March 12, 2025
Robbie Cordes
SDI Advisory Committee Member
President, California City Landowners Association
John Elmes
SDI Advisory Committee Member
Re: Engel & Engel Proposal for Forensic Investigation Services Dear Ms. Cordes and Mr. Elmes,
Thank you for the opportunity to present Engel & Engel, LLP’s (“E&E”) proposal in connection with SDI Advisory Committee’s request on or about February 27, 2025. Based on our understanding of the background relating to the Subdivision Deferred Improvement Fund (“SDI Fund”), we propose to conduct a forensic investigation and an accounting of the SDI Fund held by the City of California City for the benefit of SDI owners. Overall, E&E is well qualified, experienced and has the resources to conduct the following proposed forensic investigation.
I. Confidentiality of Information
In connection with our forensic investigation and accounting of the SDI funds and investment holdings, any reports, data, work sheets or other documents prepared in connection with this engagement will be confidential and submitted only to the SDI Advisory Committee and will not be given to any other person or party, unless the SDI Advisory Committee or the court should so direct or require. It is understood that the SDI Advisory Committee has authorized us to report any significant findings of fraud or misappropriation of funds to Rodney Klassen, Investigator for the Kern County District Attorney’s Office, Christopher Edward Chase, Special Agent FBI, the Securities and Exchange Commission (SEC), the Financial Industry Regulatory Authority (FINRA), or any other agency that is deemed necessary and appropriate under the circumstances. 273
II. Forensic Investigation of SDI Fund
Our forensic investigation will include the following scope of work from 2015 through 2025 (current):
1. Accounting of SDI Fund holdings.
2. Annual accounting of invested funds, cash reserves and other accounts.
3. Annual accounting of SDI operating and administrative expenses.
4. Annual accounting of SDI construction improvement expenditures.
5. Annual accounting of investment losses and gains by investment category.
6. Annual accounting of investment costs, commissions, fees and other expenses.
7. Investigation as to reasonableness of investment costs, commissions, and fees charged by investment.
8. Reconciliation and accounting of annual fund balances.
III. Initial Phase of Investigation
As of the date of this proposal, E&E has not been provided with complete records required for its investigation. Accordingly, we are unable to evaluate and estimate the hours and fees required to conduct our investigation without consideration of such records. In this regard, E&E will first identify and request from California City (or other third parties that the SDI Advisory Committee designates), the relevant business and financial records needed for our investigation.
After E&E obtains the relevant business and financial records, as part of its initial phase, E&E will prepare a detailed scope of work of its forensic investigation including estimated hours and fees.
IV. Investigative Phase
The investigative phase will begin after the SDI Advisory Committee approves our proposed scope of work and estimated hours and fees. As part of our investigative phase, E&E will provide the SDI Advisory Committee with our progress as we conduct our forensic investigation. Furthermore, as part of our investigative phase, E&E will provide the SDI Advisory Committee with a report of E&E’s accounting and findings.
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V. Recommendations
At the conclusion of our investigative phase, we will provide the SDI Advisory Committee with a report of recommendations. Such recommendations may include a proper accounting system for maintaining the SDI Fund, proper internal controls to safeguard SDI Fund assets, a recommendation for reporting of the SDI Fund’s financial activities, and any other recommendations that come to our attention as a result of our forensic investigation.
VI. Professional Qualifications
Attached hereto are the professional qualifications of Jason A. Engel and Brandon J. Engel. Jason A. Engel will be heading the E&E investigation and Brandon J. Engel will serve as the senior manager who will be responsible for directing E&E professional staff. Overall, E&E has extensive experience in conducting forensic accounting investigations similar to the forensic investigation required in this matter.
VII. E&E Services and Fees
E&E’s fees for services rendered will be based on time expended and out-of-pocket costs. Attached is a schedule of E&E’s current standard hourly rates. E&E shall receive a replenishable retainer of $10,000 against which fees incurred will be applied. Unapplied portions of the retainer will be refunded within thirty (30) days of the conclusion of this engagement. Upon approval of this proposal, E&E will send you its formal Engagement Letter.
We appreciate the SDI Advisory Committee’s consideration of our proposal and welcome any questions the committee may have.
Sincerely,
Jason A. Engel
Engel & Engel, LLP
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Signed by:______________________________________ Date: _____________________ Robbie Cordes
SDI Advisory Committee Member
President, California City Landowners Association
Signed by:______________________________________ Date: _____________________ John Elmes
SDI Advisory Committee Member
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Brandon J. Engel, CPA, CFE is a forensic accountant with over 10 years of experience in over 200 forensic accounting cases involving complex business litigation. Brandon’s forensic experience includes conducting financial investigations in connection with civil and criminal matters. Brandon has provided the following forensic accounting services to top law firms, private and public companies, non-profits, government agencies, and local police departments:
Brandon’s experience and expertise is highlighted in his skills and ability to investigate financial records and uncover discrepancies, hidden transactions, misstatements, fraud, and misappropriations. As a Certified Fraud Examiner (CFE), Brandon possesses specialized knowledge in investigating a variety of complex financial fraud schemes including international money laundering, embezzlement, fraudulent transfers, alter ego, and misappropriation of assets. As a highly skilled forensic investigator, Brandon also has specialized knowledge and experience in tracing funds in accordance with established legal and financial principles.
