On February 19, 2021 the San Bernardino Sentinel published an article headlined “Incoming Upland City Attorney Had A Hand In The 1980’s Southridge Graftfest.”
The article in the main dealt with Upland’s hiring of Steven Deitsch as that city’s city attorney. As a much younger man in the 1980s, Deistsh, who was then in partnership with Timothy Sabo in the law firm of Sabo & Deitsch, had alternated with Sabo in serving as the City of Fontana’s redevelopment agency attorney.
While he was Fontana redevelopment attorney, Deitsch had advised the city when it issued $65 million in certificates of participation – a type of municipal bond – and took in $55 million loans from the Glaziers’ Union to construct $120 million worth of infrastructure to facilitate the completion of the Southridge residential project. The Ten-Ninety Corporation, which was owned and controlled by brothers Dick and Bill Ashby and Larry Redman, was the proponent of the Southridge Project, originally planned to be comprised of 9,100 residential units, some neighborhood commercial elements and a school in the southwest quadrant of Fontana.
Fontana’s then-city manager, Jack Daze Ratelle, had convinced the members of the Fontana City Council that the Ten-Ninety Corporation lacked the financial wherewithal to finance the construction of the infrastructure to support the Southridge project and that the project would not come to fruition unless the city and its taxpayers defrayed the cost of the infrastructure.
Of note is that the Ashby Brothers and Redman were the purchasers of the certificates of participation. It was the proceeds from the sale of those bonds and the loans from the Glaziers’ Union which were utilized to pay to construct the Southridge infrastructure, consisting of roads, curbs, gutters, sidewalks, storm drains, sewers and a school. The City of Fontana over the next thirty years diverted a portion of the property tax it was receiving to service the debt it had taken on to build the Southridge infrastructure – making regular payments of $3.12 million per quarter or $12.48 million annually and a total of $374.4 million. Over those 30 years, the Ashbys and Redman saw a return of $202.8 million on their investment in the certificates of participation – a profit of 137.8 million.
The law firm of Sabo & Deitsch, by serving as the bond counsel on the issuance of the $65 million in certificates of participation was paid 0.5 percent of the issuance or $325,000 and by serving as the disclosure counsel on the $65 million issuance was paid 0.25 percent of the $65 million issuance or $162,500. Thus, in overseeing that bond creation and sale, Sabo & Deitsch netted $487,500.
That the Ashbys and Redmond had the ability to purchase $65 million in certificates of participation in the early- to mid-1980s controverted their claim and that of Ratelle that the Ten-Ninety Corporation was not able to defray a substantial percentage of the cost of the infrastructure and off-site improvements the Southridge project would require. It was subsequently detailed that the Ten-Ninety Corporation had been providing kickbacks to Ratelle, hiding and laundering those payments to him by putting money into a credit line the city manager had opened at the MGM Grand Hotel in Las Vegas.
The February 19, 2021 article with regard to Deitsch, Sabo and Ratelle referenced further alleged irregularities in that era of Fontana’s history relating to Neil Stone, who was employed as Fontana’s development agency director from August 1983 through February 1987 and in which capacity he was also serving as the city’s redevelopment director.
Those allegations regarding Stone were incorrect. Neil Stone did not engage in any financial irregularities or illegalities. Herein are the corrections.
The article stated that “Stone owned property in the name of his children, which was different from his own, in [a] redevelopment area in the northwest quadrant of the city. Upon learning of that circumstance, Deitsch elected to take no action.” The article further connects Stone to Ratelle, and states they had engaged “in illegal or highly questionable activities in their capacities as high-ranking staff in Fontana.”
Factually, neither Neil Stone nor his wife nor children owned property within any of the City of Fontana’s nine redevelopment project areas. The only property owned by Neil Stone and his wife within the City of Fontana was their primary residence at 10840 Nuevo Drive, Fontana. His children [both minors at the time] owned no property within the City of Fontana.
In his capacity as the city’s development director, Stone was responsible for supervision and direction of the city’s multi-faceted development division, including building and safety, community development, economic development, grants, housing and planning-zoning departments and the redevelopment agency. Stone’s departure from the City of Fontana, per his resignation letter as addressed to the city manager, mayor and each member of the city council stated that the cause for his resignation was due to his perception of the city’s financial irregularities including his continuing objection to the city attorney-redevelopment attorney also serving as the bond counsel and disclosure counsel with regard to bonds issued by the city and his inability to secure budget and expenditure reports from the city’s finance department for the departments and redevelopment agency for which he was responsible.