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No-Class Deal

Steve Soboroff may have done nothing improper, but one thing is certain: As a candidate for mayor, Soboroff unwittingly declared open season on himself when he brokered the sale of the old drive-in theater in Van Nuys.

The property at the corner of Roscoe Boulevard and Noble Avenue, in the San Fernando Valley, looks made to order for a middle school: good-sized -- about 13 acres; fairly clean land -- it was a movie house, not a factory; and a surrounding neighborhood teeming with students.

But the parcel also was tempting to developers, and Soboroff, a real estate broker by trade, arranged two separate sales of that property over the last three years. During that same period, Soboroff also served as chair of the oversight committee charged with reviewing projects funded by the local school bond, known as Proposition BB. These included the old drive-in. The second sale was especially galling to district officials because they were actively pursuing the site. A Soboroff spokesman could not confirm the amount of his commission, but industry sources say his brokerage firm probably made in excess of $300,000 on the transaction.

Soboroff‘s critics are not accusing him of violating any laws -- and the bare-bones details of the scenario emerged in the press months ago. But it doesn’t look good to make money hawking properties the school district wants, while at the same time chairing a committee tasked with helping build schools. The school district‘s inspector general declined to comment on the matter, but Soboroff’s dual role as broker and committee member appears to violate the literal wording of the district‘s conflict-of-interest policy.

The Weekly learned last week that the matter was being researched by campaign aides for mayoral rival Joel Wachs, the L.A. city councilman who represents that part of town. And almost on cue, Wachs brought up the deal in a later interview with the Weekly’s editorial board. Wachs and Soboroff, in particular, are battling for the votes of both Valley residents and city conservatives. Winning that war decisively could mean a spot in the runoff election for mayor.

Oddly enough, Wachs briefly enters the tale himself, in May 1998, when he helped negotiate conditions of operation for CarMax -- the first buyer -- that would be acceptable to concerned neighbors. Wachs also was instrumental in eliminating zoning restrictions that would have impeded the used-car chain. The Mayor‘s Office, where Soboroff was serving as senior adviser, readily approved the zoning changes.

”This is a win-win situation,“ Wachs told the Daily News at the time. ”This is a classic example of how, when a developer works harmoniously with the community and the local council office, a project can be very successful.“

When asked about his own role, Wachs said he didn’t know of any interest from the L.A. Unified School District in that site.

In fact, there wasn‘t. The school district declined to oppose the rezoning. Staffers from L.A. Unified’s environmental division testified only about the business‘ potential impact on a nearby elementary school, recalled Bob Niccum, who was the district’s director of real estate and asset management.

The problem, noted Niccum, was that the district was just then gearing up to scour the city for possible school sites. That process quickly led to the drive-in.

”It did happen within a month or two after the rezoning took place,“ said Niccum. ”I knew it would look funny for us not to have mentioned something earlier. But this drive-in was in just the right place for a school.“

Fast-forward two years from the CarMax purchase. Now it‘s CarMax’s turn to sell, not to the school district, but to Herbert Boeckmann II, the owner of nearby Galpin Ford, who wants to store and prep used cars there.

What happened?

Here‘s how Soboroff explained things last fall to the Daily News. Soboroff, the paper duly reported, tried to work out a deal with the ”old regime“ of district property managers, and had even agreed to give up his commission. But then, in October 1999, real estate director Niccum -- and other top administrators -- were placed on a yearlong administrative leave pending a review of the scandal-plagued Belmont Learning Complex project. (Niccum has since returned to work as an upper-level business manager for the school district.) After Niccum’s departure, said Soboroff, he believed the district had no further interest in the site.

”We bent over backwards for them,“ Soboroff told the Daily News. ”They did nothing. We gave up with these guys.“ He added, ”We offered it to them on a silver platter.“

Soboroff also asserted that no documents reached him -- through the Proposition BB oversight committee or otherwise -- to suggest the LAUSD‘s desire for the property had ”revived,“ as the article put it.

 

”That’s their nature,“ Soboroff was quoted. ”It [the proposal] didn‘t go to BB. It doesn’t go anywhere. All they do is talk to each other . . . The district got nothing but preferential treatment. But they‘re so disorganized. That’s why they only do one school in 20 years.“

Part of Soboroff‘s account is supported: CarMax did eventually negotiate with the school district, and that process was slow going. A review of district files, however, indicates that L.A. Unified never stopped pushing -- sometimes haltingly -- in its pursuit of the drive-in site and other locations.

The first letter to CarMax went out on October 16, 1998. School-district realty agent Ronald J. Restivo requested, by certified mail, access to the drive-in site ”for the purpose of making a valuation appraisal, soil tests andor survey of said premises,“ all part of a ”feasibility study for a new middle school.“ The file notes a follow-up effort about two weeks later, on November 2.

