Mayor’s Witnesses Seek to Paint Events as Benign

Using defense witnesses’ testimony like a shield, Michael Pancer, Mayor Roger Hedgecock’s attorney, sought Wednesday to deflect a wide array of the prosecution’s charges in the mayor’s felony perjury and conspiracy trial.

On the second day of the defense’s case, Pancer elicited testimony from five witnesses aimed at, in essence, painting a simple, legal explanation for various personal and political transactions involving Hedgecock that the prosecution has characterized as evidence of a complex conspiracy to illegally funnel money into Hedgecock’s 1983 campaign via the political consulting firm of Tom Shepard & Associates.

Seeking to unravel the threads of the conspiracy theory woven by Assistant Dist. Atty. Richard D. Huffman, Pancer attempted to show Wednesday that:

- Hedgecock’s campaign, in the defense attorney’s words, “paid everything it owed” to Shepard’s firm for its work in the 1983 race.

- The mayor delayed the reporting of a promissory note for tax reasons, not to conceal the transaction until after the May, 1983, mayoral election.

- Any errors made on Hedgecock’s financial disclosure reports were inadvertent, not intentional falsifications.

- To the best of Hedgecock’s knowledge, a $130,000 loan used to remodel his South Mission Hills house came from former La Jolla investment executive Nancy Hoover, not her business associate, J. David (Jerry) Dominelli.

Pancer also renewed his efforts to discredit a key prosecution witness who testified that Hedgecock--contrary to the mayor’s persistent denials--knew as early as November, 1981, that Dominelli and Hoover planned to invest in Shepard’s political consulting firm so that it would be able to run Hedgecock’s 1983 campaign.

Sorrento Valley investment counselor Harvey Schuster testified Monday that, in the 1981 conversation, Hedgecock made it clear that he was aware of Hoover’s and Dominelli’s plans to finance Shepard’s firm. That testimony is a crucial link in the prosecution’s contention that Hedgecock, Dominelli, Hoover and Shepard conspired to use the consulting firm, founded in January, 1982, as a laundry for illegal donations to Hedgecock’s campaign.

Pancer has attempted to disprove Schuster’s allegation primarily through several defense witnesses’ testimony that Hoover’s name was not mentioned as a possible investor in Shepard’s firm until after the date Schuster says he discussed the matter with Hedgecock. The mayor and his attorney contend that Schuster lied in his testimony because he is angry that, in 1982, Hedgecock, then a county supervisor, did not support his proposal to develop the county’s bayfront parking lots.

Gregory Dennis, one of the Shepard firm’s original partners, testified Wednesday that Hoover and Dominelli did not abandon plans to purchase Seacoast Magazine, a North County publication, until mid-December, 1981. Terry Bianco, the magazine’s former advertising coordinator, testified Tuesday that Hoover and Dominelli had contemplated buying the magazine in order to make Shepard its publisher.

However, largely for economic reasons, that plan was dropped at a December, 1981, meeting, Dennis said.

At that meeting, Dominelli and Hoover “indicated their interest in helping Mr. Shepard start . . . another business venture,” Dennis testified. “The question was broached to Mr. Shepard: ‘What are you interested in doing?’ He said, ‘I’d like to start a consulting business.’ ” Dennis added that the “general outlines” of an agreement whereby Hoover would finance Shepard’s firm stemmed from the meeting--testimony consistent with that given Tuesday by Robert Meadow, another former partner in Shepard’s firm.

Seeking to bolster Schuster’s testimony, Huffman has emphasized that Shepard, Hoover and Dominelli could have held earlier discussions about the possible formation of a political consulting business--characterized by the prosecution as a “back door” method to funnel money to Hedgecock’s campaign--without the knowledge of Dennis, Meadow and other defense witnesses.

“Do you really think that Dominelli, Hoover and Shepard were going to sit down with everybody in the world and tell them . . . about this?” Huffman asked.

The Shepard firm’s contract with Hedgecock’s campaign committee is a focal point of the trial. The defense argues that Hedgecock’s campaign had a fair, legal contract with the firm that initially provided for a $750-per-month retainer and later specified that Shepard’s fee would be a 15% commission on all television and radio advertisements that it bought on Hedgecock’s behalf--a formula that resulted in a payment of about $30,000.

