The architects of the City of Industry’s now-abandoned scheme to place control of Tres Hermanos Ranch into the hands of a corporation masquerading as a quasi-public agency four years ago have been charged by the Los Angeles County District Attorney’s Office with fraud and the theft of what is believed to be as much as $20 million in public funds.
Former City of Industry City Manager Paul Philips; La Jolla-based developer William Barkett, a principal in the entity known as San Gabriel Water and Power; former California State Senator Frank Hill, who served as a consultant to the City of Industry; and Anthony Bouza, who worked as an attorney for the City of Industry, were charged with fraud, embezzlement, theft, conflict of interest and misappropriation of public funds.
The criminal charges arise from the City of Industry’s failed attempt to maintain control of 2,445-acre Tres Hermanos Ranch, which straddles the City of Chino Hills at the extreme southwest corner of San Bernardino County and Diamond Bar in the southeast corner of Los Angeles County. In 1978, the City of Industry paid $12.1 million ($30.9 million in 2021 dollars) for the land, and later transferred ownership of the property to the city’s redevelopment agency, known officially as the Industry Urban Development Agency. Indications over the years were that the property would be utilized to host a reservoir or reservoirs which would have a holding capacity equivalent to the fifth largest body of water in Southern California.
In 2011, legislation closed out all redevelopment agencies statewide, and ownership of the 2,445 acres transferred to the so-called successor agency to the City of Industry’s redevelopment agency.
A handful of real estate development concerns including GH America Inc. and South Coast Communities of Irvine expressed interest in acquiring the 2,445 acres at Tres Hermanos Ranch for the purpose of developing it both residentially and commercially, offering $100 million for it. In August 2017, the City of Industry, which had substantial representation on the boards of both the successor agency to the Industry Urban Development Agency and the oversight board to the successor agency to the Industry Urban Development Agency, boldly took action to acquire the property. After the city tendered a $41.65 million offer on the property, in very short order the oversight board, at its August 24, 2017 meeting, directed the successor agency to sell the property to Industry for the aforementioned $41.65 million. That action was accompanied by an indication that the ranch would be in large measure converted into a solar power energy field utilizing photovoltaic panels to generate 450 megawatts of electricity while leaving some of the property dedicated as “open space” for public use. In nearly equally short order, the cities of Chino Hills and Diamond Bar raised objections with the California Department of Finance. After the California Department of Finance allowed the processing of the sale to proceed, Chino Hills and Diamond Bar lodged a series of legal actions in 2017 and 2018, all of which sought to thwart Industry’s plans to lease the property for a large solar facility to an operating entity. In the face of those legal challenges, the City of Industry moved forward with its arrangement with La Jolla-based San Gabriel Valley Water and Power, headed by William Barkett, to lease the ranch property to the company for $1 per year, extend to the company a 65-year option on continuing the lease of the property and an exclusive right to develop a solar farm on at the ranch, and provide Barkett with loans and other funding for feasibility studies and preparations relating to the solar project, what was essentially a commitment of public financing of the company’s efforts in the initial stages of the project’s development. In exchange, San Gabriel Valley Water and Power committed, once the solar plant was functioning at capacity, to make an annual payment of $4 million to the city for the use of the property along with the sale of the energy to be produced there to the city and City of Industry-based businesses at bargain basement rates.