An attorney for CarMax responded on November 3, commenting, in part, that ”the property is not for sale.“ The attorney added, ”Our client cannot at this time provide access to the Property, as requested. We understand the District’s need for additional school sites, but CarMax has invested enormous resources in time, money and personnel in this Property. The Property is a crucial component in CarMax‘s imminent entry into the lucrative Los Angeles auto sales market.“

The attorney faxed a copy of this response to Soboroff’s office. Frankly, it isn‘t clear whether Soboroff was in this loop as the chair of the oversight committee, as the mayor’s representative or as the broker for CarMax, because he wore all three hats.

L.A. Unified did not retreat. Officials accepted bids for appraisers and collected title documents. By April 1999, the school district included the site in its updated facilities report of listed projects. It hasn‘t left the list since. ”For quite some time that site had been discussed,“ noted Kathi Littman, director of new construction for L.A. Unified. ”It is in every monthly report.“ Soboroff’s oversight committee, which received these reports, met at least once a month.

Back at CarMax corporate headquarters in Richmond, Virginia, a February 23, 1999, press release noted that the company would ”delay“ expansion into Los Angeles to focus instead ”on improving profitability“ in markets where it was already established.

That was not the theme, however, in Los Angeles, in a letter dated April 20, 1999, from CarMax headquarters. Real estate director K. Douglass Moyers reiterated that his attorneys had ”denied access to the District for purposes of performing any investigation, testing or analysis.“ He added, ”This position has not changed; in fact, this site has gained even more importance in the CarMax program based on new strategic considerations.“ He added further: ”The District is on notice that CarMax will resist any and all efforts of the District to acquire the site.“

It isn‘t self-evident which portion of this response Soboroff might have been referring to when he spoke of bending over backwards to accommodate the school district.

By then, L.A. Unified was preparing a legal challenge, and went to court on May 7, 1999, for access to the property. Under the pressure of a June court date, CarMax finally relented.

Soboroff, it turns out, was on the case as well. Niccum recalls that in the first part of 1999, Soboroff pulled him aside: ”Steve said, ’Bob, can we talk privately? I know you‘re interested in the drive-in site. What if I were to work out a deal? You guys get the back of the site and CarMax takes just the frontage -- they could move the bulk of their car storage to another location. You’d have to make it work on fewer acres. Do you think you can make it work?‘ I said, ’Yes.‘ We would much rather have pursued this voluntarily rather than having a messy condemnation action.“ Niccum confirmed that, at the time, Soboroff said he was willing to waive his fees.

Later that year, on August 18, Soboroff took care of an important bookkeeping detail regarding his work on the school-bonds oversight committee. He signed his conflict-of-interest form, which states, ”I do not have any economic interest (possibility of gain or loss of income) or other externally motivated reason that would influence my recommendations and decisions as a member of this Committee.“ With the city, by contrast, he filed more detailed disclosure forms, noting that he derived income from CarMax, and also that he owned more than $100,000 of company stock.

 

Working out a compromise was difficult. CarMax complained to Soboroff that the school district was not returning calls, letting things stagnate; the district meanwhile was having trouble fashioning a workable school design on the rear of the property. In the midst of this uncertainty, both Niccum and his superior were placed on administrative leave, which left the department both rudderless and further understaffed -- in the middle of a massive construction program. Which is not to say that L.A. Unified no longer wanted the site. To that end, the school district commissioned a preliminary environmental study, which was completed by December 17, 1999.

”We have moved slowly, just as a matter of practice,“ acknowledged Scot Graham, the district’s real estate director. ”A lot of this comes out of the state-mandated environmental-review process for the construction of new schools.“ The laws regarding environmental review became more strict in the wake of the furor around Belmont, because that land was purchased prior to a sufficient analysis.

Early last year, a competing buyer emerged: Bert Boeckmann of Galpin Motors. And it was to this buyer, in May 2000, that CarMax decided to sell, for a price recorded in city property records as $9.94 million.

Boeckmann paid nearly $1 million more than CarMax had two years before. His acquisition could drive up the district‘s price for the land even further. That same month, on June 27, Alan J. Skobin, vice president and general counsel for Galpin Motors, donated $1,000 to Soboroff for Mayor. Boeckmann and his wife each had made $1,000 contributions to Soboroff about a year earlier. (According to city records, the Boeckmanns contributed to other mayoral campaigns as well: Antonio Villaraigosa and Joel Wachs also got a total of $2,000; Jimmy Hahn got $1,000. In addition, Skobin contributed $1,000 to the Villaraigosa campaign.)

District officials said they had no warning of Boeckmann’s impending purchase. Was that true? the Weekly asked Soboroff campaign manager Ace Smith. ”That‘s an absurd question,“ responded Smith. ”The school district wasn’t interested at that point. This is a story about LAUSD incompetence.“ Soboroff himself was too busy with campaign-related obligations this week to comment for this story, according to campaign aides.

