RESOLUTION NO The City Council of the City of West Hollywood does hereby resolve as follows:

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1 RESOLUTION NO "A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF WEST HOLLYWOOD DENYING THE APPEAL, IN PART, AS TO APPEAL ISSUE #1 AND APPEAL ISSUE #3; GRANTING APPEAL ISSUE #2 AND MODIFYING THE CONFIRMED NOTICE OF ASSESSMENT OF DELINQUENT TRANSIENT OCCUPANCY TAXES AND HOTEL MARKETING LEVY FOR VALADON HOTEL, LLC, ZUMA INVESTMENT CO., LLC AND STEFAN ASHKENAZY AND IN ACCORDANCE WITH WHMC , ORDERING THAT THE ENTIRE AMOUNT OF DELINQUENT TRANSIENT OCCUPANCY TAXES, HOTEL MARKETING LEVY, PENAL TIES AND INTEREST BE DUE IMMEDIATELY UPON SERVICE OF THE CITY COUNCIL'S DETERMINATION, AND THAT STAFF MAY INSTITUTE ALL NECESSARY ACTIONS TO RECOVER ALL MONIES DUE." The City Council of the City of West Hollywood does hereby resolve as follows: SECTION 1. In 1985, the City of West Hollywood ("City") adopted the "Uniform Transient Occupancy Tax Ordinance" which, in part, imposed a tax of the rent upon all occupants of any "hotel" [as that term is defined in WHMC (1 )] in the City for the privilege of occupying said hotel. The current amount of the tax is twelve and one-half percent (12 %percent). The Uniform Transient Occupancy Tax Ordinance further requires that each "operator" [as the term is defined in WHMC (3)] collect the transient occupancy tax ("TOT") and hold it in trust on behalf of the City, file periodic reports of the TOT collected to the City's Tax Administrator, and remit the TOT collected to the City's Tax Administrator. Additionally, the City has also levied an annual charge/assessment ("hotel marketing levy") upon operators of hotels located in the Hotel Marketing Benefit Zone. The reporting periods for TOT and the hotel marketing levy has been set by the Tax Administrator as monthly. Accordingly, all hotel operators are required to report and remit the TOT and hotel marketing levy to the City's Tax Administrator on the last day of the month following each reporting period. SECTION 2. Since at least December 2006, Valadon Hotel, LLC has operated a hotel at 8822 Cynthia Street, West Hollywood -which is located within the Hotel Marketing Benefit Zone (thereby subjecting its operator to the hotel marketing levy). In December 2006, Stefan Ashkenazy filed a Statement of Information with the California Secretary of State confirming that he was the managing member of Valadon Hotel, LLC. In or about December 2008, the hotel commenced doing business as Le Petit Ermitage ("Hotel"), and in February 2009, Stefan Ashkenazy filed a "Business License Tax Form" with the City confirming the Hotel's name change (from Valadon Hotel to Le Petit Ermitage) and also listing himself as the "business owner" and "president" of the Hotel...

2 SECTION 3. According to Mr. Ashkenazy and other Hotel representatives, in late 2007 and the beginning of 2008, the Hotel commenced capital upgrades to its guest rooms in an effort to reb rand the Hotel into a "first class boutique hotel". During the renovation, the Hotel was partially closed. Mr. Ashkenazy and other Hotel representatives have informed City personnel that in April 2008, a fire occurred in the basement of the Hotel which caused "substantial damage to new furniture and fixtures which were set to be installed in the rooms as well as substantial smoke damage." Mr. Ashkenazy and other Hotel representatives further state that in September 2008, the Hotel suffered further damage as a result of the overflowing of its rooftop swimming pool. SECTION 4. In early 2009, City Officials met with Stefan Ashkenazy and other representatives of the Hotel to discuss the Hotel's legal responsibilities regarding the TOT that it was collecting on an ongoing basis and holding in trust for the City, as well as its obligation to report and remit to the City the TOT and hotel marketing levy. Although the Hotel operators met with City Officials on multiple occasions between 2009 and 2011, and despite the Hotel operators continued collection of the TOT from transient guests of the Hotel and reporting of same to the City, only five (5) partial payments were made to the City between 2009 and 2011 in spite of their continuous representations to fully pay the delinquencies. In November 2011, City officials and Hotel operators met to discuss the Hotel's continued lack of timely remittance of the collected TOT and the hotel marketing levy. The City determined that an independent audit was needed to determine the extent of the delinquency. SECTION 5. In or around November 2011, the City hired Lance Soli & Lunghard, LLP, Certified Public Accountants ("LSL"), to conduct a Limited Procedures Review of the Hotel for compliance with the City's Transient Occupancy Tax Ordinance and the hotel marketing levy for the reporting and remittance periods from August 1, 2008 through October 31, With the cooperation of the Hotel operators, LSL concluded its review in January 2012, and determined that the Hotel's underpayment of the TOT and hotel marketing levy for the reporting and remittance periods from August 1, 2008 through October 31, 2011 amounted to $1,417,230. The applicable penalties and interest on the delinquent TOT and hotel marketing levy was $286, 913 and $131, 490, respectively, computed through December 31, Based upon the LSL review and computation, the Hotel owed the City a total of $1,835,634 for delinquent TOT, hotel marketing levy, penalties and interest for the reporting periods between August 2008 and October SECTION 6. While understanding the financial difficulties faced by the Hotel, in January 2012, after nearly three years of the Hotel's continued collection of TOT from its transient guests and its repeated failure to timely remit the TOT and hotel marketing levy to the Tax Administrator, City Officials engaged the City Prosecutor's Office to collect the delinquent TOT through the administrative remedies provided in the West Hollywood Municipal Code. 2

