allowing medical marijuana clinics to operate but resolved in November 2015 with councilman Ed Camargo dissenting to allow marijuana to be cultivated in indoor nurseries located within the city’s industrial park district. Subsequently, the council mutated the city’s stance further, consenting to let dispensaries set up operation as well. And with the passage of the Adult Use of Marijuana Act contained in 2016’s Proposition 64, the council, again with Camargo in opposition, went the whole nine yards and has resolved to transition the city, which in June 2013 stood on the brink of bankruptcy to the point that it had declared a fiscal emergency, into the marijuana capital of California.

The federal government yet classifies marijuana as a Schedule 1 narcotic and many within its law enforcement structure are looking for an opportunity to demonstrate that federal law trumps state law with regard to drug use policy and drug use tolerance. For them, Adelanto represents an attractive target, not simply because of the presence of drugs there but because the activity in accommodating the New Age drug culture is teeming with indicators that it is corrupting the city’s normal governmental and social functions, such as land use policy and priorities, not to mention the integrity of standard governmental processes and operations.
To obtain damning information, investigators need do little more than attend public meetings. A recent example was when Shad Boyd came before the city council and openly acknowledged that he had purchased property in Adelanto based upon assurances given to him ahead of time that the property would be rezoned to accommodate a cannabis-related use. He expressed disappointment that the city had yet to come through with that commitment.
In other cases, the investigative spadework FBI agents need to engage in consists of nothing more than a trip to the courthouse, where a review of lawsuits against the city document that the prospect of marijuana riches coming their way has compromised the judgment of Adelanto city officials.
On December 21, 2017, Irvine-based attorney Rick Augustini filed a lawsuit against the City of Adelanto on behalf of American Scientific Consultants, LLC over what Augustini alleged was the city’s breach of an agreement to sell the city’s public works yard. The language in that suit, including the concessions Augustini makes with regard to his client’s motivations and actions, shows the degree to which the power city officials yield in making zone changes that literally overnight will increase the value of property ten-fold to twenty-fold has debased the city. That debasement includes city officials involving themselves in discussions relating to selling off city assets to interested buyers at market price and then engaging in zone changes which subsequently escalate the value of that property into the stratosphere.
According to the American Scientific Lawsuit, “ln or about mid-2016 ASC [American Scientific Consultants] decided to enter the medical cannabis business and started looking for real property to purchase in the City of Adelanto, including making offers on property owned by defendant. In late 2016 and early 2017 ASC spent hundreds of hours and thousands of dollars securing medical cannabis permits and licenses from the City of Adelanto. Sometime prior to March 30, 2017, defendant decided to sell the real property located at 17451 Raccoon Avenue Adelanto, CA 92341, the subject property, as part of its effort to generate additional revenue to pay for infrastructure and resolve a budgetary shortfall. On or about March 30, 2017, ASC offered to purchase the subject property from defendant. Over the next several months ASC and defendant negotiated the terms of the sale of the subject property in an arms length transaction.”
The property at 17451 Raccoon Avenue was the city’s public works yard.
Noting that the manager of American Scientific Consultants, C.B. Nanda, negotiated on the company’s behalf and Adelanto’s interim city manager, Mike Milhiser, negotiated on the city’s behalf, the suit continues, “Between March 30, 2017 and July 3, 2017, the city council discussed the sale of the subject property in closed session in the presence of the city attorney on multiple occasions, including on March 30, 2017, June 14, 2017 and June 28, 2017. Following the meeting on June 28, 2017, the defendant advised ASC that it would sell the subject property to it for $1,000,000.00. On or about July 3, 2017, ASC submitted a written offer to purchase the subject property for $1,000,000.00. On or about July 13, 2017 defendant accepted ASC’s offer and entered into [a] written agreement. ASC thereafter assigned its rights to AMN, LLC [a company affiliated with ASC] and entered into an agreement with Canniatric, LLC [a company which makes tinctures of cannabis] at the specific request of defendant because of its national reputation in the cannabis industry. Mr. Nanda signed the agreement on behalf of ASC and Mr. Milhiser signed the agreement on behalf of defendant. At the time ASC and defendant entered into the agreement the subject property was outside the cultivation zone that defendant had established for the manufacturing, testing and distribution of medical cannabis pursuant to its municipal code. On or about September 8, 2017, plaintiffs are informed and believe that defendant decided to expand the cultivation zone to include the subject property. Plaintiffs had no involvement in or foreknowledge of defendant’s decision to expand the cultivation zone to include the subject property.”
The lawsuit continues, “Before defendant decided to expand the cultivation zone, it consisted of approximately 663.35 acres. After defendant decided to expand the cultivation zone, it consisted of approximately 2,214.5 acres. The decision by defendant to expand the cultivation zone to include the subject property increased its value significantly. At some point after the cultivation zone was expanded to include the subject property, plaintiffs are informed and believe that defendant decided to renege on the agreement in the hope of selling it to someone else for more money.”
