For FBI, Public Works Yard Sale Intensifies Adelanto Graft Probe

Inadvertently, newly installed Adelanto City Councilwoman Joy Jeannette last week provided the FBI with a key element augmenting that agency’s tentative investigative findings that two of her council colleagues were involved with the councilman she has replaced in trading votes to favor would-be marijuana business operators for monetary considerations.
In November 2015, the Adelanto City Council, in a 4-to-1 vote, with Mayor Rich Kerr and councilmen Jermaine Wright, John Woodard and Charley Glasper prevailing, voted to open the city to the cultivation of medical marijuana, conditional upon those seeking permits and licenses to do so locating their operations within the city’s industrial park. That move set off a frenzy of purchases of property within the industrial park, where the zoning had been revamped to allow indoor cultivation of the drug to take place. Within short order, all available property within the industrial park, which previously had been available for sale or lease at rock bottom prices, had been snatched up, with selling prices doubling, then tripling, and quadrupling in the course of a week, and then escalating from there, as speculators flooded into the city and applicants for permits overwhelmed the city staff available to process them.
C.B. Nanda learned of what was going on in Adelanto and grew likewise interested in profiteering within the context of tolerance toward marijuana that had suddenly manifested in the City of Adelanto. Nanda created an entity, American Scientific Consultants, LLC, to achieve that goal. A problem was, however, that Nanda had come onto the scene a tad too late, as all the locations within the city’s industrial park had already fallen into the hands of those applying for cultivation project permits or landlords who were now in a position to charge top dollar for their warehouses where the indoor nurseries and greenhouses could be set up, eating into a significant amount of profit a grower might hope to realize.
What Nanda needed was to get ownership or control of some property in Adelanto where a) growing marijuana would be permitted; b) the utilities to do that, namely electricity and water, were available at the site; and c) he would not have to pay an extortionary price for a and b above. At that point, the zoning regulations had not changed to allow such operations beyond the industrial park. Moreover, within Adelanto the utilities to facilitate such cultivation activity outside the industrial park were sufficiently rare that finding such a place was challenging. A bit later in 2016 Nanda and American Scientific Consultants set sights on property owned by the city, in particular the city’s public works yard, located at 17451 Raccoon Avenue in Adelanto. The public works yard featured two two-story metal buildings, one of which housed the city’s emergency operations center. That emergency operations center had been constructed on the site and outfitted through a $375,000 grant from the U.S. Department of Homeland Security the city received expressly for that purpose in 2011. Given the range of activity at the yard, the facilities there had been augmented with utilities and infrastructure so its public works department, its motor pool, its maintenance divisions, indeed the entirely of the city’s physical operation that needed support in terms of equipment operation, mechanical service support, storage, repair and application could function on a daily basis. Thus, Nanda noted, the property would be perfect for housing a humongous marijuana cultivation facility.
Ultimately, Nanda was somehow able, through dialogue with city officials in the spring and early summer of 2017, to convince them that the city would do well to unburden itself of its public works yard and that it should be sold to American Scientific.
According to a lawyer for American Scientific and Nanda, Irvine-based Rick Augustini, “On or about March 30, 2017, American Scientific Consultants offered to purchase the property” and “Over the next several months American Scientific Consultants negotiated the terms of the sale of the property in an arm’s length transaction.”
The Sentinel has learned that at this point, the FBI is less than fully convinced that the negotiation was carried out, as Augustini has represented, at “arm’s length.”
Nanda negotiated on the company’s behalf and Adelanto’s then-interim city manager, Mike Milhiser, negotiated on the city’s behalf. At the city’s March 30, 2017, June 14, 2017 and June 28, 2017 meetings, the city council discussed the sale of the property in closed session in the presence of the city attorney at that time, Curtis Wright. Subsequent to the June 28, 2017 meeting, city officials told Nanda that the city was willing to sell the public works yard to his company for $1 million. On July 3, 2017, American Scientific Consultants tendered an offer in writing to purchase the subject property for $1 million.
On July 6, 2017, City Attorney Curtis Wright submitted a letter of resignation, saying his departure would be effective on July 12.
On July 13, 2017 the city accepted American Scientific Consultants’ offer and entered into a written agreement to effectuate the transaction. Almost immediately thereafter American Scientific Consultants assigned its rights to purchase the building to AMN, LLC, a company affiliated with American Scientific Consultants, and entered into an agreement with Canniatric, LLC, a company which makes tinctures of cannabis, according to Augustini, at the specific request of city officials. An agreement committing the city to the sale and committing American Scientific Consultants to the purchase was signed by Milhiser and Nanda.
