|Photo by Virginia Lee Hunter|
Ed Roski Jr. looked a bit out of place one sunny March morning at the groundbreaking of downtown L.A.'s new sports mecca, the state-of-the-art, $350 million Staples Arena, future home of the Lakers, the Clippers and the Kings. As Kobe Bryant and Shaquille hammed it up for the cameras like the media-genic superstars they are, Roski looked on stiffly in a charcoal suit and starched white collar. And while one civic leader after another proclaimed the new arena a “catalyst for the economy of downtown,” when it came Roski's turn to take the microphone, he talked about how “frustrating” the experience had been. His smile seemed forced. His jokes were sour.
But for all his lack of stage presence, this was Ed Roski's show. It was he, along with his partner, Denver rail tycoon Phil Anschutz, who had financed the arena project and carried it through protracted negotiations with the city. And even at that early date, Roski was moving to parlay his downtown stake into another, bigger deal – controlling partner of a new NFL franchise in Los Angeles, a billion-dollar brass ring that had for years eluded both the league and L.A.'s top deal makers.
Taken together, these sports-cum-real-estate ventures marked a breakthrough for the downtown political and business establishment, which had thrown millions of public and private dollars on development projects that had failed utterly to breathe new life into the trash-strewn streets. Now Roski was promising to make it all happen.
Yet for Roski personally, the public attention marked a sort of coming out, stepping into the light after a career in the shadows. If he seemed awkward at the star-studded ceremony, chalk it up to opening-night jitters. “I still see myself as real estate guy,” Roski offered later to explain his lack of charisma. “Not as a public figure.”
It is indeed a new posture, this public persona. Roski is a local boy – raised in Westchester, a USC grad, a resident of Toluca Lake – but until now he has remained virtually unknown outside the world of commercial real estate development, a low profile that belies his considerable clout. For the past 30 years, Roski has quietly built his Majestic Realty Corp. into the largest commercial real estate concern in Southern California, with a portfolio boasting 33 million square feet, a staff of 140, and annual gross revenues of $165 million. But he has remained better known in the backrooms of L.A.'s bare-knuckles Eastside than in the button-down boardrooms downtown.
It was there that Roski built his empire, in cities like Commerce, Industry and Chino – and it is a fortune rooted in the gritty, insider byways of Eastside development. Roski learned the ropes in the City of Industry, where his primary collaborator was sent to prison in one of the biggest public corruption scandals in recent memory. Since then, he has made a specialty of wringing lucrative concessions out of local governments, battling for competitive edge in the game of unfettered, helter-skelter development by lavishing political contributions, plying insider connections and, when all else failed, bullying rivals and public agencies alike.
And while he's managed to keep it out of his standard public résumé, one of Roski's longtime business interests is gambling. He currently owns and operates a casino in Las Vegas – the sort of connection that can raise eyebrows among government regulators and sports executives.
No wonder, then, that Roski has stepped gingerly into the spotlight. He's patient but reserved in dealing with the press; even in his own New Coliseum News, a newsletter promoting his NFL bid, he conceded that speaking with reporters is “still not something I'm completely comfortable with.” But in his budding partnership with Anschutz, and as the point man in deals with bona fide moguls like Rupert Murdoch, who recently acquired a sizable share of the arena project, Roski is forging ahead, learning to smile and serve up platitudes about “creating a sense of community.”
For now, Ed Roski Jr. is on a roll. As the walls of the downtown arena go up, a design team is putting the finishing touches on plans for an adjacent shopping, hotel and entertainment complex. Last month Roski's design for a refurbished Memorial Coliseum -long dismissed by doubters as unworkable – won enthusiastic endorsement from NFL owners at league meetings in Kansas City. In downtown's depressed-development economy, Roski is being hailed as a savior, an angel who has gone where others feared to tread.
