A Mansion, a Shell Company and Resentment in Bel Air


LOS ANGELES — The most notorious new house in Los Angeles hangs from a Bel Air hillside, high above the sprawl and smog, unfinished and unloved.

Outraged neighbors call it “the Starship Enterprise,” and in truth it looks like nothing so much as an earthbound space station of curved glass and steel, draped in scaffolding and tarpaulin, roughly 30,000 square feet and nearly 70 feet high.

That height, about twice the legal limit, is among a litany of violations that have stalled construction at 901 Strada Vecchia for more than a year. Without the city’s permission, workers tore down the original house and leveled the hillside. Though the site is in an “earthquake-induced landslide area,” subsequent inspections found “unsecured open excavations” and other perils. Inspectors also uncovered a host of features, unapproved though befitting a house with an aspirational price tag of $100 million, among them underground bedrooms and an IMAX theater.

As unapologetically extravagant as the project is its impresario — Mohamed Hadid, father of the celebrity models Gigi and Bella Hadid, sometime guest on “The Real Housewives of Beverly Hills” and one of the city’s leading luxury developers. For years, Mr. Hadid’s Instagram account has featured photos of himself amid the rebar at the Bel Air site. He calls it his “office” and labels the photos with the hashtag #themodernhouseofhadid.

Yet for all that, over four years of violation notices, inspections and hearings, efforts to hold someone accountable for the mess at 901 Strada Vecchia have repeatedly hit a legal wall. It is, as a judge said during an October session where once again nothing got done, “an extremely complicated case.”

That is because “themodernhouseofhadid” belongs not to Mr. Hadid but to an entity that keeps the actual owner at a legal remove — a shell company named 901 Strada L.L.C.

Fueled largely by the vast streams of wealth crossing the globe as never before, a new generation of hyper-luxury homes with stratospheric price tags is colonizing the most gilded hillsides and canyons of Los Angeles. In some areas, every third or fourth home has been torn down, leaving gashes of dirt and debris where new mansions will rise.

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Mohamed Hadid is one of the city’s leading luxury home developers.

Credit
Illustration by Michael Hoeweler.

And more often than not, the people behind the purchases are hidden by shell companies.

Here, as in other roosting places of the superrich, the recent influx of foreign money has gone hand in hand with the rising use of shell companies — generally limited liability companies. Shell companies were used in three-quarters of purchases of over $5 million in Los Angeles over the last three years, a higher rate even than the roughly 55 percent in New York, according to a New York Times analysis of data from PropertyShark. What is more, in Los Angeles, where so many of the new palaces are spec houses — luxury magnets for global wealth — not only are the buyers shielded by shell companies, but the developers are, too.

L.L.C.s were created to protect individuals from legal liability, and they have a range of legitimate uses. In an interview, Mr. Hadid said he used L.L.C.s for liability reasons, adding, “One hundred percent of the time that people build, they create an L.L.C.”

Today in Los Angeles, as at 901 Strada Vecchia, L.L.C.s have provided insulation — some would say impunity — amid a gathering anti-development backlash.

“That’s my — that’s the property I’m developing,” Mr. Hadid explained. “I’m the developer. I develop for other people.”

Law enforcement officials and anticorruption groups worry that while many foreign buyers are simply seeking to safeguard their wealth in United States real estate, some are using shell companies to hide illicit gains, despite banking laws designed to flag the movement of large sums of money by foreign government figures, their families and close associates.

This year, articles in The Times pierced the secrecy of shell companies owning units in one archetypal condominium complex in Manhattan — the Time Warner Center. Among the owners were a growing proportion of wealthy foreigners, including a number of government officials and people close to them. At least 16 owners had been the subject of government inquiries around the world, either personally or as heads of companies.

Here in several neighborhoods of the Platinum Triangle — Beverly Hills, Bel Air and Holmby Hills — a search for who is behind shell companies, based on property and incorporation records, as well as interviews, found a predictable mix of celebrities, lawyers, media executives and the like. But it also turned up owners from a diverse collection of countries, including some involved in current or past law enforcement inquiries.

Head up North Alpine Drive in Beverly Hills, for example, and on the right is a $14.7 million home owned by a shell company tied to Kola Aluko, a Nigerian businessman who is a figure in an investigation of that country’s former oil minister.

A block away is one of several local properties that have been owned by shell companies tied to a son of Suharto, the corrupt and brutal former president of Indonesia.

And back down the hill is Le Palais, a faux chateau — with a swan pond and a Turkish bath with hand-carved Egyptian limestone columns — that a shell company tied to Mr. Hadid sold to a shell company tied to Lola Karimova-Tillyaeva, a daughter of the president of Uzbekistan. The Karimov family faces corruption investigations in several countries, according to two people who have worked in law enforcement and have knowledge of the inquiries.

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Le Palais, a Beverly Hills estate featuring a swan pond and a Turkish bath, was sold to a shell company tied to Lola Karimova-Tillyaeva, a daughter of the president of Uzbekistan.

