Montebello settles with developer over controversial housing project

City officials in Montebello announced Thursday that a developer has agreed to repay the city  $1.3 million to settle a lawsuit over a proposed affordable housing project that became a flashpoint for questions about political corruption and mismanagement in the troubled city.

Ku and Associates was awarded $1.3 million in federal funds by the city in 2008.  Danny Ku had pledged to build affordable housing along fading Whittier Boulevard. The project was never built, but city officials recorded it as being completed in a federal database.

When the discrepancy came to light, federal officials demanded that Montebello pay the money back. City officials in turn sued Ku, saying the money had been disbursed to him improperly. Ku initially refused to repay the money, noting that city files contained documents that authorized him to receive the funds. A federal audit found that a document that supposedly authorized the deal had signatures that appeared to have been cut and pasted improperly from another document. City officials said that matter is still under review but Ku is not accused of involvment.

In a statement, Ku's lawyer, Doreen Mercado, said that Ku intends to proceed with a development on the Whittier Boulevard site, including a hotel and that "as a good corporate citizen, Mr. Ku would definitely consider building ... affordable housing if the city provides him with the necessary subsidy as as the original intent."

She added that "Danny Ku did not do anything wrong" and he is "a world-renowned architect and developer and the city of Montebello should support him." The City Council vote to resolve the lawsuit, she said, "is a start."

--Jessica Garrison