Hawthorne Mayor Danny Juarez used a ruse that he was conducting his own audit of a struggling city business to extort cash from the owners, according to grand jury transcripts released this week.
Juarez was indicted on Oct. 18 on two counts of perjury by declaration, after a three-day, closed-door Los Angeles County grand jury trial found that he deposited campaign donations in his personal bank account and did not report them, as required by state law.
According to witness testimony recorded in the transcripts, Juarez told Gold's Gym owners Steve and Abram Tavera he wanted to personally audit their business after learning that they were about to file bankruptcy and default on a $2.5 million city loan.
But instead of doing a thorough review of the gym's finances, Juarez merely reviewed a few documents and then asked for a campaign contribution in December 2009, shortly after he had been elected mayor. The Taveras - father and son - said they gave him two $1,000 checks that he returned, asking for cash, which he was given.
"I had written a check for a thousand dollars on the 28th of December as a donation to his campaign," Tavera testified. "He came, I think, on the 8th of January ... and needed another thousand dollars for his campaign.
"After I wrote the two checks, he said he needed cash, so I tore up the checks and went to the bank and cashed $2,000 worth of money."
Juarez denied taking money from the Taveras.
"His version of an audit involved them handing him a few pieces of paper, telling him sort of where they stood financially, and asking that they give him money personally," Huntsman said. "Juarez shook down this business for $2,000 cash. Then a few months later he deposited another $2,000 that he got who-knows-where."
The Taveras reported the incident to the District Attorney's Office, saying they felt uncomfortable with the exchange. An investigation began in 2011, according to the transcripts.
Investigators reviewed bank documents, check stubs, and interviewed Juarez, the Taveras, City Council members, and former City Attorney Russ Miyahira, among others. They found that Juarez deposited $4,000 into his personal bank account a week after Abram Tavera withdrew $2,000 and said he gave it to the mayor.
Juarez did not testify before the grand jury, but district attorney's investigator David Bermejo relayed his May 2011 interview with the mayor.
Bermejo said Juarez initially denied ever receiving a check from the Taveras. Upon further questioning, Juarez later acknowledged taking a check from them, but said he returned it. No explanation was offered as to why he made large cash deposits into his personal account.
Bermejo said Juarez told him he didn't mention the check at first because he didn't consider it a campaign contribution - rather, a contribution made to repay campaign debt from the previous election.
"His explanation was that I had specifically asked about a campaign contribution, and he classified the check that he had accepted from the Taveras as a check to help retire his campaign debt," Bermejo said. "He said he returned the check."
After the purported audit, Juarez asked Miyahira whether he should publicly acknowledge the audit in order to avoid any conflicts of interest when he voted on Gold's Gym matters during City Council meetings. However, Juarez never mentioned a check changing hands between himself and the Taveras - an important detail for a politician, who must be accountable to strict ethics rules regarding their campaign contributors.
"When you run for office, you can take your own money, you put it into the campaign and when it's all done, you can get people to pay you back," Huntsman told the grand jury. "That's the way our political system works. But you have to report it."
Juarez has complained that the investigation and resulting charges are unfounded and the result of political retaliation from former Mayor Larry Guidi, who was friendly with the Taveras. He has said he believed some city employees - including Miyahira, one of two city employees hired and fired by the council - were too closely allied with Guidi. Juarez and his two council allies abruptly fired Miyahira in August.
Huntsman alleges Juarez orchestrated Miyahira's removal because the attorney was cooperating with the district attorney's investigation, and Juarez was upset about it. The only evidence to support that were several statements that Juarez told other people he did not have confidence in Miyahira and that he was unhappy with the investigation, according to the transcripts.
The city helped Gold's Gym open in 2007 with a $2.5 million low-interest federal loan that is usually reserved for nonprofit community development projects. Within three years of opening, the gym went bankrupt and, earlier this year, closed its doors. The council majority, led by Juarez, aggressively criticized Guidi and city employees like Miyahira for pushing for the loan to the gym. Juarez accused Guidi of accepting kickbacks in return for directing city funds to the business.
Huntsman argued that Juarez knowingly misled people to hide his activities, and said he is suspicious other money might have been solicited from local businesses.
"He claims he returned the check and that was the end of it," Huntsman said. "But you heard from the Taveras that that was not the end of it. ... And it's not just a question of his word against their word, it's also a question of ... him misleading people."
Follow Sandy Mazza on Twitter at http://twitter.com/sandymazza