It is, perhaps, because of the desperation for private-sector leadership that the city hasn't taken too hard a look at its new partner. But somewhere along the line someone – at a pro-league office, in newsrooms around the city, perhaps even the public, if a bond issue makes it to the ballot – someone will start asking: Who is Ed Roski? What kind of businessman is it that L.A. is climbing into bed with?
William Bible, the longtime chairman of the Gaming Control Board in Las Vegas, put the question a different way. It was May 1994, and Roski was seeking a license for his Blue Diamond Hotel and Casino, a joint venture he formed with Boomtown, Inc., a gambling concern with interests in half a dozen states across the nation. Roski was no stranger to Nevada, having developed over a million square feet of property there in the previous five years, and he came to Bible's forum well-connected: Boomtown's senior vice president and corporate counsel was Robert List, a former governor of the state. Still, the ranks of licensed gaming operators in Las Vegas is a closed fraternity, and Bible likes to administer a hazing to all who enter.
At the hearing, once Bible got the particulars out of the way – a 300-room hotel, 30,000 square feet of gaming space, 1,100 slots and 34 gaming tables – the crusty chairman got down to business. “Let's talk about individuals in the application, Mr. Roski,” he began. “You identified . . . quite a number of individuals that you've had either business or personal dealings with that have had some difficulties with the criminal justice system.”
What, Bible went on, was Roski's relationship with a disbarred attorney and convicted felon named Kevin Kirwan. “Kirwan is a long-term friend of mine,” Roski answered, “just a personal friend. He had been involved in the card-club business in the Southern California area and had, I guess, experienced some problems in his ownership and had been – I guess no longer associated with that, I guess is the best proper way to put it, with the card club.”
The “problems in his ownership” Roski was having such a hard time describing involved a deal Kirwan put together in the early 1980s to give two Bell city officials secret ownership of 51 percent of the Bell Card Club in exchange for their vote approving the new, 64-table gambling hall, then the biggest in Southern California. In 1984, Kirwan pleaded guilty to two counts of mail fraud in connection with the scheme and went to prison along with a former mayor of Bell, Pete Werrlein Jr.
At the time, Roski and Kirwan were more than personal friends. Kirwan had his office in a Majestic-owned complex in Commerce that was the unofficial headquarters of a tight-knit Eastside political scene fueled by development deals and powered by longstanding connections to County Supervisor Pete Schabarum. Kirwan and Roski have remained close, going on bike tours in places as far off as Ireland and Pakistan. “The reason we enjoy each other's company,” Kirwan told the Weekly, “is precisely because we are not involved in business.”
The two men crossed that line in 1992, however, in pursuit of another fishy card-club deal. That year Roski received a call from his old friend Tim Carey, a longtime Schabarum consultant, asking would he be interested in backing an effort to build a card club in Oxnard. Roski knew Carey through political circles and had contributed to the Southern California Caucus, Carey's political action committee.
Roski brought Kirwan, his friend with experience in such deals, to his first meeting with Carey. Bible pressed for details on the deal, and Roski said he'd been asked to put up a building and serve as the club's landlord. In a recent interview, Roski says he found the property unappealing and never seriously considered the deal. “There is nothing wrong with card clubs in their proper location,” he clarified. “We wouldn't mind owning the real estate and leasing it to somebody.” To hear Roski tell it, he never even planned to get into the gambling business; it was simply smart management of some lackluster property.
Kirwan's version of events, however, differs slightly from his old friend's, and calls into question Roski's professed disinterest in gambling. Kirwan said Roski called him a week after their meeting to say he could not do the Oxnard card club because the Boomtown development was beginning to take shape, and due to state laws could not be involved in both deals. Kirwan says Roski encouraged him to sign on with Carey as a consultant, which he did.
Within weeks the whole deal unraveled when city officials learned they were negotiating with felons. Kirwan's past was no secret, but Carey had a hidden conviction of his own. In 1992, Carey plead guilty to three felony counts of lewd behavior with a minor – a friend's 12-year-old daughter.
