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California controller to audit City of Industry

City of Industry Mayor David Perez speaks to the media at a press conference in this September 18, 2010 at Industry Hills Golf Club at Pacific Palms in City of Industry, California. Perez has come under intense scrutiny in recent weeks over lucrative contracts he and his family held with the city over the past 20 years. On Thursday, May 7, 2015, the state controller's office said it would audit the city to look for any signs of wrongdoing.
City of Industry Mayor David Perez speaks to the media at a press conference in this September 18, 2010 at Industry Hills Golf Club at Pacific Palms in City of Industry, California. Perez has come under intense scrutiny in recent weeks over lucrative contracts he and his family held with the city over the past 20 years. On Thursday, May 7, 2015, the state controller's office said it would audit the city to look for any signs of wrongdoing.
Jeff Golden/Getty Images

The state will audit the City of Industry after an outside firm raised questions over $326 million in payments to businesses owned by a former mayor and his family, the California Controller's office said Thursday.

Former mayor David Perez has come under intense scrutiny in recent weeks over lucrative contracts he and his family held with the city over the past 20 years.

A previous audit ordered by the city and released in April by KPMG found that much of the money paid to Perez and his family was supported by vague or even erroneous invoices, according to the San Gabriel Valley Tribune, which first reported the story.

"In examining and comparing the reports that the city makes versus their audited financial statements, we found a number of discrepancies in things like total revenues, total expenditures, debt service fund," John Hill, spokesperson for State Controller Betty Yee, told KPCC.

Yee's office said it sent a letter to city officials on Thursday notifying them her office would be investigating those discrepancies along with allegations of wrongdoing and any irregularities in local, state and federal programs administered by the city.

The Perez family has held a number of lucrative contracts to provide city services since the 1970s, according to the Tribune.

One of the companies tied to Perez, Zerep Management Company, was also at the center of sexual harassment complaints that cost the city more than $7 million. “Zerep” is “Perez” spelled backwards.

On Tuesday, L.A. County supervisors voted to ask District Attorney Jackie Lacey to investigate "possible fraud, corruption and illegal activity on the part of the mayor and City Council of the City of Industry," according to the Los Angeles Times.

City officials said they have been contacted by D.A. investigators, according to the controller's office.

Industry is a small city in southeastern Los Angeles County with only about 400 residents, yet as the Tribune notes, the business-centric town still manages to generate $140 million in revenue each year.

In its statement, the controller's office said it will first look at the fiscal years of 2012-2013 and 2013-2014. The review may expand if needed.

City officials responded to the Associated Press late Thursday:

The city manager said Thursday that his office has a May 18 meeting scheduled with Yee's staff.

"We will provide the information that they need so they can complete their report," City Manager Kevin Radecki said.

The city canceled the maintenance and street sweeping contract with Zerep in September for unspecified "wrongdoing," Radecki said, but it still has a contract with a company Perez partly owns for trash collection. That contract, which runs through 2025, is worth $13 million annually, Radecki said.

This story has been updated.