Smith added he couldn‘t be of any help confirming the exact amount of Soboroff’s commission for each sale of the property. So instead the Weekly surveyed commercial real estate brokers. The industry standard is about 5 percent of the sales price, said Jerry Schneiderman, a Hollywood-based developer, who added that he regularly pays such fees to brokers. For vacant land, like the drive-in, fees are sometimes as high as 8 percent. For big-money transactions, fees can drop as low as 3 percent. Other brokers surveyed fell within the same 3 percent to 8 percent range. Which would put Soboroff‘s combined commissions on the two sales in a range from $550,000 to $1.5 million.

Contacted in Virginia last week, CarMax’s Moyers had little to say: ”We sold the property. LAUSD looked at the property as a potential school site. They never made a move, and we decided not to build a CarMax on it. We sold. Steve Soboroff was the broker. That‘s all I can discuss. Goodbye.“

District staff members in facilities, on the other hand, were anxious to talk volumes, but not for attribution, for fear of offending the current mayor or possibly the future one. ”I think Steven got tired of waiting,“ commented one. ”He said, in essence, ’I‘ve screwed around with it a year. I’ll do my thing and prove once again that you‘ll lose a site to someone else.’“

That comment was among the more charitable. The district, by this point, had invested substantial funds in the property.

And now, it was Boeckmann who had no intention to sell. On September 18, 2000, Galpin attorney Skobin wrote, ”We oppose any effort by the School District to acquire the property, particularly since it is critical to our business and we do not have the other options that the District has.“

Boeckmann is no buyer off the street. A political conservative who favors Valley secession, he‘s among the staunchest supporters of Mayor Riordan and serves as one of the mayor’s appointees to the Police Commission. Deputy Mayor Rocky Delgadillo told the Weekly that the Mayor‘s Office has been trying to find another location for Boeckmann to store his inventory.

The irony of this campaign issue is that Soboroff’s resume on education is perhaps the strongest among the mayoral contenders. Soboroff, after all, served three years as chair of the bond-oversight committee. And he always was a force to contend with -- inspiring admiration as well as opprobrium for his hard-charging, cut-through-the-malarkey persona. Early on, he pushed hard for a fast-track school air-conditioning contract that would rely heavily on management from outside the school district. Critics thought he was plugging too hard for the L.A. Department of Water and Power, given that the city budget would benefit, and given that he had a vested interest as the mayor‘s representative. In the end, the DWP obtained only a limited role in this work.

 

Later on, Soboroff got into a feud with then--Chief Operating Officer Howard Miller. An angry Soboroff fingered the district for incompetence in bond-funded projects. Miller answered by commissioning an audit that accused private companies -- the very ones Soboroff had cited as models to emulate -- of overcharging the school system in their management of construction projects.

In both episodes, Soboroff acted with initiative and energy, but also prompted questions about his ability to contain himself within an appropriate, well-defined position of civic responsibility. In the later sale of the drive-in, noted one district administrator, ”Steve was plainly in a dual role. Even when he was planning on not making money off the transaction, there wasn’t enough distance between his role as broker for CarMax and in his official capacity as head of the oversight committee.“

The district‘s Inspector General’s Office, which investigates legal and ethical breaches, declined to comment on the drive-in transaction. But the Ethics Policy Statement then in effect speaks directly to conflicts of interest. Officials ”shall not make or influence a District decision which will benefit the employees‘ outside employment, business, or personal finances.“ The provision applies to ”officers, commissioners, appointed committee members, independent contractors and consultants, volunteers and other representatives of the district in addition to all paid employees.“

Soboroff merited a vigorous defense from fellow oversight-committee member David Abel, even though Abel is an adamant critic of Mayor Riordan. ”I thought the leadership that Steve tried to bring to the citizens-oversight function was quite constructive and impressive at times,“ said Abel. ”With the better staff that the district now has in place, it’s come to light that the numbers and information we had been receiving were poorly constructed and unreliable.“ In other words, Soboroff had a right to be ornery.

Since Soboroff left the oversight committee, added Abel, ”We no longer command the respect and attention we once did from the district, from the neighborhoods or from the larger community that we did when Steve was present.“

Abel didn‘t know the particulars of the CarMax episode, but said he’s not surprised that a company would seek a buyer other than the school district: ”In any business, reputation counts a lot when you‘re trying to make a deal. With the school district, you never know that they’re going to complete the transaction.“

Not good enough, said a facilities administrator: ”That was Soboroff‘s middle finger that pushed the fax button sending the purchase and sale documents to the buyer. If you want to give him the benefit of the doubt, let’s just say that he was using performance art to demonstrate that the district moves inefficiently.“

Researcher Dave Perera contributed to this story.


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