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Lawsuit Says Beverly-Wilshire Homeowners Group Mishandled Money It Got From Suing Developers

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UPDATE: Through his lawyer, Robert Silverstein has objected to statements made about him and his work in this piece and our Jan. 3 piece. Among other things, he complains that the pieces imply that he has engaged in the same types of misconduct that Stan Brent alleges in his lawsuit were committed by the Beverly-Wilshire Homes Association. Curbed does not believe that its pieces contain any such implication, and none was intended.

More details are emerging in the "greenmail" practices of the Beverly-Wilshire Homes Association, one of Los Angeles's notoriously obstructionist NIMBY organizations. Greenmail is the dirty little secret of land use and development practices around California and Los Angeles, where homeowner groups and unincorporated community associations sue developers under the auspices of the California Environmental Quality Act and then often collect settlements. Two actions taken against BWHA allege that the organization's lawsuits and settlements don't actually benefit the community or the environmental impacts of development projects. Instead, mounting evidence shows that money gained via greenmail activities is used for the personal financial gain of individual members of these organizations.

The Park La Brea News has the details of a claim, filed in July 2011 with the California Franchise Tax Board, the California Attorney General's Office, and the IRS, alleging that BWHA, "has been suing developers for hundreds of thousands of dollars and not reporting the settlements on their taxes, which is legally required as a 501(c)4 organization." Moreover: "BWHA has engaged in prohibited transactions, misrepresented its tax-exempt status and failed to report revenue to the IRS without reasonable cause from 1993 to 2011."

The evidence for the claim: "According to the association's tax returns from 2008--the most recent returns the IRS could provide--the association reported $27,815 in total assets at the beginning of the year, with that figure at $8,032 by year's end. However, it excludes a $62,000 settlement from the developer of the Beverly Connection from June 30, 2008." The city of Los Angeles approved the Beverly Connection, along with some necessary zoning changes for the retail/parking project at the corner of La Cienega and West Third Street, in 2006, but BWHA received a settlement after the project was revised.

According to the article, the IRS could not specify whether the organization had been audited as a result of the claim. The Franchise Tax Board does have the power to suspend BWHA's corporate privileges, revoke its exemption, or impose penalties.

The claim also asks the logical question: "Of greater significance, however, is where or to whom the payments received by the organization [from 1993 to 2011] have gone." In that regard, a recent lawsuit by former BWHA member Stan Brent could bring even more evidence about the organization's practices to light. According to the article, Brent is suing BWHA "for allegedly giving favorable recommendations to businesses seeking variances, licenses and permits from the city of Los Angeles in exchange for financial support." The suit also alleges that such donations were used for the personal benefit of the BWHA's directors, namely, Diane Plotkin. Brent claims to have a "body of evidence" dating back several years, and intends to add defendants to the lawsuit prior to an expected April trial (mark your calendars).

Curbed recently reported on the similar case of the La Mirada Avenue Neighborhood Association. A leaked settlement agreement shows proof that the organization, an unincorporated community association led by Doug Haines, has reaped financial benefits in confidential settlements with developers.

Also on the CEQA news front, the California Planning and Development Report details a recent study that breaks down the common use of CEQA. The report's findings: CEQA is most often used to delay or prevent urban infill projects (on lots that have been previously developed) while exurban and suburban projects face relatively less opposition. CP&DR also shares this little nugget about how CEQA stacks up in court compared to NEPA, the similar, federal environmental legislation: "In 2011, veteran CEQA lawyer Clem Shute found that over a 40-year period, courts had found CEQA EIRs inadequate more than 40% of the time, compared to 0%--yes, zero--for NEPA compliance by federal agencies."
· Complaint filed against BWHA claims settlement missing in tax returns [Park La Brea News]
· Leaked Settlement Shows How NIMBYs "Greenmail" Developers [Curbed LA]