Huffman, though, argues that the Hedgecock campaign received much more from Tom Shepard & Associates than it paid for, and contends that if a pro-rated portion of the firm’s staff and overhead costs are assigned to the campaign, the firm actually lost more than $140,000. Pancer counters that whether the contract was sufficient to produce a profit was Shepard’s concern, not Hedgecock’s. In addition, Pancer has argued that the firm’s partners viewed the Hedgecock campaign as a “loss leader” that, if successful, would enhance its reputation and attract other clients--which, in fact, proved to be the case.

‘No Track Record’ J. Michael McDade, Hedgecock’s chief of staff and his 1983 campaign manager, testified Wednesday that he considered the contract, which he helped negotiate, to be a fair one “in view of the fact that (the firm) . . . had no track record” in running such a major campaign. McDade also pointed out that Hedgecock’s campaign committee had to pay more than $25,000 to two other local consulting firms to assist Tom Shepard & Associates in the production of TV and radio ads.

Huffman has emphasized that Shepard and the firm’s other employees worked on Hedgecock’s behalf before August, 1982, when the firm signed a contract with the campaign committee. However, McDade, concurring with testimony by earlier defense witnesses, said that Shepard and the others worked as volunteers for Hedgecock during the first half of that year, adding that it is not uncommon for consultants to do so, as Pancer put it, “out of principle and not just for the dollars.”

“Some people collect stamps,” McDade said. “We play politics.”

A $16,000 promissory note that Hedgecock sold to Hoover is another major element in the case. Hedgecock acquired the note, secured by a trust deed on an El Cajon house, as a result of the dissolution of an unsuccessful condominium development partnership with Michael Turk.

Hedgecock sold the note to Hoover in the fall of 1982, but, citing “personal reasons,” asked her attorney not to record the sale until June 23, 1983--a delay that prosecutors argue was designed to conceal his financial ties to Hoover until after the May, 1983, mayoral election.

Tax Angle Disputed However, Turk, a general contractor, testified that he told Hedgecock that he would realize “a major tax advantage” if he did not sell the promissory note until at least one year after the partnership’s final June 22, 1982, dissolution agreement. In response, Huffman argued that Hedgecock actually acquired the note via a March, 1981, dissolution pact, and that tax considerations therefore would not have been a factor at the time that Hedgecock sold the note to Hoover.

The perjury charges facing Hedgecock allege that he intentionally falsified required personal and campaign financial statements to prevent disclosure of the promissory note and other controversial transactions.

Pancer, however, characterized the errors and omissions on Hedgecock’s financial reports as merely “inadvertent . . . oversights.”

Under Pancer’s questioning, lawyer Leo Sullivan testified that he helped Hedgecock prepare more than one dozen amendments to his financial statements in the spring of 1984. Those corrections, Pancer argued, are proof of the mayor’s “good-faith effort” to comply with the complex financial disclosure regulations.

The defense attorney had planned to call two city election law officials to testify that such amendments are common because of the law’s complexity. However, Superior Court Judge William L. Todd Jr. refused to allow the testimony after Huffman objected that “the behavior of all other candidates and what (the two city officials) think about it . . . is irrelevant.”

“If Mr. Hedgecock wants to testify that he didn’t understand the forms . . . (and) that it was all a big happy mistake . . . that’s fine,” Huffman said. Pancer and Hedgecock say they have not decided whether the mayor will testify.

The investigation that led to the criminal charges facing the mayor was touched off by the disclosure that had Hedgecock received a $130,000 loan from Hoover, based on an oral agreement, to remodel his house. Prosecutors contend that some of that money actually came from Dominelli. In response, Hedgecock has repeatedly insisted that he asked Hoover for the loan, that he never discussed the deal with Dominelli and that, to the best of his knowledge, all of the money that Hoover loaned him was hers.

Hedgecock’s version of the details surrounding the loan was supported by the testimony Wednesday of McDade and lawyer Peter Aylward, one of the top advisers in Hedgecock’s 1983 race. Both men testified that they never heard Hedgecock refer to anyone but Hoover as being the source of the $130,000 loan.