Jia Yuan USA, the California-based subsidiary of Shenzen Hazens, has agreed to pay $1.05m in return for a three-year non-prosecution agreement with the US Department of Justice to resolve an investigation into the company’s conduct with public officials in the City of Los Angeles.
The non-prosecution agreement (NPA), announced Wednesday by the US Department of Justice, is the latest development in an ongoing investigation into a wide-ranging “pay-to-play” scheme in which the developers bribed Los Angeles city officials to secure official acts beneficial to their real estate projects.
China-based Shenzhen Hazens established Jia Yuan USA to acquire, operate and redevelop the Los Angeles Luxe City Center Hotel, which it purchased in 2014 for more than $100 million. Jia Yuan “planned a massive redevelopment that would include retail space, residential units, and hotel rooms, valued at approximately $700 million,” according to a “statement of facts” accompanying the NPA.
Under the NPA, Jia Yuan will pay the $1.05m penalty within two weeks and will continue to cooperate with the FBI’s ongoing public corruption probe. The NPA also requires the cooperation of Jia Yuan’s parent company, as well as other Hazens subsidiaries in the Los Angeles-area.
The government has agreed not to prosecute the company for three years, as long as it refrains from any criminal conduct. The NPA was offered due to the company’s timely acceptance of responsibility for its conduct and implementation of remedial measures, which include improving its compliance programme and firing its real estate development consultant, George Chiang, who earlier plead guilty to racketeering charges.
The company fully cooperated with the investigation by providing the government with records located in China and in the personal possession of its chairman, as well as making the chairman available for an interview, despite the fact that he was outside the reach of US law enforcement.
The company also agreed to further cooperate with the United States Attorney’s Office and the FBI as the agencies continue to investigate and prosecute cases that may touch upon the company’s conduct.
The statement of facts contained within the NPA gave a list of the misdeeds committed by Jia Yuan in relation to former Los Angeles City Councilmember, Jose Huizar, and real estate consultant, George Chiang. Former Councilmember Huizar faces a trial in June 2021 on a 34-count racketeering indictment, and George Chiang is scheduled to be sentenced in February 2021 after pleading guilty earlier this year to participating in a Huizar-led racketeering enterprise.
In the NPA Jia Yuan admitted to a series of acts, including providing Katy Perry concert tickets to Huizar soon after Huizar and “Individual 1” (previously identified as the city’s deputy mayor for economic development) intervened in a compliance issue at a Hazens-owned hotel. Jia Yuan employees also made campaign contributions to several U.S. political candidates, some of whom were later reimbursed by the company at the direction of a foreign national, who was prohibited from participating in U.S. elections. Jia Yuan provided in-kind contributions to several U.S. political candidates by hosting reduced-cost fundraising events at the Luxe Hotel, again at the direction of a foreign national, who was prohibited from participating in US elections. In addition, the chairman of the Hazens companies facilitated an introduction that resulted in a contract that paid indirect bribe payments to Huizar. Jia Yuan also admitted that George Chiang as a consultant to the company organized a trip to China for Huizar and his family that Hazens partially subsidized.
After receiving all of these benefits, Huizar voted to approve the Luxe Hotel project before the city’s Planning and Land Use Management Committee, which he chaired until shortly after federal agents executed search warrants at his Boyle Heights home and city offices in November 2018.
The statement of facts also details how Chiang and “Individual 1” asked the Hazens chairman on several occasions to make a $100,000 contribution to a political action committee established to benefit a Huizar relative who was planning to run for his City Council seat. While the chairman did not authorize the donation, Chiang told Huizar that Hazens would make the $100,000 donation, which prompted Huizar to take additional officials acts to approve the Luxe Hotel project.