• Fraud Investigations
• Economic Damage Calculations
• Business Valuations
• Bankruptcy and Insolvency
• Alter Ego
• Fraudulent Transfers
• Business Interruption
• Intellectual Property Litigation
• Real Estate Litigation
• Probate/Trust Litigation
• Construction Litigation
• Employment Litigation
• Personal Injury
• Partnership / Shareholder Disputes
American Institute of Certified Public Accountants California Society of Certified Public Accountants National Association of Certified Fraud Examiners Brandon J. Engel, CPA, CFE [email protected] Tel: (310) 277-2220 350 S Grand Avenue, Ste 3160 Los Angeles, CA 90071
Tel: (310) 277-2220
Brandon J. Engel, CPA CFE
Professional Qualifications
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Brandon has conducted over 50 fraud investigations involving a wide variety of fraudulent schemes.
Brandon’s experience and expertise in conducting fraud investigations is illustrated in his tracing of approximately $20 million of fraudulent funds that were laundered through over 150 U.S., Swiss, and Korean bank accounts to real estate, luxury cars and Swiss bank accounts. Brandon has also assisted a local Los Angeles police detective in uncovering and documenting financial fraud and embezzlement.
Brandon’s experience includes conducting fraud investigations in connection with the following:
• Misappropriation of Funds
• International Money Laundering
• Fraudulent & Misleading
Financial Statements
• Contract Fraud
• Construction Fraud
• Insurance Fraud
• Securities Fraud
• Employee Embezzlement
• Bankruptcy Fraud
• Embezzlement Schemes
• Ponzi Schemes
• Tracing of Fraudulent Funds
• Real Estate Fraud
• Inventory Fraud
Fraud Investigation
Brandon has prepared over 100 economic damage calculations in a wide variety of litigation matters and industries. Brandon’s experience and expertise includes developing complex damage models that are consistent with established legal principles and able to withstand the scrutiny of the court. Brandon is also uniquely skilled in creating demonstrative graphs and charts for trial that are designed to make complex business transactions easily understandable.
Brandon’s extensive forensic experience in calculating economic damages for both plaintiffs and defendants includes the following:
• Lost Profits
• Contract Damages
• Fraud Damages
• Lost Goodwill
• Compensatory Damages
• Reliance Damages
• Out of Pocket Damages
• Mitigation Analysis
• Rescission Damages
• Reputational Damages
• Employment Damages
• Personal injury Damages
• Benefit of the Bargain Damages
• IP Infringement Damages
• Construction Damages
and Delay Claims
• Business Interruption Damages
• Unestablished Business Damages
Economic Damages
American Institute of Certified Public Accountants California Society of Certified Public Accountants National Association of Certified Fraud Examiners Brandon J. Engel, CPA, CFE [email protected] Tel: (310) 277-2220 350 S Grand Avenue, Ste 3160 Los Angeles, CA 90071
Tel: (310) 277-2220
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• Corporation Code 2000 Valuation
• Minority Shareholder Valuation
• Corporate Mergers & Acquisitions
• Corporate and Partnership Dissolutions
• Buyout Agreements
• Fair Value Solvency Analysis
• Net Worth Valuation
• Shareholder & Partnership Disputes
• Economic Damage Analysis
• Buy and Sell Agreements
Brandon has been involved in a variety of business valuation engagements among a broad array of industries. Brandon’s business valuation expertise includes conducting various business valuation approaches including market analysis, capitalization of earnings, discounted cash flow, book value, liquidation value, public company guideline method, and other generally accepted valuation methods.
Brandon’s experience includes business valuations in connection with the following:
Business Valuation
Brandon’s bankruptcy litigation experience covers a broad spectrum of bankruptcy matters. Specifically, in connection with bankruptcy fraudulent transfers, Brandon has extensive experience in tracing fraudulent funds applying a variety of tracing methods in accordance with established legal and financial principles.
Brandon’s bankruptcy litigation experience includes a variety of engagements involving the following:
• Bankruptcy Fraud Investigation
• Solvency Analysis
• Fraudulent Transfers
• Analysis of Undercapitalization
• Analysis or Reasonably Equivalent Value
• Preference Analysis
• Liquidation Analysis
• Fair Value and Fair Market Value
Valuations
• Investigation of Hidden Distributions
Bankruptcy and Insolvency
• Bachelor’s degree in accounting from California State University, Northridge • Member of the American Institute of Certified Public Accountants (AICPA) • Member of the Association of Certified Fraud Examiners (ACFE) • Member of the California Society of CPA’s.