In defiance of normal standards of public disclosure that attend the operation of governmental entities, the City of Industry provided virtually no information about the proposed project beyond a rudimentary description of its parameters, while essentially bankrolling the San Gabriel Valley Water and Power in the earliest stages of the project preparation. Ultimately, that lack of accountability redounded to the City of Industry’s detriment, as Barkett and San Gabriel Valley Water and Power burned through roughly $14 million in carrying out preliminary planning on the project and spent another $6 million in legal fees and other nondescript expenses by December 2017 without producing anything tangible in terms of physical assets on the ranch grounds nor anything other than conceptual plans and projections as to generating capability. The city satisfied San Gabriel Valley Water and Power’s billing up to that point for that work and those expenses, but began questioning whether the company was working in good faith toward the goals outlined in their development agreement. When Barkett and San Gabriel Water and Power next submitted invoices for services relating to the solar farm proposal exceeding $1.5 million but was not convincingly responsive with regard to the justification for that billing, the city council balked at making those payments. In January 2018, the city council took up discussion of firing all three Industry staff members most closely identified with championing the solar project – then-City Manager Paul Philips, then-City Clerk William Morrow and Anthony Bouza, an attorney the city was employing with regard to the solar farm’s development and legal issues, moving by the end of January to sack Morrow and Bouza, and thereafter were summoning up the requisite votes by the end of February to hand Philips his walking papers.
Having spent $53.75 million over the years in securing the property, then squandering another $20 million in the thoroughly unproductive relationship with San Gabriel Valley Water and Power, and its legal bills mounting in having to fend off the lawsuits brought against it by Chino Hills and Diamond Bar, the City of Industry in 2018 entered into quiet negotiations with those latter two entities.
As early as 2018, San Gabriel Water and Power sought a preliminary injunction against the City of Industry in its effort to prevent the city from gaining access to the company’s documents relating to its work on the solar project. San Gabriel Water and Power thereafter filed suit against the city, claiming it was owed $218 million for work it had initiated on the solar project. Ultimately, in 2019 the City of Industry sued San Gabriel Valley Water and Power over the missing funds that San Gabriel Water and Power had refused to account for in 2018, alleging Barkett had used money provided for work on the solar project for other purposes. Throughout that litigation, San Gabriel Valley Water and Power has withheld records and documents.
In February 2019, Chino Hills, Diamond Bar and the City of Industry announced six lawsuits Chino Hills and Diamond Bar had launched against the City of Industry in 2017 and 2018 were to be dismissed and that the City of Industry was to be welcomed into the Tres Hermanos Conservation Authority, a joint powers agency formed in January 1999 by the cities of Diamond Bar and Chino Hills. Under the terms of the settlement of the lawsuits, the board of the authority was to increase from four to seven members with the City of Industry allotted three of those board positions. Furthermore, the City of Industry agreed to sell Tres Hermanos Ranch to the Tres Hermanos Conservation Authority with deed restrictions that limit future use to open space, public use, and preservation. The City of Industry absorbed 90 percent of that purchase price in the sale of the land to the conservation authority. Chino Hills and Diamond Bar covered 10 percent of the sale price prorated according to the acreage within their boundaries. With 1,750 acres of Tres Hermanos Ranch in Chino Hills, and 695 acres in Diamond Bar, Chino Hills paid Industry $2,959,967 and Diamond Bar coughed up $1,205,033.
Thereafter, in August 2020, investigators with the Los Angeles County District District Attorney’s Office served search warrants at the homes and offices of Philips, Bouza, Hill and Barkett.
There were questionable relationships between the four men. Bouza, apparently through Philips, wangled the role of attorney representing the City of Industry in the negotiations relating to the contractual arrangements between the city and San Gabriel Valley Water and Power, despite Bouza having previously done legal work for Barkett, for which he was reportedly yet owed $1.5 million when he was working for the city. Hill was a former California State Senator representing portions of Orange and Los Angeles counties from 1982 until 1994, when he was indicted by a federal grand jury, convicted and removed from office after he took what he thought was a bribe from an undercover FBI agent. In 2018, HIll was serving as a consultant to the City of Industry with regard to its effort to retain the Tres Hermanos Ranch property and see it properly utilized. He had a financial connection to Barkett and had set up a company that was to profit alongside San Gabriel Valley Water and Power when the land was converted to a solar field. He had worked on the campaigns of two of the members of the City of Industry City Council elected in 2015. The city council coalition including those two members hired Philips that year.
-Mark Gutglueck