At the Adelanto City Council meeting on November 8, the council voted to back away from the deal with American Scientific Consultants. According to the suit, “The day after the meeting, November 9, 2017, another attorney representing defendant, Ruben Duran of Best Best & Krieger, purported to terminate the agreement by among other things falsely claiming the interim city manager, Mr. Milhiser, lacked the authority to enter into the agreement and the agreement was the result of a conflict of interest.”
The Sentinel is told by an informed source that American Scientific Consultants had a side arrangement with members of the Adelanto City Council of which Best Best & Krieger had learned. Terminating the deal with American Scientific Consultants was meant to prevent from being actuated a criminal act which would have involved city officials, the Sentinel was told.
Reasoning that the city’s public works yard has become worth $5 million as a result of the zone change, Augustini asserts that American Scientific Consultants is entitled to the profit it would have been able to realize by acquiring the property and then liquidating it in accordance with the greater value that would have been assigned to it by the council’s action. Consequently, Augustini is seeking for his client a judgment “for damages according to proof at trial but in no event less than $5,000,000.00 plus prejudgment interest at the legal rate.”
What is apparent is that members of the Adelanto City Council routinely discuss with land speculators their future intent with regard to zoning changes.
Also apparent is that the city council can no longer rely on any of several current or former city employees to maintain loyalty to the council and its individual members, as the FBI has already completed or is in the course of scheduling or carrying out dialogues with Milhiser, current suspended city manager Gabriel Elliott, city clerk Cindy Herrera, former city attorneys Todd Litfin and Julia Sylva, former senior planner Mark de Manincor, former public works superintendent Nan Moore, former senior management analyst Mike Borja, conservation specialist/administrator Belen Cordero, and public works maintenance worker Jose Figueroa.
Kerr engaged in an effort to oust Elliott, who had been city manager for the four months since August 2017, in December, primarily as a consequence of Elliott’s cautious approach in licensing marijuana-related businesses and the delays this was causing. When accusations of sexual harassment were lodged against Elliott, he was suspended just prior to Christmas. An examination of those allegations has been carried out. The Sentinel is told that investigators were unable to sustain the charges against Elliott, and he will likely be restored to his position as city manager on February 14. Elliott’s return to command at Adelanto City Hall will facilitate investigators’ open access to city files.
The FBI has delved into payments made to Jessie Flores and the various entities in which he is financially involved, as well as charting any payments that may have been made by him directly or from the entities he controls, in particular to any employees or officials with the city.
The council’s headlong pursuit of cannabis industry-related development was blunted by the arrest, charging and continued incarceration of Wright, who last month was stripped of his council position after missing all regularly scheduled city council meetings for the 60 consecutive day period ending on December 24, 2017. Wright’s travails have severely chastened council member Glasper, who has begun to seriously rethink the wisdom of supporting the pro-cannabis availability strategy that was championed by Kerr, Wright and Woodard. With council member Camargo consistently resistant to that course, the council finds itself in a 2-2 deadlock on all issues relating to further institutionalizing and increasing cannabis availability in Adelanto. The council must await upon a special election to be held in June that has been consolidated with the Gubernatorial Primary balloting for the city’s voters to replace Wright before there can be any prospect that Kerr and Woodard will be able to further their agenda.
Simultaneously, with each day Wright remains incarcerated the likelihood increases that he will decide to cooperate with his jailers, offer up information about what he knows of activity in Adelanto that was ongoing while he was still at large there and involved intimately in taking the city in the direction envisaged by Kerr and Woodard. In the meantime, both Kerr and Woodard are carrying on as though what occurred to Wright had nothing at all to do with them and that their advocacy of a wide open policy of facilitating the cultivation, processing, wholesale and retail marketing and mass shipment of marijuana is simply a forward-looking acceptance of the new social reality in California and an earnest effort to get Adelanto in on the ground floor of the cannabis-related entrepreneurial wave that will rejuvenate the city’s economy and generate tax revenue to move the city’s governmental structure out of the red and into the black. They curtly dismiss, or ignore completely, any suggestions that there is a venal element to their activity.
Still, there are signs that behind the brave facade, they are nervous. One is the city’s recent move to remove all of the videos of its public meetings from the city’s website, the same public meetings where would-be cannabis millionaires who have permit or licensing requests or applications before the city have let slip, perhaps in not so many words, that city officials are on the take. But that action, coming as it does well over a year since the FBI has begun its probe of Adelanto in earnest, resounds as the closing of the corral gate after the mounts have left the ranch. There is a growing belief among Adelanto’s citizens that Wright will not be the only city official collared by the FBI.

Leave a Reply