Bible didn't blanch at Roski's willingness to explore card-club opportunities with a man previously convicted of fraud in connection with card-club operations – he was satisfied with Roski's vow never to engage in business with Kirwan, and voted to approve a license for Roski and Blue Diamond. But the chairman had a couple more questions before he was through. What about Robert King, Bible asked, and what about Jim Stafford?
The answers took Roski back to his early forays as a partner with his father in the rough-and-tumble world of Southern California real estate. King was the chairman of the Bank of Industry, where Roski also sat on the board; Stafford was the city's founder. Each was convicted on criminal charges stemming from their schemes in Industry.
It was here, in an isolated city where business is king, that Ed Roski and his father built the foundation of their real estate empire. And it was here that Roski was first accused of using his political connections to make millions of dollars off real estate deals financed in part by public funds.
Ed Roski Jr. joined the family business after returning home from a tour in Vietnam, where he served with the Marine Corps. At that time, Ed Roski Sr. had a successful industrial real estate brokerage firm in the City of Commerce. It was not long before Junior, as he became known, encouraged his father to diversify the business and get into development.
Industry proved the perfect venue. Founded in 1957 by Stafford, then a wealthy San Gabriel Valley rancher, Industry was never so much a city as a concept: Draw a boundary around a stretch of fallow, freeway-close farmland, declare the area a redevelopment zone, commit all the resources of municipal government to development, and see how much money could be made. Over the course of 20 years, the city, which never boasted more than 200 registered voters, issued $600 million in public debt, the proceeds of which went to finance a development boom at the juncture of the 60 and 605 freeways. Along the way, Stafford and a small clique of cronies reaped millions of dollars in profit and real estate. And from the time the Roskis arrived in 1975, Majestic Realty was Stafford's primary development partner. As a competing real estate agent put it at the time, Majestic was Stafford's “hip-pocket developer.”
One Industry profit center for Majestic and its sister firm, Commerce Construction Co., was the city contract to build a $15 million, 284-room hotel atop the city's exhibit and conference center – known together under the rubric Industry Hills and Sheraton Resort. Under the terms of a 50-year contract, Majestic also operated the hotel under a lease for the “air rights,” or space above the new center, without competitive bidding for 3 percent of the hotel's gross revenues. The city's redevelopment agency paid for designing, building and managing the facility's restaurants, bars, conference halls, two 18-hole golf courses, Olympic-size pool, riding stables and riding trails. Industry, in short, paid for the amenities that made the hotel worth visiting, and for annual operating losses as high as $5.5 million after the center's completion.
On several other projects, when Majestic set out to assemble land parcels and encountered resistance from another landholder, city officials condemned the property of the recalcitrant owners and then sold the sites to Majestic.
A case in point is a property once owned by Leo and Louisa Vejar. In 1975, the Vejars were ready to sell their property or develop it themselves, but, according to their attorney, the city withheld building permits and actively discouraged potential buyers. The city's Urban Development Agency then condemned the property and sold it to Ed Roski Jr., whose Commerce Construction promptly built a retail furniture outlet on the site. Some time later, it turned out that Stafford held an interest in the property.
Even the 110-acre Crossroads Business Park, home to Majestic's headquarters, was purchased from Industry's redevelopment agency. The city spent millions of dollars to build the surrounding infrastructure, and millions more lobbying Caltrans to build an offramp and interchange adjacent to its offices.
Stafford's remarkable run in Industry came to light in 1980, when the L.A. Herald-Examiner published Scot Paltrow's groundbreaking series detailing a string of inside deals and sweetheart contracts that revolved around Stafford. Four years later, Stafford was indicted along with King and a handful of local contractors; at the time, a federal prosecutor dubbed it “the biggest public corruption scandal in California history.”
Ed Roski and his father were never charged with any crime, but the Herald stories and prosecutors in the criminal case portrayed Majestic as a key to Stafford's operations. Roski was a partner with Stafford in a number of real estate holdings; to this day Roski holds property in partnership with both of his convicted colleagues. And Stafford and King were close friends with Roski (see sidebar).
