Why the City of Industry’s $20 million solar project collapsed like a house of cards

Second of two parts

Industry City Manager Paul Philips was given an ultimatum outside City Council chambers in early 2018.

He needed to cut all ties with Frank Hill, a former state senator working behind the scenes in Industry, or he would be fired, according to Councilman Newell Ruggles, who delivered the message along with City Attorney Jamie Casso.

“I did not want to see any more of his (Hill’s) friends working for the city,” Ruggles explained in court testimony in April. “It seemed to me he was calling the shots in the background.”

Just over two years after he engineered an overhaul of the city administration, Hill was wearing out his welcome at City Hall — even among officials like Ruggles, whom he had helped elect in 2015. Not only had city leaders become wary of the key personnel hires Hill had recommended, according to interviews and court testimony in an ongoing criminal case, but red flags were waving over the massive solar project he was pushing on ranch land known as Tres Hermanos.

Part One: How a coup in the City of Industry opened the door for a $20 million corruption scandal

In roughly a year-and-a-half, the project’s budget had ballooned, jumping from a $500,000 advance to $20 million by the end of 2017.

And questions began to arise about what exactly Industry was getting for its money from the development company, San Gabriel Valley Water and Power, co-owned by Hill and managing partner William Barkett. It was Barkett who had entered into a lease agreement with the city to develop the up to 450-megawatt solar farm in May 2016.

The city’s finance director flagged discrepancies in the invoices submitted by Barkett. Letterheads looked suspicious, text was askew and dollar figures used different fonts. She refused to sign off on his payments until the company provided more information to support its requests.

The Cordoba Corp., a company hired by Industry to serve as its engineering department and as the project manager on the Tres Hermanos proposal, sent an employee to the offices of one of the vendors to verify work was being done. But the employee wasn’t allowed on the premises and was told the information was proprietary, according to the testimony of Henry Martinez, the senior vice president at Cordoba, in a criminal case now underway for Philips.

“My conclusion was that things were slowing down, or were not being done,” Martinez testified.

The city struggled to get supporting documentation for the questionable invoices, but instead of shutting the project down, the lease agreement was renegotiated by Anthony Bouza, an attorney hired by Industry and allegedly owed $1.5 million by Barkett.

The city’s advances were restructured into a “loan” and, because the money presumably would be repaid, the city’s finance director, Susan Paragas, believed she did not need to scrutinize the invoices as much and unfroze the payments, she said in interviews and in her testimony.

In December 2017, San Gabriel Valley Water and Power, at a meeting of stakeholders led by Hill, warned that the project needed another $10 million or would soon run out of funds, according to court testimony.

However, a new majority had formed on the City Council through the addition of Catherine Marcucci, a longtime family friend of then-Mayor Mark Radecki, and this new leadership wanted nothing to do with the project — or Hill.

Text messages obtained through a public records request show Marcucci was brought onto the council at the behest of Radecki, who supported the solar project and opposed the eventual firings of those pushing it. But the decision backfired when Marcucci’s votes went elsewhere.

Marcucci, who says she did vote in line with Radecki for the first few months solely because he was the mayor, denies she was ever told how to vote by anyone. But when she asked a question at a council meeting about a Planning Commission appointee,  Mark Radecki’s wife, Mary, warned her in a text to fall back in line.

“We gave it all to you instead of giving it to somebody else,” Mary Radecki wrote. “There is a lot of people that have been brought into the city to board seats, jobs by friends of friends, like you said you wouldn’t be in the city if it wasn’t for friends, so I don’t understand why out of all the people we’ve brought in you’re the only one causing problems.”

One of the first calls Marcucci received after the text blowout was from Hill. The exchange troubled her.

Marcucci, Ruggles and Councilwoman Cory Moss, unified now in their distrust for Hill, pushed back against the solar project and what they perceived as Hill’s influence. Diamond Bar and Chino Hills, which had jurisdiction over the Tres Hermanos land straddling the two cities, had filed lawsuits that threatened to stall the solar project potentially for years.

Concerns about the spending still lingered, though the payments, up to a $20 million cap, had resumed.

The decision to oust Hill and others was largely driven by an unrelated housing proposal.

Ruggles, Moss and Marcucci believed Hill was behind a staff-led push to build 25 new homes in the City of Industry, a move that would install the single largest voting bloc in the city of less than 300 and potentially shift control to whoever chose the new tenants. At the time, most of the roughly 58 homes in Industry were owned by either City Hall or the influential Perez family, which owns Valley Vista Services, the city’s exclusive trash hauler.

City Clerk William Morrow, Hill’s best friend and a fellow former state legislator, had been hired to manage the 2017 election and to serve as an adviser on housing reforms.

In a February 2018 email to Philips, Councilwoman Moss expressed concern about Morrow’s role.

“It has become clear to me that Bill Morrow is not working in the best interest of the City of Industry,” Moss wrote. “His loyalty lies with Frank Hill and their goal is to rush this project through and hand-pick every resident to stack the deck for future elections.”