According to Augustini, “At the time American Scientific Consultants, LLC and defendant entered into the agreement, the subject property was outside the cultivation zone that the City of Adelanto had established for the manufacturing, testing and distribution of medical cannabis pursuant to its municipal code.”
The city’s cultivation zone then covered 663.35 acres, all of which fell within the city’s industrial park.
In August, the city council elevated community development director Gabriel Elliott to the city manager’s position. On September 8, 2017, at the direction of the city council, upon which Kerr, Wright and Woodard were the controlling majority coalition, one of the first significant actions Elliott took as the city’s top staff member was to orchestrate the city council’s expansion of the city’s cultivation zone by a factor of more than three, which included the property in the 17000 block of Raccoon Avenue. Elliott was not in favor of the zoning expansion and he felt it ill-advised for the city to proceed with the sale of the public works yard. He nevertheless held his tongue and facilitated the zone change, having acceded to the position of city manager less than a month prior to that. According to Augustini, “American Scientific Consultants, LLC and C.B. Nanda had no involvement in or foreknowledge of the City of Adelanto’s decision to expand the cultivation zone to include the subject property.”
The city’ September 8 action zoomed the city’s cultivation zone from 663.35 acres to 2,214.5 acres. The council’s decision to change the city’s zoning map increased significantly the value of the properties moved into the cultivation zone.
In October, the FBI, which had been conducting an investigation into a multiplicity of circumstances in Adelanto pertaining to the city’s moves to open it to the marketing of marijuana, cinched up a case against Councilman Jermaine Wright, who is of no blood relation to former City Attorney Curtis Wright. FBI agents had successfully lured Jermaine Wright into taking a bribe from an undercover FBI agent posing as a would-be marijuana distributor in exchange for assisting in cutting through city red tape to get that business up and running. Caught red-handed, Wright initially agreed to cooperate with the agents in further efforts to ferret out graft and corruption involving Adelanto officials and those seeking commercial marijuana business operating permits. Almost immediately, however, Wright compromised the undercover operation by disclosing it to others. On November 6, 2017, the U.S. Attorney’s Office obtained an arrest warrant for Wright and the following day the FBI arrested him on charges relating to bribery and conspiracy to engage in arson. He remained in federal custody until late May. In January 2018, he was removed from his position on the city council.
The day after Wright’s arrest, on November 8, 2017, the city council went into closed session, during which Elliott had scheduled the council to come to a determination with regard to whether the sale of the public works yard would be finalized. Yet of consequence was whether the closure of the city’s emergency operations center, which would take place if the public works yard was sold, would be a violation of the city’s commitment to the federal government in having received the federal grant used to create the emergency services center six years previously. Without Jermaine Wright present, the crucial third vote to support finalizing the sale of the public works yard to American Scientific was not provided, as councilman Ed Camargo, who had always been opposed to the marijuanization of Adelanto, along with councilman Glasper opposed closing the deal, as American Scientific Consultants’ intention to convert it into marijuana cultivation facility was clear. Both Kerr and Woodard, who had offered C.B. Nanda their personal assurances that the sale would be approved, were livid with Elliott, having correctly surmised that he had outmaneuvered them in blocking the sale of the public works yard. Ruben Duran had replaced Curtis Wright as Adelanto city attorney. Word had reached Duran that based upon the arrangement made between American Scientific and Canniatric, LLC in July, well ahead of the city council’s September 8 action expanding the cannabis-related business operating zone to include the public works yard property, some type of side arrangement involving American Scientific Consultants and members of the Adelanto City Council was in place. Duran moved in November, the Sentinel is informed, to terminate the deal to prevent a criminal act which would have involved city officials from being actuated.
More than a month later, on December 21, 2017, Augustini filed a lawsuit against the City of Adelanto on behalf of American Scientific over what Augustini alleged was the city’s breach of an agreement to sell the city’s public works yard.
In the suit, Augustini maintained that on “November 9, 2017, an 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 lawsuit propounds that the city is essentially obliged to rezone property would-be operators have acquired to accommodate cannabis-related commercial activities, skirting around the issue of the degree to which public officials have committed to making those changes ahead of time. Reasoning that the city’s public works yard has become worth $5 million as a result of the zone change made in September, Augustini asserted in the lawsuit 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 in the lawsuit sought 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.”