Education and Professional Associations
American Institute of Certified Public Accountants California Society of Certified Public Accountants National Association of Certified Fraud Examiners Brandon J. Engel, CPA, CFE [email protected] Tel: (310) 277-2220 350 S Grand Avenue, Ste 3160 Los Angeles, CA 90071
Tel: (310) 277-2220
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PROFESSIONAL QUALIFICATIONS
JASON A. ENGEL, CPA, CFE, CIRA, CVA, MAFF, ABV
PUBLIC ACCOUNTING
EXPERT WITNESS AND
FORENSIC ACCOUNTING
Mr. Engel is a Certified Public Accountant and has been engaged in the practice of public accounting since 1979. His public accounting experience includes auditing, taxation, management consulting, SEC registration, and SEC reporting for public companies. His professional background includes experience at two of the Big Four accounting firms where he was a Senior Manager in both the Audit Practice and Management Consulting Practice.
Since 1982, Mr. Engel has been engaged in the practice of forensic accounting and expert testimony in connection with a variety of business litigation matters including economic damages, bankruptcy and insolvency, fraud and embezzlement, business valuation, alter ego, wrongful termination, net worth calculations, and partnership and shareholder dissolutions. He has also been engaged in accounting malpractice and other matters requiring an evaluation of financial statements and compliance with Generally Accepted Accounting Principles and Generally Accepted Auditing Standards.
He has made various presentations and has published research publications on the subject of economic damages, lost profits, alter ego, bankruptcy and insolvency and otherforensic accounting topics.
Mr. Engel has served as an expert witness in over 500 cases and has testified in federal, bankruptcy and state courts. He has also testified in arbitration and has served as a court appointed accounting referee.
His professional credentials include those of Certified Public Accountant (CPA), Certified Fraud Examiner (CFE), Certified Insolvency and Restructuring Advisor (CIRA), Certified Valuation Analyst (CVA), Master Analyst of Financial Forensics (MAFF) and Accredited inBusiness Valuation (ABV).
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EXPERTISE:
ECONOMIC DAMAGES
BUSINESS LITIGATION
EXPERTISE:
FINANCIAL FRAUD
EXPERTISE:
BUSINESS VALUATION
Mr. Engel has extensive experience and expertise in investigating and developing economic damage calculations and providing expert testimony in connection with a wide variety of business litigation matters. He has earned the credential of a Master Analyst of Financial Forensics (MAFF) and has written various research publications on the subject of economic damages, lost profits, infringement damages, alter ego and other business litigation topics.
His experience and expertise includes investigating and calculating economic damages in connection with lost profits, lost goodwill, lost business value, contract damages, patent infringement, trademark infringement, copyright infringement, compensatory damages, consequential damages, lost earnings, reliance damages, construction delay damages, environmental and contamination damages, unfair business competition, misappropriation of trade secrets and lost opportunity damages. His experience and expertise also includes investigating and providing expert testimony as to the elements of alter ego and fraudulent transfers.
Mr. Engel is a Certified Fraud Examiner (CFE) and has extensive experience and expertise in investigating, detecting and uncovering financial fraud and embezzlement. His fraud expertise includes skilled knowledge and application of specialized investigatory techniques designed to detect fraud, embezzlement and fraudulent and misleading financial statements.
Mr. Engel has provided expert testimony in connection with a variety of fraud related engagements. He has experience in conducting fraud investigations in connection with civil and criminal white collar fraud, corporate and employee embezzlement, Ponzi schemes, lapping schemes, securities fraud, insurance fraud, contract fraud, misappropriation of funds and fraudulent and misleading financial statements.
Mr. Engel is a Certified Valuation Analyst (CVA) and Accredited in Business Valuation (ABV). He has conducted in excess of 100 business valuations. His experience includes performing business valuations in a wide variety of industries, including manufacturing, wholesale, construction, insurance, health care, distributorship, retail establishments, real estate agencies, service enterprises, import and export, franchises and a variety of professional practices including medical, dental, accounting and law.
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He has conducted business valuations in connection with economic damages, bankruptcy and insolvency, mergers and acquisitions, fraudulent transfers, minority shareholder valuations, net worth calculations and marital, corporate and partnership dissolutions. He has also assisted counsel in evaluating and defending a $4.2 billion hostile takeover of a national insurance company.
EXPERTISE:
BANKRUPTCY AND
INSOLVENCY
EDUCATION,
CERTIFICATIONS AND
MEMBERSHIPS
Mr. Engel is a Certified Insolvency and Restructuring Advisor (CIRA). His experience in bankruptcy and insolvency includes court appointments by the United States Bankruptcy Court as the accountant for debtors, creditors and Trustees under both Chapters 7 and 11 of the United States Bankruptcy Code. He also served as an accounting expert for a United States Bankruptcy Judge.