Morrow now serves on Hill’s criminal defense team.

By 2018, Philips was the last man standing following a series of firings that had removed Morrow, reform monitor William Lockyer, Bouza and others over their perceived ties to Hill. Cordoba, which had paid Hill nearly $700,000 for his work on the solar project, later decided to end its contracts with the city. A company official testified that the company’s leadership believed Industry was backing away from pledges to reform.

Though Philips agreed to the ultimatum, the council later fired him anyway. His severance agreement prevents him from speaking about the reason. The city also has declined to explain the firing.

Lockyer, the former reform monitor, alleged after the firings that the group was ousted because the Perez family did not want more homes to be built and because Philips had suggested revisiting Valley Vista Services’ exclusive trash contract.

The family of former Mayor David Perez, who left office in 2012 and died in 2020, has repeatedly denied those allegations through their attorney.

After Industry backed out of the Tres Hermanos proposal, Hill, Barkett and Bouza would later show up in Commerce and Vernon to pitch those cities on similar solar projects. In Commerce, they attempted to convince that City Council to purchase Tres Hermanos out from under Industry.

Industry sued San Gabriel Valley Water and Power, Cordoba and Hill civilly in 2019 to try to recover the $20 million invested in the project. The company has refused to turn over documents related to the project.

Barkett’s personal attorney, David Gilmore, later filed a lawsuit on behalf of the “Concerned Citizens of the City of Industry” that accused the city and the Perezes of operating the city like a “criminal enterprise.” The lawsuit was later thrown out by a judge.

In 2021, the Los Angeles County District Attorney’s Office charged Hill, Barkett, Bouza and Philips with corruption-related charges for their various roles in the solar project. They allege the men took part in an uncharged conspiracy that dates back to a similar proposal pitched by Hill and Barkett in 2012 that was ultimately rejected by the administration ousted in 2015 by the new slate advanced by Hill.

Barkett is accused of embezzling from the solar project and is alleged to have spent more than $8 million of the public funding on personal items, including $2 million for his daughter’s lavish wedding in the French Riviera. His charges include embezzlement, grand theft, money laundering, misappropriation of public funds and 44 counts of forgery.

Of the $20 million transferred to SGVWP by Industry, less than $7 million of the funds allegedly made it to subcontractors, according to prosecutors.

A Southern California News Group investigation in 2020 found that the SGVWP had overbilled the city by at least $1 million through allegedly altered invoices from two of the subcontractors. Several business owners have come forward in the criminal and civil cases against SGVWP and alleged that the invoices provided to the city by SGVWP did not match what those companies actually charged the solar developer.

Hill is charged with two counts of conflict of interest and one count of misuse of public funds over his dual roles on the project.

His criminal defense attorney, former Orange County District Attorney Tony Rackauckas, argued in an interview that Hill’s role as an adviser was not covered by the state’s conflict-of-interest laws until a California Supreme Court decision in 2017 more broadly interpreted the statute.

He denied that Hill had any knowledge of how the project money was spent.

“If it turned out that much, or some amount of that money, that was paid up front didn’t go to the right causes, and went to the wrong place, that’s not something that Frank had anything to do with,” Rackauckas said. “Nobody expected the vendors to be unpaid, or invoices to be changed or any of that.

“As far as he knew, it was being managed well and whatever money was being spent was being spent for the proper purposes,” he said.

Bouza, who was hired as special counsel to oversee and negotiate the solar agreements on behalf of Industry, allegedly never disclosed the $1.5 million that Barkett owed Bouza’s real estate company. He is charged with eight counts of conflict of interest and one count of misappropriation of public funds.

The three men are expected to appear in court next on Tuesday, May 10.

A preliminary hearing is already underway for the fourth defendant, Philips, the city manager who took over following the 2015 election. City Council members have alleged that Hill chose Philips for the role, but Philips, through his attorneys, has denied that.

The prosecution alleges Philips assisted in the overall scheme by turning a blind eye to red flags around Barkett’s billing and by signing off on allegedly unauthorized payments. He is charged with a single felony count of misappropriation of public funds.

His attorneys, Joe Weimortz and former L.A. County District Attorney Steve Cooley, have denied the allegations and say Philips’ simply followed the council’s instructions. They argue that while its possible others may have defrauded the city, Philips wasn’t involved.

Philips’ attorneys say Philips also was a victim of the fraud.

A letter written by Barkett, featuring Philips’ signature, was delivered to the city not long after Philips’ firing. It stated that Philips had approved Barkett’s request for additional monies above the $20 million cap and pointed to the signature as a stamp of approval. The letter had allegedly been used to secure a $2 million loan from a third party and that third party wanted the city to repay the monies.

The signature block, however, appeared to be photocopied from a prior agreement, according to court testimony. Philips, through his attorneys, denied giving any such approval.

Today, Tres Hermanos Ranch is owned by a joint powers authority made up of Diamond Bar, Chino Hills and Industry. The group hasn’t decided what to do with the property.

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