‘You Liar,’ Mayor Says as Schuster Testifies

A local investment counselor testified Monday that San Diego Mayor Roger Hedgecock told him in late 1981 that former financier J. David (Jerry) Dominelli planned to bankroll Tom Shepard & Associates so that the political consulting firm would be able to run Hedgecock’s 1983 campaign.

That assertion by Harvey Schuster--the only direct evidence linking Hedgecock to an alleged conspiracy to circumvent local campaign laws--was perhaps the most significant of a handful of damaging allegations made against the mayor Monday by Schuster, a former Hedgecock partisan who arguably is the chief prosecution witness in the mayor’s felony retrial.

The Sorrento Valley investment counselor told the eight-woman, four-man jury that:

- In early 1982, then-County Supervisor Hedgecock, facing serious personal financial problems caused by an unsuccessful condominium development partnership, sought a $24,000 loan from Schuster at a time when Schuster was bidding on a multimillion-dollar contract to develop the county’s bayfront parking lots. To avoid reporting the loan--which never was consummated--on financial disclosure reports, Hedgecock suggested that Schuster make out the check to a property management company owned by the mayor’s wife, Schuster testified.

- Hedgecock was present when Schuster told a Century City lawyer--whom he had taken Hedgecock to see to discuss his financial problems--to send him (Schuster) the $500 bill for the legal services. Hedgecock’s subsequent vote on Schuster’s bid for the proposed county parking lot development--ultimately awarded to another bidder--is the basis of a misdemeanor conflict-of-interest charge filed against the mayor, who also faces 15 felony conspiracy and perjury counts.

- Hedgecock told him in early 1982 that political activist George Mitrovich would be spending half of his time working on Hedgecock’s potential mayoral campaign while on the payroll of the now-bankrupt La Jolla investment firm of J. David & Co. Prosecutors contend that Mitrovich’s alleged role further documents how the J. David firm provided purportedly illegal assistance to Hedgecock’s 1983 campaign in a scheme to circumvent the city’s $250-per-person donation limit.

Defense Attorney Oscar Goodman charged that Schuster lied in his testimony because of his anger over not being awarded the lucrative 1982 contract to develop the county’s bayfront parking lots.

Goodman, who hammered away at inconsistencies between Schuster’s testimony at Hedgecock’s first trial and the retrial, said Schuster “changed his testimony . . . on every question of any importance.”

“If (Schuster is) impeached, then there’s no case against Mayor Hedgecock,” said Goodman, noting that all 30 other prosecution witnesses to date have testified about circumstantial evidence about the alleged conspiracy.

Hedgecock, who angrily muttered, “You liar!” during one point in Schuster’s testimony, added, “The man can’t keep his testimony straight from one question to the next. The only thing he got consistent from trial one to trial two is his name.”

Deputy Dist. Atty. Charles Wickersham, however, said after Monday’s court session that Goodman failed to accomplish his earlier stated objective of “leaving Harvey Schuster . . . lying in ruins.” The inconsistencies cited by Goodman were minor ones, Wickersham said.

Questioned by Wickersham, Schuster said that as early as 1979, Hedgecock began discussing his aspirations to run for mayor in the event that then-Mayor Pete Wilson “stepped aside.” Wilson’s election to the U.S. Senate in November, 1982, triggered the special May, 1983, mayoral election won by Hedgecock, who argues that serious planning for his campaign did not begin until mid-1982, after Wilson had won the Republican nomination in the Senate race.

Schuster, however, testified that in mid-1981, Hedgecock asked him to join a “kitchen cabinet” that would advise him on local issues and, presumably, help begin preparations for a possible mayoral race. In a May, 1981, letter to Hedgecock, Schuster wrote that he was “delighted to learn you’re in the mayor’s race to stay.”

