3 Say Hedgecock Was Unaware of Apparently Illegal Donations

Three witnesses testified Thursday about apparently illegal contributions to San Diego Mayor Roger Hedgecock’s 1983 mayoral campaign, but they each said that, to their knowledge, Hedgecock was unaware of the improprieties.

Two former J. David & Co. employees testified that Nancy Hoover, a former principal in the bankrupt La Jolla investment firm, either directly gave them money or reimbursed them with company funds for making contributions totaling $1,000 to Hedgecock’s campaign. Under City of San Diego election laws, one person may not give money to another to contribute to a candidate, and corporations are barred from making any political contributions.

However, under cross-examination from defense attorney Oscar Goodman, the two former J. David workers--Betsy Milich and Sally Roeder--said they did not discuss their contributions with Hedgecock, adding that when they made the donations at Hoover’s direction, they did not realize that doing so violated election laws.

Similarly, Robert Meadow, one of the founding partners of Tom Shepard & Associates, said that the firm paid for the installation and repair of a mobile telephone in Hedgecock’s personal car during the 1983 race, but never, as it should have, billed Hedgecock’s campaign committee for the expense. However, Meadow added that, until Hedgecock’s case began, he was unaware that the consulting firm had paid nearly $700 for the telephone, suggesting that the failure to bill the mayor’s political committee was an oversight.

During most of Thursday’s court session in the mayor’s felony conspiracy and perjury retrial, Deputy Dist. Atty. Charles Wickersham led Meadow through a lengthy description of the funding and operation of Shepard’s firm, founded in January, 1982. Meadow, who testified under a grant of immunity, was named as an unindicted co-conspirator by the San Diego County Grand Jury that last year indicted Hedgecock, Hoover, Shepard and former financier J. David (Jerry) Dominelli on charges that they conspired to funnel money illegally into Hedgecock’s 1983 campaign through Tom Shepard & Associates. Hedgecock also is charged with intentionally falsifying financial disclosure statements to conceal those transactions and illegal personal financial aid from Hoover and Dominelli.

Meadow told the eight-woman, four-man jury that the consulting firm’s partners felt fortunate to obtain an August, 1982, contract to run Hedgecock’s potential mayoral campaign--a race that did not become a reality until then-Mayor Pete Wilson won the U.S. Senate race three months later.

“We felt that it would enhance our professional reputation if (Hedgecock) won,” said Meadow, a professor of political science at the University of Southern California. That statement is consistent with Hedgecock’s contention that Shepard treated his campaign as a “loss leader,” hoping to attract clients by running a successful citywide race.

Hoover and Dominelli financed the consulting firm’s start-up costs with monthly contributions of between $10,000 and $12,000. Those monthly investments, which ultimately totaled more than $360,000, increased to about $20,000 in late 1982 and early 1983--at the height of the mayoral race--and declined in the summer of 1983, after the race was concluded.

Prosecutors contend that the fluctuations in those monthly investments--combined with staff reductions at the firm shortly after the May, 1983, mayoral race --demonstrate the link between Shepard’s company and Hedgecock’s campaign.

However, new clients drawn to Tom Shepard & Associates by Hedgecock’s success reduced the need to rely on the two former J. David executives’ investments. Meadow testified that there was a “dramatic increase” in the firm’s clientele after the mayoral race, adding that the company had begun making a profit shortly before adverse publicity from the investigations into both J. David and the mayor’s finances led to its dissolution in 1984.

In an effort to bolster the prosecution’s contention that Shepard’s firm was little more than a vehicle to launder illegal donations to Hedgecock’s campaign, Wickersham pressed Meadow for details on how much time the firm spent on the race.

Meadow estimated that 80% of its time was spent on the campaign in the first five months of 1983, and 30% between August and November, 1982. The last half of that estimate contradicts Meadow’s own testimony from the first trial, when the political consultant said that the firm had devoted about 70% of its time to Hedgecock’s campaign during the three-month period in late 1982.

“I’ve had a chance to rethink it since then,” Meadow told an incredulous Wickersham, explaining that he had forgotten when testifying at the first trial that two of the firm’s other clients were “consuming a large percentage of both Tom Shepard’s and my time.”

Wickersham also pounced on other inconsistencies in Meadow’s testimony, as well as those of another witness, Nancy MacHutchin, Hedgecock’s chief fund-raiser, frequently reading from transcripts of the first trial in an attempt to raise questions about their credibility.

For example, Meadow denied that Shepard’s firm ever loaned money to Hedgecock’s campaign committee, but said that the firm sometimes “floated” money to the group--in essence, extending a brief grace period to allow for gaps between the time bills were submitted and paid. Wickersham, however, pointedly reminded Meadow that he used the word “loan” in his testimony before the Grand Jury.

“I may have, but I meant ‘floated,’ ” Meadow answered. “I used the word incorrectly. I’m not an accountant.” MacHutchin, like Meadow, attributed most of the inconsistencies recited by Wickersham to imprecise phraseology during her earlier testimony, saying that she “may not have been clear . . . due to the (nervousness) of being in a courtroom.”

MacHutchin conceded that she sought clemency before testifying before the Grand Jury because of concerns over whether Hedgecock’s campaign had received improper aid from Hoover in the form of so-called “in-kind” contributions--non-cash donations, such as services or materials. MacHutchin added, however, that those initial concerns resulted from the fact that she was “confused . . . at the time.”

Following Thursday’s court session, Goodman said he doubted that Wickersham’s attempts to undermine the credibility of Meadow’s and MacHutchin’s testimony--at least those areas that reflected favorably on the defense--succeeded.

“I think that this jury (knows) . . . that there’s nothing wrong, and it’s natural for somebody to think about an event which they talk about on one occasion, and after some thoughtfulness goes into it, that they change their mind,” Goodman said. “You get into gradations of gray, and there’s just no problem with that. I think it makes the witnesses more human and more believable.”

Wickersham, not surprisingly, viewed the matter differently. Asked about his own visible anger as he delineated for the jury the changes in the two witnesses’ testimony, the prosecutor said, “What’s wrong with a little righteous indignation?”

One of the prosecution’s major contentions is that Shepard’s firm rendered free services for Hedgecock’s campaign in the form of unreimbursed staff salaries and overhead expenses. Meadow, however, stressed that “almost none of our clients” were billed for the firm’s labor costs. In addition, the defense argues that because Hedgecock’s campaign committee had a contract with Shepard’s firm --one that resulted in a fee of about $30,000--the question of whether that payment was large enough to produce a profit was Shepard’s concern, not Hedgecock’s.

In other testimony Thursday, Milich, who worked as J. David’s director of community relations, said that in February, 1983, Hoover told her to write a personal check for $500 to Hedgecock’s campaign--the maximum $250 donation for both herself and her husband--and then reimburse herself from J. David’s community relations account.

Roeder, who delivered flowers for J. David and formerly lived with Hoover’s brother, Ken Holm, added that Hoover gave her five $100 bills and told her to purchase two $250 money orders--to be made out in her name and Holm’s --to donate to Hedgecock’s campaign in order to attend a major February, 1983, fund-raiser.

Both women, however, told Goodman that they had not discussed their contributions--nor the true source of the donations--with Hedgecock. Arguing that there was no way for Hedgecock or his aides to know that Hoover was the true benefactor, Goodman emphasized that both Milich’s and Roeder’s donations were listed on the mayor’s financial disclosure statements--an apparent effort to show that the mayor’s campaign committee made a good-faith effort to properly report campaign contributions.