Witnesses Differ on Source of Mayor’s $130,000 Home Loan

Conflicting testimony about the source of a $130,000 loan that San Diego Mayor Roger Hedgecock used to renovate his house--and about the actual cost of the project --was presented Thursday as prosecutors neared the end of their case in the mayor’s felony retrial.

Two local bank officials testified that they were told by a prominent Hedgecock supporter in early 1984 that the mayor had borrowed the money used to remodel his South Mission Hills house from the now-bankrupt La Jolla investment firm of J. David & Co. However, the supporter himself testified that he told the bank officials that Hedgecock had borrowed the money from Nancy Hoover, a former J. David principal.

In another dispute over the renovation project--a central element in the case--two construction officials who supervised the project conceded that the $130,000 figure did not include costs for some of the work done. They blamed the inaccuracies on sloppy bookkeeping. A carpenter, however, testified that one of the officials told him that he “was changing numbers and figures” on invoices in an attempt to conceal the fact that the project actually cost more than $200,000.

The discrepancies in the witnesses’ descriptions goes to the heart of Hedgecock’s retrial on felony conspiracy and perjury charges. The prosecution contends, and some of the perjury counts facing Hedgecock allege, that the mayor falsified financial disclosure statements by listing Hoover rather than the J. David firm as the lender.

The origin of much of Thursday’s testimony was a Feb. 12, 1984, meeting at Hedgecock’s house--a gathering that prosecutors have dubbed the “Black Sunday” meeting. On that date, a handful of Hedgecock’s closest supporters were summoned to his house for a meeting at which the mayor explained that J. David’s impending collapse had forced Hoover to ask him for immediate repayment of the $130,000 oral-agreement loan.

About $50,000 of the loan had earlier been 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 that 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. The next day, Cushman called the bank and arranged the loan, agreeing to act as the guarantor.

In his testimony Thursday, Cushman insisted that Hedgecock had told him that he needed the loan to repay Hoover, adding that he gave the same description of the transaction to bank officials.

However, two San Diego Trust officials who followed Cushman on the witness stand testified 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 “to repay a home improvement loan to the J. David company.” James Costello, the bank’s vice president, concurred.

During his questioning, defense attorney Oscar Goodman sought to characterize the apparent discrepancy as a simple misunderstanding.

“Could you have said to Mr. Etter that Nancy Hoover, who was with the J. David company, was the source of the loan?” Goodman asked.

“Very possibly, yes,” Cushman answered. Etter and Costello later admitted that, at the time they processed the bank loan, they had never heard of Hoover, leading Goodman to imply that the name J. David would “stand out” in the bank officials’ minds over Hoover’s name. And, while certain bank documents stated that the $80,000 loan was designed to repay the J. David firm, the bank officials told Goodman that Hedgecock had never seen those records.

Deputy Dist. Attys. Charles Wickersham and David Cox, who hope to conclude the prosecution’s case early next week, later raised questions about the veracity of the $130,000 figure.

Prosecutors have previously suggested that Hedgecock borrowed much more money than he repaid, and further argue that Hoover’s “loan” actually was intended to be a gift that probably would not have come to light were it not for J. David’s collapse in early 1984. Moreover, Wickersham contended that at the February, 1984, meeting at Hedgecock’s house, the mayor and his inner circle of advisers, seeking to distance Hedgecock from the discredited J. David firm, “were trying to jimmy the figures to try to come up with $130,000” because that was as much as Hedgecock could afford to repay.

Parin Columna, a J. David employee at the time whose contracting firm handled the renovation, testified that he and carpenter Ron Harris, the day-to-day manager of the project, originally estimated that $130,088 had been spent when they pulled out of the project in February, 1984. A 10% profit was added to that first cost estimate, raising the total bill to $143,096.

Later, after learning that certain subcontractors’ bills had not been included in that figure, Columna and Harris, at Hedgecock’s request, prepared a second cost sheet that put the total expense at $169,923. No profit figure, however, was added to that bill.

While questioning Columna, Cox repeatedly implied that the 10% profit figure had been omitted from the second cost sheet in an effort to lower the bill and conceal the actual expenses. Columna, however, noted that the $169,923 figure included costs for work not yet completed when his firm halted its work.

“Since it wasn’t completed, (we) didn’t feel we could put in a profit (because) we weren’t going to be responsible for the work,” Columna explained.

Cox confronted both Columna and Harris with invoices showing that some bills--for painting, draperies and tile--had not been listed on the cost sheets, evidence that prosecutors cited as further proof that the $130,000 figure was a fanciful one. Columna, though, jokingly conceded that describing himself as a bad bookkeeper “would be a compliment,” and blamed the errors on the fact that, at the time he prepared the cost sheets--a period that overlapped the J. David collapse--his financial records were in disarray.

Columna admitted that most of the money used to finance the initial phases of the work on Hedgecock’s house came from various J. David accounts, not from Hoover.

Hedgecock, however, reiterated that “my deal was with Nancy,” adding that he was unaware that the bulk of the money consisted of checks written by Dominelli.

Outside court Thursday, Hedgecock said that the house renovation to date had cost “$194,000 and change” and that he paid all costs beyond those covered by Hoover’s $130,000 loan, which he repaid last year with interest.

“What (prosecutors) were trying to pin down was, was the loan $130,000?” Hedgecock said. “And that’s all I was ever told. Whether it was or wasn’t was up to (Columna) to tell me. He was the contractor. It was his responsibility to tell me what I owed.”

However, Andy Carey, a carpenter formerly employed by Columna who did not work on the Hedgecock house renovation project, painted a less benign picture of how the $130,000 figure emerged.

When he saw Harris doing paper work in Columna’s office, Carey testified, Harris told him that “he was changing numbers and figures on bills of subcontractors (who) had worked on the Hedgecock job.”

“His statement to me was that he was trying to come up with a figure of either $130,000 or $150,000,” Carey added. Harris also told him, Carey said, that as of February, 1984, about $206,000 had been spent on Hedgecock’s house, and that the mayor was aware of that fact.

During a spirited cross-examination, Goodman sought to discredit Carey’s testimony by characterizing him as an angry investor who lost money in J. David.

“You lost a lot of money, didn’t you?” Goodman asked.

“A couple of bucks,” Carey replied. Pressed by Goodman for a specific figure, Carey conceded that he lost $12,000.

“It’s not a couple of bucks, is it?” Goodman said. “Did that cause you to change your life style?”

“It changed a little bit, but it wasn’t like the world came to an end,” Carey answered. “It wasn’t the first time I lost money in an investment . . . and it probably won’t be the last.”

After Thursday’s court session, Wickersham expressed skepticism about Hedgecock’s explanations that he was unaware that most of the “Hoover loan” funds actually came from J. David and exceeded the $130,000 figure.

The mayor has provided similar explanations about two other key pieces of evidence in the case. Hedgecock says he was unaware that political consultant Tom Shepard paid a $2,000 bill for video lessons for him, and was unaware that Sorrento Valley investment counselor Harvey Schuster paid a $500 legal bill for him. In those two instances, Hedgecock has said, he did not know that the bills were paid--or, in the case of the legal work, whether there even was a bill--because invoices were not sent to him.

“It’s one more instance where (Hedgecock) wasn’t aware,” Wickersham said of the house renovation project. “This case is just one solid string of things that he didn’t know about.”