3 SECTION 7. On July 20, 2012, in accordance with WHMC , the City's Tax Administrator issued a Notice of Assessment to Valadon Hotel, LLC; Zuma Investment Co., LLC; and Stefan Ashkenazy; and each of them, in connection with delinquent transient occupancy taxes, hotel marketing levy, latepayment penalties, and interest resulting from the operation of the Hotel. SECTION 8. On July 30, 2012, Valadon Hotel, LLC, timely filed a request for an administrative hearing before the Tax Administrator in order to show cause why the amount of TOT (and hotel marketing levy) assessed pursuant to the Notice of Assessment was incorrect. Although the administrative review hearing was properly scheduled (and Notice duly issued to Valadon Hotel, LLC) for August 28, 2012, at the request of Valadon Hotel, LLC (through its attorney, Farhad Eshaghpour), the hearing was continued to September 25, 2012 and the continuance was duly noticed. SECTION 9. On September 25, 2012, the Tax Administrator conducted an administrative review hearing. In attendance on behalf of the Hotel operators were Douglas Walsh, Esq., Farhad Eshaghpour, Esq., Stefan Ashkenazy, and Geoffrey Sunderland, CPA. The City's Tax Administrator (David Wilson, Interim Finance Director) and Attorney James Eckart were also present. SECTION 10. On October 4, 2012, the City's Tax Administrator issued a "Confirmed Notice of Assessment of Delinquent Transient Occupancy Taxes and Hotel Marketing Levy." The City's Tax Administrator concluded that after having carefully considered the evidence submitted by and on behalf of Valadon Hotel, LLC, as well as the statements and legal argument presented in the Request for Hearing, Hearing Brief, and at the administrative review hearing, the Tax Administrator determined that Valadon Hotel, LLC; Zuma Investment Co., LLC; and Stefan Ashkenazy, and each of them, have failed or refused to remit the requisite TOT (and hotel marketing levy) for the reporting period between August 2008 through December 2011 as follows: Transient Occupancy Taxes Hotel Marketing Levy Penalties Interest Total Due $1,274, $ 152, $ 301, $ 175, $1,903, The notice required that all delinquent amounts due and specified in the "Confirmed Notice of Assessment of Delinquent Transient Occupancy Taxes and Hotel Marketing Levy" be remitted to the City on or before 4 p.m. on October 19, SECTION 11. On October 18, 2012, Attorney Douglas Walsh filed a request for an appeal before the City Council, on behalf of Valadon Hotel, LLC, Zuma Investment Co., LLC, and Stefan Ashkenazy, of the Confirmed Notice of Assessment of Delinquent Transient Occupancy Taxes and Hotel Marketing Levy. 3

4 The Notice of Appeal specifically seeks City Council review on the following three issues: 1. "Responsible Parties;" 2. "The Confirmed Notice of Assessment Includes Amounts That Cannot Be Collected By The City;" and 3. "The Penalties and Interest Assessed." SECTION 12. On November 13, 2012, the City Clerk duly issued a Notice of Appeal Hearing to Valadon Hotel, LLC, Zuma Investment Co., LLC, and Stefan Ashkenazy confirming that the appeal hearing had been scheduled for December 17,2012. At the request ofvaladon Hotel, LLC, Zuma Investment Co., LLC, and Stefan Ashkenazy through their attorney, Douglas Walsh, the City Clerk duly issued a Notice of Continuance of Appeal Hearing to Valadon Hotel, LLC, Zuma Investment Co., LLC, and Stefan Ashkenazy rescheduling the appeal hearing to February 19, SECTION 13: On February 12, 2013, Attorney Douglas Walsh filed a request for the appeal hearing before the City Council, on behalf of Valadon Hotel, LLC, Zuma Investment Co., LLC, and Stefan Ashkenazy, of the Confirmed Notice of Assessment of Delinquent Transient Occupancy Taxes and Hotel Marketing Levy, be continued to a date beyond March 4, On March 6, 2013, the City Clerk duly issued a Notice of Continuance of Appeal Hearing Before the West Hollywood City Council Regarding Confirmed Assessment of Delinquent Transient Occupancy Taxes and Hotel Marketing Levy to Valadon Hotel, LLC, Zuma Investment Co., LLC, and Stefan Ashkenazy rescheduling the appeal hearing to March 18,2013. SECTION 14: On March 18, 2013, the City Council of the City of West Hollywood held a duly-noticed Public Hearing on the Appeal of the Confirmed Notice of Assessment of Delinquent Transient Occupancy Taxes and Hotel Marketing Levy for Valadon Hotel, LLC, Zuma Investment Co., LLC, and Stefan Ashkenazy and, after considering the evidence and argument presented thereat, the City Council denies the appeal, in part, as to Appeal Issue #1 and Appeal Issue #3; grants Appeal Issue #2 and modifies the Confirmed Notice of Assessment of Delinquent Transient Occupancy Taxes and Hotel Marketing Levy for Valadon Hotel, LLC, Zuma Investment Co., LLC, and Stefan Ashkenazy accordingly; and in accordance with WHMC , orders that the entire amount of delinquent Transient Occupancy Taxes, Hotel Marketing Levy, Penalties and Interest be due immediately upon service of the City Council's determination, and that Staff may institute all necessary actions to recover all monies due totaling $1,855, which includes $1,270, (Transient Occupancy Taxes); $122, (Hotel Marketing Levy); $294, (Penalties); and $168, (Interest). PASSED, APPROVED AND ADOPTED by the City Council of the City of West Hollywood at a regular meeting held this 18 1 h day of March, 2013 by the following vote: 4

5 JEFFREY PRANG, MAYOR ATTEST: COREY SCHAFFER, CITY CLERK 5