The inside dealings in Industry were complex and hard to track, and their legality was never fully explored. Instead, federal prosecutors identified Stafford and several others as engaging in a simple fraud that involved $1.3 million in false billings to the redevelopment agency. In 1984, Jim Stafford was convicted and sentenced to 10 years in federal prison. He was released after serving nine years. Roski, in the meantime, remained in Industry and continued to reap the benefits of his collaboration.
In an interview with the Weekly, Roski Jr. denied doing anything unethical in Industry. And he was quick to defend the character of his old friend. “Jim Stafford was a very, very good person,” Roski said. “He got involved in a situation that any other time in his life he never would have. I felt very sorry for him.”
For the next 10 years, the Roskis maintained a very low profile. But they kept Industry as their base of operations – it remains the site of their largest holdings – while continuing to build their real estate empire.
Majestic's formula was to purchase surplus parcels of land from the Union Pacific, Southern Pacific and Santa Fe railroads in a string of Eastside cities, and then build big-box warehouses through Roski-owned Commerce Construction Co. The strategy led to Roski's introduction to Phil Anschutz, who bought Southern Pacific in 1985. Negotiations over land deals led to a partnership that now includes the purchase of the Kings and the financing of the downtown arena. More important for Majestic, the rail-corridor strategy matched the needs of Fortune 500 shippers and manufacturers like IBM and Goodyear, allowing the firm to prosper even as the real estate market plunged into recession. Between 1990 and 1995, the company developed 8 million square feet of new property, including major projects in Atlanta, in Denver and in cities across California. “We do our homework,” explained Kent Valley, a senior vice president at Majestic and a buddy of Roski Jr.'s since Vietnam. “It's not gambling, it's well-thought-out development.”
Within California, the Roskis specialized in redevelopment projects, and in cultivating the sort of close contacts with public officials and city staff that had served them so well in Industry. In some cases, local officials describe their collaboration with Majestic as all positive. Others, however, describe the experience bitterly.
Majestic's accumulation of land in the Inland Empire has been most intense in Chino, the San Bernardino County city best known for its state prison. Today, the firm controls almost 500 acres of the city's prime undeveloped land, mostly fallow farm acreage, which one city councilman valued with buildout at over $300 million. Naturally, Majestic and the city share a vested interest in seeing these properties developed. “We work very closely with the city of Chino,” said David Wheeler, Majestic's point man there. “We are talking constantly, between staff, City Manager's Office and City Council . . . it really is a partnership.”
The means by which Majestic solidified its “partnership” in Chino, however, generated considerable criticism.
In the 1980s, Majestic built goodwill in Chino by revving up its political machine and donating thousands of dollars to council candidates. Roski's mandarins also cozied up to city staff, at one point giving the daughter of then-City Manager Richard Rowe a job with the firm.
By the end of the decade, Roski was ready to make a deal. After a lengthy process, the Chino council endorsed a two-phase, 90-acre development agreement with Majestic for a portion of its property along Highway 71. The city's redevelopment agency committed $15 million in public money to build the area's infrastructure.
The first phase allowed Roski to build the Chino Spectrum Marketplace, a 15-acre “Power Center” complex featuring a Home Depot and industrial warehouses. Majestic Vice President Wheeler touts the project as the best the company has ever built. “It really is,” he said, “a marquee master-plan business park.”
Chino's main interest, however, was a 75-acre regional shopping mall to be developed in Phase 2 – the sort of project that might lift the stature and tax base of a non-descript suburban backwater. But after a series of delays, Majestic announced that building a mall on the site was no longer economically feasible. According to Wheeler, new malls in nearby Pomona and Chino Hills undermined Majestic's plans.
Despite the company's explanations, many community leaders were incensed. “The perception we had was that the former city manager was instructed to bend over backwards for Majestic,” said Chino Councilman Glenn Duncan. “You had the impression that Majestic got everything they wanted.” People were starting to believe the city had been hoodwinked.