Earlier in 1981, Schuster said, Hedgecock discussed with him for the first of many times the financial problems that he was experiencing due to an unsuccessful condominium project in which Hedgecock was a partner with local developer Michael Turk. Hedgecock told him, Schuster testified, that payments on the condominiums--which proved difficult to sell because of soaring interest rates in the early 1980s--were a serious drain on his personal finances.

Hoping to help Hedgecock find a solution to his financial problems, Schuster said, he set up an appointment with a Century City lawyer and later paid the $500 consultation fee. Schuster added that he and Hedgecock, who feared that publicity about his financial difficulties could be politically embarrassing, agreed that it would be preferable to meet with an out-of-town lawyer because “an attorney in San Diego might have a big mouth.”

“He (Hedgecock) said that he certainly couldn’t run for mayor . . . with the public knowledgeable that he was having serious personal financial difficulties,” said Schuster, the president of California Investment Counsel Inc., a real estate management and investment firm.

In mid-November, 1981, Schuster drove Hedgecock to Los Angeles to meet with the lawyer, Ron Blanc. The lawyer gave Hedgecock some preliminary advice at the meeting and later sent him a four-page letter with additional recommendations, Schuster said.

During that meeting, Schuster testified that, in Hedgecock’s presence, he told Blanc, “Please send the bill to me.” However, during intense cross-examination by Goodman, Schuster conceded that Hedgecock might not have been present.

Schuster also admitted that he never told Hedgecock that he had paid the $500 charge or even that there had been a bill--an admission that the defense attorney emphasized in an effort to bolster Hedgecock’s contention that he was unaware that Blanc billed him. The prosecution, however, argues that Hedgecock, himself a lawyer, knows that attorneys typically do not render services for free and must have realized that Schuster paid the bill.

While driving back to San Diego from the meeting with Blanc, Hedgecock told him that Tom Shepard planned to leave his county supervisorial staff to set up a political consulting firm “to work on Roger’s campaign for mayor,” Schuster testified. Schuster added that Hedgecock explained that Shepard’s firm would handle “computer work, precinct work and . . . grunt work” for his potential campaign.

When Schuster asked Hedgecock how Shepard, “a person of limited means,” could afford to set up his own business, Hedgecock told him that Dominelli was going to underwrite the company, Schuster said. That testimony directly conflicts with Hedgecock’s oft-stated contention that he was unaware that Dominelli had invested in Tom Shepard & Associates. The mayor has said he believed that

former J. David principal Nancy Hoover was Shepard’s financial backer, and that she only wanted to help her close friend Shepard start his own business, not assist Hedgecock in his mayoral campaign.

Hedgecock explained, Schuster testified, that the reason that Dominelli planned to invest in Shepard’s firm was that “Jerry was like putty in Nancy Hoover’s hands, and anything that Nancy wanted, Jerry would do.” Hoover lived with Dominelli in the early 1980s after leaving her husband.

Prosecutors have introduced evidence showing that Dominelli and Hoover invested more than $360,000 in Shepard’s firm in 1982 and 1983. Because Hedgecock was the firm’s major client during that period, prosecutors allege that the investments were tantamount to illegal political contributions that were used to prop up an integral element of Hedgecock’s campaign.

Seeking to expand the picture of the alleged illegal aid that Hedgecock purportedly received from the J. David firm, Wickersham elicited testimony from Schuster about a luncheon that he had with Hedgecock in early 1982, several months after Mitrovich had become J. David’s public affairs director.

At the lunch, Hedgecock told him that “there was a great new development,” Schuster testified. “He said George Mitrovich had joined the J. David company and . . . would be spending 50% of his time on J. David matters and 50% of his time on . . . the Hedgecock campaign.” Hedgecock, who shook his head while Schuster made that statement, denies ever making such a remark.

Amid Hedgecock’s continuing concerns over his personal finances, Schuster said he agreed, at Hedgecock’s request, to buy one and possibly two of Hedgecock’s condominiums in late 1981.

