Testimony Conflicts on Source of Loan to Hedgecock

Mayor Roger Hedgecock’s chief of staff testified Tuesday that a $130,000 loan used to remodel the mayor’s house came from Hedgecock’s friend Nancy Hoover. But two bank officials said they were told by a prominent Hedgecock supporter that the mayor had borrowed the money from the former La Jolla investment firm of J. David & Co.

The discrepancy in the witnesses’ descriptions goes to the heart of the mayor’s felony perjury and conspiracy case. The prosecution contends--and some of the perjury counts facing Hedgecock allege--that the mayor falsified financial disclosure statements by listing Hoover as the lender rather than the J. David company.

J. Michael McDade, Hedgecock’s chief of staff and his 1983 campaign manager, testified in Superior Court that there was “no question” that the money used to renovate Hedgecock’s South Mission Hills house came from Hoover, a principal in the now-bankrupt J. David firm.

When Hedgecock began considering renovating his house in 1983, he told McDade that he was contemplating approaching Hoover for financial assistance, McDade said. McDade added that he asked Hedgecock whether that was “a smart thing to do,” noting that public figures’ private financial transactions are “subject to scrutiny.”

Hedgecock “said he did not see any problem with the transaction at all,” McDade said. The two did not discuss the subject again, and it was not until February, 1984, that he learned that Hedgecock had, indeed, obtained a loan from Hoover, McDade said.

Supporters’ Gathering Recalled

On Feb. 12, 1984, a handful of Hedgecock’s closest supporters were summoned to his house for a meeting at which the mayor explained that J. David’s financial difficulties had forced Hoover to ask him for immediate repayment of the $130,000 loan. About $50,000 of the loan was repaid through a J. David account that Hedgecock had opened as collateral, and the mayor told his advisers that he intended to repay the remaining $80,000 by selling a piece of undeveloped property he owned near La Jolla Valley in the North City area.

At the meeting, Hedgecock backer Larry Cushman, a wealthy investor with extensive local real estate holdings, agreed to help the mayor obtain an $80,000 loan from San Diego Trust & Savings Bank, to be repaid when Hedgecock sold his property. Two San Diego Trust officials, however, testified Tuesday that Cushman told them that Hedgecock needed the loan to repay the J. David company, not Hoover.

Melvin Etter, the bank’s executive vice president, testified that Cushman told him that the loan was “for the purpose of paying off a home improvement loan to the J. David company.” James Costello, the bank’s vice president, concurred.

Last week, Cushman testified that he did not recall making such a comment and said he believed that the $80,000 loan, which he obtained for Hedgecock within 24 hours, was to repay Hoover.

Loan Amount Questioned

Assistant Dist. Atty. Richard D. Huffman, who hopes to conclude the prosecution’s case this week, also raised questions about the veracity of the $130,000 figure. The prosecutor, who previously has suggested that Hedgecock borrowed much more money than he repaid, asked McDade whether the Feb. 12 meeting was used to help develop “figures that jibed” with Hedgecock’s $130,000 estimate.

McDade responded that one of the major purposes of the meeting was to “get documentation . . . on the actual figures” for the renovation from contractors who did the work. “Mr. Hedgecock was going to pay whatever he justly owed Miss Hoover,” McDade said.

In other testimony Tuesday, Huffman sought to direct jurors’ attention to other gifts that Hedgecock received from Hoover and other alleged improprieties in the mayor’s personal and campaign finances, characterizing that evidence as the thread used to help weave a conspiracy to circumvent the city’s election laws.

Frank Nagy, who managed a limousine company formerly owned by Hoover, testified that, at Hoover’s direction, he transported Hedgecock and his supporters on several occasions in 1982 to the Del Mar Race Track and to a Los Angeles dinner honoring President Reagan. The prosecution has described the limousine trips as enticements used to attract campaign contributions for Hedgecock.

Limousine Made Available

During a recess in the trial, however, Hedgecock said that he had made only one limousine trip to the Del Mar track and emphasized that he did not arrange the trip.

Nagy also said that Hoover told him to remove a $3,000 mobile telephone from a J. David Co. limousine and install it in Hedgecock’s car, so that Hedgecock could make calls while traveling between campaign appearances. Michael Pancer, Hedgecock’s attorney, pointed out that the phone has since been returned to Hoover.

Other highlights in testimony by the eight witnesses Tuesday included:

- A disclosure by Hedgecock’s campaign treasurer that the mayor’s chief fund-raiser told him that she planned to seek immunity in a statewide investigation into the mayor’s finances because she was aware of irregularities on Hedgecock’s campaign reports.

The treasurer, banker Peter Q. Davis, said that when he asked fund-raiser Nancy MacHutchin about the alleged irregularities in September, 1984, she replied that he probably “didn’t want to know” about the problems--which later led to a civil lawsuit being filed against Hedgecock by the California Fair Political Practices Commission. When he pressed her for details, Davis said MacHutchin told him that some so-called “in-kind contributions”--non-monetary donations of services and goods--might not have been properly listed on Hedgecock’s finance reports.

“I said, ‘You mean like . . . Hoover,’ and she said, ‘Yes . . . and others,’ ” Davis testified.

- Patrick Kruer, a local real estate developer, testified that now-jailed financier J. David (Jerry) Dominelli told him in February, 1983, that he was “going to work very, very hard to defeat” former City Councilwoman Maureen F. O’Connor, Hedgecock’s 1983 opponent.

During a dinner near Park City, Utah, Dominelli “said he knew a lot of people in the (San Diego) community and was going to get out and help Mr. Hedgecock,” Kruer said. Kruer added that Dominelli’s comments led him to surmise that the financier intended to provide financial assistance to Hedgecock.

Prosecutors contend that Hedgecock, Hoover, Dominelli and political consultant Tom Shepard conspired in a scheme to illegally funnel money into Hedgecock’s 1983 campaign through Shepard’s consulting firm. Hedgecock, however, argues that the more than $360,000 that Hoover and Dominelli invested in Shepard’s firm was a “routine business investment” intended primarily to help Shepard start his own firm.