Mr. Engel has testified as an expert witness in United States Bankruptcy Courts in a variety of bankruptcy issues. His bankruptcy and insolvency experience and expertise includes investigating, analyzing and testifying as to the elements of a fraudulent transfer including reasonable equivalent value, insolvency, unreasonable small assets, and inability to pay debts as they become due. In addition, Mr. Engel’s experience and expertise includes preference analysis, liquidation analysis, analysis of adequate protection, preparation and analysis of reorganization plans, preparation and analysis of Interim Statements and Operating Reports, financial projections, business valuations, crisis management and fraud investigations of insiders and officers.
Mr. Engel has written various research publications on the subject of bankruptcy and insolvency. He has completed a course in the study of Business Reorganization under the Bankruptcy Reform Act sponsored by the University of Southern California Law Center.
Mr. Engel earned, in 1979, a Bachelor of Science in Business Administration with a specialty in accounting from California State University at Northridge. In 1982, he attained his CPA credentials and in 1992, he attained his CFE credentials. He attained his CVA and CIRA credentials in 1996 and his CFFA credentials in 2003.
He is a member of the California Society of Certified Public Accountants, the American Institute of Certified Public Accountants, the Management Consulting Section of the American Institute of Certified Public Accountants, the National Association of Certified Fraud Examiners, the Association of Insolvency and Restructuring Advisors, the National Association of Certified Valuation Analysts.
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STANDARD HOURLY RATES
2025
ACCOUNTING SERVICES
Jason A. Engel, CPA, CFE, CIRA, CVA, MAFF, ABV. ...........................$600 Brandon J. Engel, CPA, CFE .....................................................................$450 Managers ........................................................................................$450 – $550 Senior Accountants .........................................................................$350 – $450 Staff Accountants ............................................................................$250 – $350
ADDITIONAL SERVICES
Technical Consultants .....................................................................$200 – $300 Bookkeepers ...................................................................................$150 – $250
TRIAL & DEPOSITION TESTIMONY
Jason A. Engel, CPA, CFE, CIRA, CVA, MAFF, ABV. ..........................$700 Brandon J. Engel, CPA, CFE ....................................................................$500 Hourly rates stated above effective through December 31, 2025
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4902-2380-0875 v1
RESOLUTION NO. 25-3119
A RESOLUTION OF THE MAYOR AND CITY COUNCIL OF THE CITY OF CALIFORNIA
CITY AUTHORIZING THE MAYOR AND ONE MEMBER OF THE SDI COMMITTEE TO
EXECUTE AN AGREEMENT WITH ENGEL AND ENGEL, LLP CERTIFIED PUBLIC
ACCOUNTANTS TO CONDUCT A FORENSIC AUDIT OF THE SDI FUND FOR AN INITIAL NOT TO EXCEED AMOUNT OF $300,000 AND TO 1.) BRING BACK THE AGREEMENT TO THE COUNCIL FOR APPROVAL OR 2.) NOT BRING BACK THE AGREEMENT TO
COUNCIL FOR REVIEW
WHEREAS, California City is a municipal corportation under the laws of the State of California, with pwer to contract for services necessary to achieve its purpose; and WHEREAS, the SDI Committee has reviewed, interviewed, and selected Engel and Engel, LLP as the most qualified auditing firm to conduct and audit of the SDI Fund; and; WHEREAS, the City wishes to ensure that its funds are accounted for and expensed in accordance with generally accepted accounting principles; and; WHEREAS, the Mayor and City Council have previously provided direction to conduct a forensic audit of the SDI Fund; and;
WHEREAS, CITY desires to enter into a professional services agreement with Engel and Engel, LLP for forensic auditing service.
NOW, THEREFORE BE IT RESOLVED by the City Council of the City of California City authorizes the following:
1. The Mayor is hereby authorized to execute a professional services agreement with Engel and Engel, LLP subject to legal concurrence from the City Attorney’s Office.
2. One member of the SDI Committee is hereby authorized to execute a professional service agreement with Engel and Engel, LLP.
3. That the City Manager or is his designee is authorized to appropriate $300,000 from the SDI fund for this expenditure.
4. That the initial not to exceed amount be set at $300,000.
5. That the Agreement is brought back to Council for approval or
6. That the agreement is not brought back to Council for approval The foregoing resolution was introduced and adopted at a regular meeting of the City Council of the City of California City held on March 25 , 2025, by the following vote, to wit:
AYES:
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4902-2380-0875 v1 2
NOES:
ABSENT:
DATED:
ATTEST: APPROVED AS TO FORM:
__________________________
Leanndrea Weible Victor Ponto
Acting City Clerk City Attorney
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