It is in Bel Air, though, that an army of resistance has risen, a coalition of influential neighbors with their own considerable resources. Call it the haves vs. the have-even-mores, or perhaps the old (for L.A.) money vs. the new. And while their bill of grievances extends to suspicions about shell companies hiding corrupt foreign money, what they talk about most is unethical and dangerous development — about dirt trucks run amok, the inevitability of mudslides and the waste of water in a time of drought. One of the Strada Vecchia neighbors, Nancy Walton Laurie, a Walmart heir, accused Mr. Hadid of encroaching on her land and harming her eucalyptus tree, damage she says will cost her $75,000.

The property at 901 Strada Vecchia is the crystallization of all this — in its grandiosity, its 60 pages of violations and other notices and the ire it has provoked.

And for the maddening elusiveness of its provenance.

“The person who is in control of the property has every interest in remaining invisible,” said James Spertus, a lawyer for the lawyer who is listed as 901 Strada L.L.C.’s manager and who became a co-defendant when the city took the highly unusual step of filing a criminal case. “They’re not charged, and they want to stay that way, so there is no public record of that person.”

‘Let’s Make a Deal’

Silver-maned at 67, Mr. Hadid, like many of his clients, is an immigrant. Born in Israel, he moved to Virginia as a teenager with his Palestinian family and spent his early business career in the Washington, D.C., area, developing office buildings and Ritz-Carlton hotels. Central to his success even then was his ability to woo foreign financiers — French and German backers, and in particular the SAAR Foundation, a group of Saudi investors.

In the 1990s, Mr. Hadid was involved with a number of small companies. Several ran into problems, and he filed for personal bankruptcy.

By the early 2000s, Mr. Hadid had moved to Los Angeles and begun his next act, as homebuilder to the stars. He built the estate where Michael Jackson died, as well as Palazzo di Amore, a Beverly Hills estate now listed for resale for $149 million. His clients were not always happy — among those who sued him and later settled was Sylvester Stallone — but new buyers kept coming.

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Among his big-ticket sales was a Beverly Hills house, with a glowing pyramid in a reflecting pool, that was acquired in 2010 by a shell company tied to the stepson of the prime minister of Malaysia. (The prime minister is now a target of corruption investigations at home and abroad.)

When Mr. Hadid bought the 1950s ranch house on 1.2 acres at 901 Strada Vecchia for $1.93 million in 2011, the building boom was starting to pick up steam. Bel Air and Beverly Hills are among the areas most popular with foreign buyers in Los Angeles County, where more than 1,400 homes have sold for more than $5 million each since the start of 2013, according to PropertyShark.

While the prices are high — $20 million, $50 million, $100 million — people in real estate say that in terms of square footage, Los Angeles is actually a deal.

“L.A., it’s the cheapest real estate in the world,” Mr. Hadid said, sipping tea during the interview at Le Belvédère, the 48,000-square-foot mansion where he lives in Bel Air. “London is more, New York is more.”

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$50 millionSold in 2010

Le Belvédère

630 Nimes Road, Los Angeles

Mohamed Hadid, a well-known developer in Los Angeles, sold this home to a shell company in 2010, but continues to live there.

Aerial photo by Pictometry International

Los Angeles has another important advantage, according to a leading high-end real estate executive, Aaron Kirman of the John Aaroe Group: Buyers do not have to worry about being vetted by co-op or condominium boards. (In fact, as The Times reported in February, New York condo boards, at least, almost never investigate the identity of the individual behind a shell company or the source of a buyer’s money. Nor are real estate brokers legally bound to ask such questions.)

“That’s the beauty of L.A.,” said Mr. Kirman, who says most of his buyers are foreign. “If somebody has the money to pay, let’s make a deal.”

Allan Alexander, a former Beverly Hills mayor who now practices real estate law, said he, too, had seen a steep increase in foreign buyers, especially from China.

“A lot of them are buying because of the safety of the investment here, and they don’t care about the price so much because, candidly, they want to get their funds in a safe place,” he said.

Some of those seeking a safe and secret harbor for their money are not buyers but investors, several real estate executives said. Developers pitch the projects with predictions of high returns, and the money flows in from shell companies with little scrutiny.

As for the new homes themselves, even the designation “mega-mansion” seems insufficient, so Angelenos have derisively labeled them “giga-mansions.”

“It’s another one of these — you walk in, and you’re at the Forum or something,” John Kelly, the lead investigator for the city’s building department, said of the Strada Vecchia house.

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In Bel Air, a truck backed up to let another pass in January 2015. Neighbors said they were concerned about heavy truck traffic from luxury home development.

Credit
Maureen Levinson

Water features are popular — man-made streams and waterfall walls and manicured lawns that go on and on — even as poorer areas turn brown complying with drought restrictions.

To compensate for the city’s strict height restrictions, a huge selling point is the “daylight basement,” an expanse of subterranean luxury built into a hillside so that a wall of windows opens out to the view. But such vast basements require removing dirt, vast quantities of it. Last year, an out-of-control dump truck collided with a police car in Beverly Hills, killing an officer. Two months later, a concrete truck killed another officer.

“The trucks will come and fill up the whole road,” said Maureen Levinson, a Bel Air resident who closely monitors the special hauling routes the city set up to manage the dirt-truck traffic. “I have feared for my daughters’ lives.”

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