Because Schuster planned to bid on the county’s proposed bayfront development, he, Hedgecock and Jean Kauth, Schuster’s business associate, agreed “it wasn’t a good idea to buy (the condos) in my name,” Schuster said. As a result, Schuster suggested that he could make the purchase in the name of his family’s retired housekeeper and her daughter--an idea that Hedgecock claims was Schuster’s alone.

After Schuster had contacted a bank and made other preliminary moves aimed at purchasing the condos, Hedgecock asked to meet with him and Kauth on March 12, 1982, at the Hilton Hotel on Mission Bay, Schuster said.

Hedgecock appeared “literally destroyed, the worst I’ve ever seen Roger look” at the meeting, Schuster said.

During the meeting in the hotel’s coffee shop, Hedgecock told him that “the condominium deal was off (because) it wouldn’t look right,” and asked instead for a $24,000 loan to prevent Sumitomo Bank from foreclosing on his home and other property that he had used as security for the condo construction loans. Schuster quoted Hedgecock as being worried “that his kids would be sleeping in a tent in the park.”

Hedgecock asked that the loan be made to Homeowners Management Co., a property management firm owned by his wife, Cindy, Schuster testified. The investment counselor added that Hedgecock told him that “it would be a disclosure problem” if the loan were made directly to him.

Schuster said that he agreed to loan Hedgecock the money in return for a promissory note in which he agreed to repay the money, at 12% interest, over two years. After Hedgecock provided the note, Schuster made out a check and, when he left town in late March, 1982, left it with Kauth, who notified Hedgecock that it was ready.

Hedgecock never picked up the check, however, and in mid-April told Schuster that he no longer needed the loan.

During the first trial, Hedgecock testified that it was Schuster’s idea, not his, that the $24,000 check be made out to Cindy Hedgecock’s company, adding that his realization that Schuster had done so was the reason he never consummated the deal. The mayor also said in the first trial that he told Schuster at the March, 1982, meeting that if he accepted the loan, he would be unable to vote on his bid for the county bayfront development--implying that Schuster made out the check to Homeowners Management Co. in an attempt not to lose Hedgecock’s possible support.

One of the most dramatic moments in Monday’s testimony occurred when Schuster claimed that in early 1982, shortly after the county began reviewing proposals for the bayfront project, Hedgecock told him that “he had saved our ass and (another bidder’s) ass.” That comment from Schuster drew a disgusted snort from Hedgecock, who muttered, “You liar!” loud enough to be heard by courtroom spectators.

“That is so mythical, so fictional, so made up, since it was the recommendation of (county) staff that we followed (and) . . . since the vote was unanimous to select the four finalists, how in the world could I have said that I ‘saved his ass’?” Hedgecock said outside the courtroom. “It was personal, it was false, I’m angry about it--and Mr. Schuster is a liar.”

Although Hedgecock, along with the other supervisors, did name Schuster’s firm as one of the four finalists for the county contract in March, 1982, the Board of Supervisors voted unanimously later that year to award the project to another bidder.

During his cross-examination, Goodman dwelled on that point, seeking to undermine Schuster’s credibility by implying that he was testifying against Hedgecock only because he was upset that his company had not received the contract.

Schuster insisted that he “wasn’t happy . . . but wasn’t totally unhappy” about losing the contract--a decision that the defense attorney argued potentially could have cost Schuster millions of dollars. Schuster, though, noted that the development still has not been built.

Goodman also cited discrepancies between Schuster’s testimony at the two trials, as well as between Schuster’s version of events and that of John Armstrong, an investigator in the district attorney’s office who interviewed Schuster last year. The defense attorney pointed to more than a half dozen inconsistencies, prompting Schuster to claim that Armstrong had misunderstood some of his remarks.

Charging that Schuster “changed his testimony . . . on every single point that was raised,” Goodman added, “A jury’s not going to rely on that kind of evidence to convict a fellow citizen.”

Schuster will return to the stand today for further cross-examination. Asked how long he expects his questioning of Schuster to last, Goodman answered, “As long as I can make him miserable, I’ll keep it up.”