At the Adelanto City Council’s last meeting in March, while the council was yet one member short because Jermaine Wright’s vacancy had not been filled, Kerr and Woodard succeeded in convincing Glasper that the city should settle the suit on terms by which the city agreed to sell the public works yard and its two buildings and accompanying one gross acre of property to American Scientific for $1 million, subject to a $1 per year leaseback arrangement by which the city will be allowed to have the emergency operations center remain in place for four years. Scientific American, according to the terms of that agreement was to hereinafter abandon any litigative claims against Adelanto arising out of the city having sought to terminate the deal. Scientific American also agreed to end its appeal of the city’s action in revoking permits it had once granted to Scientific American for a cannabis-related operation on Koala Road. The city moved to shutter that operation after the city’s code enforcement division learned that Scientific American had jumped the gun on initiating operations there prior to having other permits and documents certified.
Despite that agreement, however, a glitch manifested when American Scientific Consultants concluded that the $1 million asking price was too much, given that the city’s emergency operations center was going to remain in place there. For the next three plus months the deal languished.
In June, the candidate Kerr and Woodard backed in the special election the city called to correspond with this year’s statewide primary election to fill Jermaine Wright’s council position, Joy Jeannette, emerged victorious. After the election results were certified by the Registrar of Voters Office earlier this month, Jeannette was sworn in on July 11. That day she voted with Kerr and Woodard to terminate Elliott, whom Kerr had managed to place on administrative leave last December. Five days later, at a specially called meeting on July which neither Camargo nor Glasper attended, the council voted 3-to-0 to sell the public works yard to AMN, LLC, which is American Scientific Consultants corporate affiliate, and thus put the suit filed by American Scientific Consultants to rest. Three votes were needed to make the sale.
In virtually every other way, since Duran became city attorney slightly more than a year ago, he has made every effort to accommodate the council majority, such that he is largely referred by many of those who frequent City Hall and city council meetings as “Kerr’s attorney” rather than city attorney. Duran’s resistance to the sale of the public works yard to American Scientific Consultants is the one visible exception to that, conveying that he recognizes the issue is fraught with hazard for the city council and Kerr and Woodard in particular. Notably, City Hall and Kerr’s home were the targets of an FBI raid on May 8.
The settlement agreement entered into last week entails considerable complication and expense for the city. Nanda is unwilling to accommodate the emergency operations center in its present location or at the site at all for a number of reasons, not the least of which is that an operation funded through federal grants cannot be located within 300 yards of any cannabis-related activity. Thus, the emergency operations center will need to be relocated at considerable expense to the city. If the city elects to simply close out the emergency medical center, it will need to refund to the federal government the grant money it received specifically to create the center.
The irregularities around the public works yard sale – in particular American Scientific Consultants entering into an agreement relating to the use of the Raccoon Avenue property with Canniatric, LLC prior to the zoning of the property to allow it to be used for cannabis-related commercial activity and the September 8 action by the city council to rezone the property, thereby raising the value of the property from $1 million to four or five times that – has elevated suspicion to a fever pitch.
Said one city official, “The claim is C.B. Nanda did not have knowledge that the property would be rezoned. Why would Scientific American want to purchase a public works yard for a million dollars, then? No knowledge, my unicorn.”
All the way around, and from every conceivable perspective, the city got the short end of the stick on the public works yard sale, the employee said.
“C.B. Nanda not only got a $5 million property for cheap that included all utility connections, the two buildings have six units each that can be individually rented out as huge moneymakers. The city invested $200,000 of taxpayer money and another $200,000 in public works staff time doing the renovations that included all new plumbing, restrooms, drywall, electrical cabinets, carpet, and tile. Staff worked on the project for at least 8 months. The tax payer money used was money the city received from the sale of the Adelanto prison to renovate the building. This is as shady as it gets.”
Yet no actual smoking gun existed until title on the property was actually transferred to AMN/American Scientific.
Word now is that the sale of the city’s public works yard to AMN, which is tantamount to a sale to American Scientific Consultants, has given the FBI evidence it needs to form a case and the U.S. Attorney’s Office the grounds upon which to seek and obtain an indictment of two members of the Adelanto City Council.
The Sentinel reached out to City Hall for its version of events but received no response.
-Mark Gutglueck

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