By the 1996 City Council campaign, despite substantial campaign contributions to the mayor and each council member, Majestic was the target of open hostility. Some political campaigns, such as that of Bruce Robbins, used the company as its central campaign issue. “By today's standard, Majestic got a very lucrative deal . . . excessive even,” says Robbins, who won a seat that fall. “I ran to call attention to the fact that developers were getting everything and taxpayers were footing the bill.” The company had become such a bogeyman in town that two council members returned Majestic's cash. “I thought they were getting a better deal with how they do business than the average person,” explained Maurice Ayala, who returned a $1,000 contribution during a failed run for mayor. “I just think we got taken advantage of.”
Regarding the considerable public funds Chino invested in Majestic projects, Roski is unapologetic. “Chino wouldn't have [the Spectrum Marketplace] unless they assisted financially,” he told the Weekly. The taxes collected, he says, mean “the city gets all the benefits in a kind of way.”
Roski is not alone in his steadfast belief in public subsidies. Monterey Park, which subsidized a commercial project that partnered Majestic with Eastside developer TELACU, has nothing but praise for the company. Sometimes cities even seek Majestic out. In 1995, for example, when Yorba Linda found itself without a developer for a 36-acre site on which it had already spent millions for improvements, city officials got on the phone and called Majestic. After negotiations made the $25 million project pencil out for both sides, Majestic constructed expansive “big box” facilities for Home Depot and Best Buy. “It's a good deal for us,” said David Gruchow, the city's assistant city manager. “We'll get at least $500,000 a year in sales tax.” Majestic now also holds options for additional development there.
Roski does not rely solely on his firm's expertise to get projects built. When a city council is not persuaded by Majestic's usual sweet talk, company executives are than willing to push to get what they want.
The city of Redlands is a case in point. Since 1992, Majestic has engaged in a high-stakes war with competitors to build a regional mall in this quaint Inland Empire town, which most believe can sustain only one such development. Sometimes, however, the company appears to be at war with the city.
Majestic's stake in Redlands lies in a “doughnut hole,” an unincorporated chunk of San Bernardino completely surrounded by the city. Majestic put together 125 acres of farmland and proposed a $100 million “Citrus Plaza,” which like the Chino project would include a power station and a regional mall. City officials weren't pleased – they wanted to tailor the development so it would not compete directly with the city's historic downtown. But when its plans were rejected, Majestic turned to the county and won approvals there. Incensed, the city filed four lawsuits to assert their jurisdiction; the courts eventually found for Redlands.
In the meantime, Redlands community leaders floated a slow-growth initiative aimed at Majestic and several competing developers. Majestic spent $250,000 in 1994 to defeat the measure; it passed, and the ensuing negotiations with the city over annexation and site plans did not go well. “Majestic always spoke with a forked tongue,” former Mayor Swen Larsen, who retired at the end of 1997, says of the negotiations. “They would tell me one thing and then do another.”
While Majestic was bickering with city officials, two rival developers steamed ahead on nearby projects that fell within the city limits. By fall of 1997 one had signed a development agreement with the city and a second, Redlands Crossing, was on the verge of doing so. A second slow-growth initiative was passed by city voters that November – this time Majestic did not oppose it – and Redlands Crossing needed to finalize its deal with the city before the end of the year to be exempt from the initiative's requirements. As the deadline approached, talks with the city stalled; it later turned out Majestic had quietly promised the City Council a $2.25 million bonus for signing with Majestic first.
Majestic's tactics provoked immediate rebukes. “Majestic is playing hardball,” the San Bernardino Sun editorialized; “Redlands must call a stop to any further bullying.” Rather than back down, Majestic pressed its case, demanding every piece of paper the city had generated in its talks on Redlands Crossing – an unusual and cumbersome task involving thousands of legally sensitive documents. “I am sick and tired of dealing with them,” Councilwoman Geni Banda told the Riverside Press-Enterprise. “I am tired of their unnecessarily aggressive action.”
