For Adelanto councilman, real estate transaction presents ethical dilemma

Feb. 20--ADELANTO -- An attorney and his wife purchased an old bar and restaurant on Adelanto Road for $450,000 in October. Weeks later, the City Council proposed re-zoning the land and more nearby for medical marijuana dispensaries.

David Serrano, the buyer, is the brother of Manny Serrano, the former spokesman for the High Desert Cannabis Association, who said he stepped away from the organization to avoid any perceived conflicts of interest when the brothers bought a 3-acre pot farm in the city's existing green zone.

This latest acquisition at 17535 Adelanto Road, once The Jet Room, is merely planned to be a law office, according to Manny Serrano, speaking on behalf of his brother. David Serrano, who did not return a message last week relayed by his brother, had been apparently enticed by the land's proximity to Highway 395.

The Council's proposal, unchanged as of Wednesday, to draw dispensary borders around the property hasn't changed David Serrano's considerations, according to his brother, although conditions would seem ripe for an attorney with business and familial connections to the industry to act on such a pivot.

"We can't even look at that particular direction," Manny Serrano said, noting how the proposal hasn't yet been formally drawn into an ordinance nor adopted.

The broker representing David Serrano on the deal that was completed Oct. 11, about seven weeks before the Council proposed to re-zone the land, was also fully aware of the buyer's intentions.

"When (David) spoke with Mr. Woodard, he basically let him know this was going to be a law office," Manny Serrano said. "Dispensaries and marijuana were never mentioned during the discussions."

In this case, Mr. Woodard is Councilman John "Bug" Woodard who, aside from being arguably the local medical marijuana industry's most fervent champion, owns real estate company Woodard Realty.

During a Nov. 29 Council workshop, Woodard did not recuse himself from discussions led heavily by Mayor Pro Tem Jermaine Wright that drew the proposed boundaries around his buyer's property, and Woodard also did not object. The borders: Pearmain Street, Air Expressway, just west of Mesa Linda Road and Rancho Road.

"I did nothing in impropriety," Woodard said.

But his involvement in the transaction, detailed in real estate records reviewed by the Daily Press, and his subsequent participation in drawing new zone boundaries, have raised questions over whether Woodard knew that the former Jet Room would soon be a more lucrative investment and, if so, whether he shared any of this information with his buyer.

"In situations like this, it raises red flags and it may cause the public to wonder, is he acting in the public's best interest or is he acting in his client's best interest?" said Hana Callaghan, director of government ethics for Santa Clara University's Markkula Center for Applied Ethics. "Is this a case where his client got insider knowledge or an inside track that wasn't available to other potential purchasers of the land?"

But both Manny Serrano and Woodard remain adamant there was nothing nefarious about the deal.

"In no way did we do anything we think was illegal," Manny Serrano said.

Woodard concluded that he did "absolutely not" have insider knowledge, nor did he feed anything secretly to David Serrano.

"After the fact," Woodard said, emphasizing the importance of the timeline, "it was revealed that maybe they would like to use it as a dispensary."

That would, however, contradict Manny Serrano's insistence that the idea had never been broached.

For Woodard, the evolution of the proposed dispensary borders, one of two zones being actively considered by the Council, could potentially function as a defense against any suggestions of graft in the deal. During the Oct. 26 Council meeting, Woodard voted on a proposed border that stopped at Joshua Avenue on the south end, which would have actually squeezed out David Serrano's property.

At the workshop a month later, Wright, the mayor pro tem, proposed dragging the southern border much further south to Rancho Road, which did not face any vocal objections from the dais.

But Woodard then, and again Wednesday, has shown he is increasingly in favor of ridding designated zones altogether in exchange for allowing dispensaries in commercial/retail areas, which he said would mitigate problems with artificially exploding land values in only portions of Adelanto, as well as potential traffic congestion.

"It makes no sense at all (to create zones). (Patients) have to have access. Really, it's logical that you would have a retail business be in a retail area," he said Thursday. "At first, it sounded like an OK idea ... It sounds like it's causing more problems than need to be."

The property itself was sold after 91 days on the market without extensive negotiation, according to Heros Minasian, of Stevenson Real Estate Services, who brokered the transaction on behalf of the seller, Dmitri Manucharyan.

But the sale also represented a nice return for Manucharyan, who had bought it less than seven months before for just $239,000, or a bit more than half for which he later sold it.

"I thought it was underpriced when we bought it, to be honest with you," Minasian said. "Probably was worth in the mid-$300,000s. It was in horrible condition."

Manucharyan had purchased it for his uncle, and added a fence. When they decided to sell, the suggested price point was mostly arbitrary.

"Let's put it on the market and see what we can get," Minasian said. "When these people actually approached me to make an offer, they really didn't negotiate the price at all."

As the broker, Woodard likely stood to make between 2.5 to 3 percent of the sale value, or $11,250 to $13,500, which is the standard commission for brokers, according to Joseph W. Brady, president and broker at The Bradco Companies, a commercial real estate group in the High Desert.

"Commissions are not set in stone," Brady added, "so the one thing we do is negotiate."

Woodard said he was paid by the seller.

If the zone proposal comes before the dais for vote, Woodard vowed "naturally" to recuse himself. As of now, plans call for incorporating the zone in question, a secondary zone and the idea to allow dispensaries in retail/commercial areas.

City officials have said that only four dispensaries would be allowed in Adelanto, following the rule of one pot shop for every 8,500 residents, meaning the limit could be relaxed in the future as the city's population grows.

During another medical marijuana-focused workshop Wednesday, Mayor Rich Kerr appeared to prefer the 8,500-to-1 strategy, saying it would remove a significant and time-consuming hurdle: Having to navigate the complexities of general plan amendments, re-zoning, sending notices, planning and other long-term moves.

It also might fend off unflattering chatter from the peanut gallery, Kerr said unprovoked, such as "hearing the things that, you know, the mayor's on the take, Ed's on the take (Camargo, a councilman), Jermaine's driving around in a rent-a-car, I mean a brand new car -- which is a rent-a-car, by the way" -- and also "that we're taking bribes to open up the zones so you can have a dispensary."

Shea Johnson can be reached at 760-955-5368 or [email protected]. Follow him on Twitter at @DP_Shea.

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