The effect of the delays was to kill the Crossings project. The developers have subsequently sued the city for $24 million. “We were a threat to [Majestic] so they put a contract out on us,” Ben Reilling, Redlands Crossing's developer, concluded. “I can understand it from a business point of view, but it doesn't make me happy.”
While Majestic's negotiations with Redlands continue, the developer's lawyers say it is no longer offering the regional mall that Redlands said it wanted. They are still seeking to build a power center there, but it seems that yet another competitor, this one in the city of San Bernardino, signed an agreement with Majestic's prospective anchor tenant. Said Roski, “We thought it was going to be a slam-dunk deal – it didn't quite turn out.”
It's hard to say what prompted Ed Roski to step out from 20 years of obscurity as a backroom development tycoon and into his new role as a leader of L.A.'s downtown establishment. Perhaps he felt satisfied with Majestic's level of success. Perhaps he believed the stench of the Industry scandal had finally blown over. Or perhaps it was simply, as he put it recently, that “I had something to give back” to his hometown.
Whatever the reason, Roski moved quickly and on a broad scale. First there was the 1995 acquisition of the Kings, a solid big-league franchise despite the financial troubles that swamped former team owner Bruce McNall. The following year, Roski and Anschutz initiated talks with the city on construction of a downtown sports arena and, nearby, a hotel, entertainment and shopping complex. Now, Roski is playing point man in the city's high-stakes bid to land an NFL franchise.
Through it all, Roski has operated in characteristic fashion – negotiating quietly, releasing details only when pressed, pushing public entities for millions of dollars in subsidies, and spending lavishly on lobbyists to advance his interests.
There were setbacks, of course. When his proposal for a long-term city subsidy of $70 million to the sports arena became public, Councilman Joel Wachs vowed to sponsor an initiative to block the deal, and after a series of threats to walk away from the project, Roski backed off. Still, according to Steve Soboroff, an experienced Westside real estate consultant who served as Mayor Riordan's negotiator on the deal, Roski still got most of what he wanted.
True, he lost the $70 million, but those funds were replaced by a commitment from the Community Redevelopment Agency to spend $12 million on land acquisition and site preparation. In fact, said Soboroff, once inflation and interest are factored in, the value of $12 million cash is virtually equal to $70 million distributed over 30 years. “It's a better deal for Anschutz and Roski than it was before,” Soboroff asserted.
As his downtown financial commitments have increased, so has Roski's spending. He retained the services of Latham & Watkins attorney George Mihlsten, the consummate Spring Street insider who in 1997 secured $70 million in city tax breaks for DreamWorks' Playa Vista development and is today shepherding Universal Studios $2 billion expansion. In addition, Roski hired two of the city's top lobbying firms, Cerrell & Associates and Marathon Communications, to work the corridors of City Hall. Since June of 1996, Majestic Realty and the L.A. Arena Company have topped the city Ethics Commission's list of companies attempting to influence policy at City Hall, spending a total of almost $600,000.
Along with outlays for lobbying, Roski made substantial political contributions in L.A. and around the state. But his free spending in Chino was an exception; Roski is normally selective in his largess, and the campaign-finance reports he files with the state suggest a focused effort to curry favor. At the state level, for instance, Roski contributed heavily to the coffers of then-state Treasurer Matt Fong, who was uniquely situated to rule on state tax assessments. In L.A., Roski gives heavily to District Attorney Gil Garcetti – more than $40,000 since 1993. Asked why he donates such large sums to the county's top law-enforcement authority, Roski said, “Gil is a friend. I think he is doing great things for Los Angeles.”
As to L.A. lawmakers, Roski has eschewed direct campaign contributions; he and his company spread just $1,500 in contributions among several candidates in the 1997 city election. The primary exception is Roski's ally in the Coliseum deal, 8th District Councilman Mark Ridley-Thomas. Roski donated $1,000 to Ridley-Thomas in 1996, another $250 in 1997; in December of tha
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