Slumming It With Mike Schaefer : L.A.’s Notorious Landlord Goes East to Run for the Senate on Someone Else’s Good Name
Michael Schaefer dreams the implausible dream: It is a cool, clear October night, and the moon sends a silver shimmer across Chesapeake Bay. The moneyed Republicans of Baltimore--men in black tie, women in furs and diamonds--are funneling into a grand ballroom. They have come to honor, at $500 a plate, the surprising new star of Maryland politics--Michael Schaefer!--who a month earlier stunned opponents by winning the GOP nomination for U.S. Senate. Schaefer is beaming; tonight those ugly problems of the past are forgotten. And who else shows up to make sure the Senate seat stays Republican? “Ladies and gentlemen,” a voice intones, “the President of the United States.” There to endorse Michael Schaefer, a great American.
And one of California’s most notorious slumlords.
Michael Schaefer--lawyer, self-made millionaire, political junkie--is almost giddy as he wheels his Chevette over a cobbled stretch of downtown Baltimore. He is indeed the wild-card candidate, the “what if,” in Maryland’s Republican senatorial primary Sept. 9. No, he admits, he probably won’t get the nomination. But he’ll have his fun and make some news. And if that means all of Maryland learns about his troubles back in Southern California, that’s OK by him. He says he doesn’t care what people think. Under duress, a lot of people say that; Schaefer appears to really mean it.
And that helps explain how Schaefer became the man he is today. Twenty years ago, Michael Schaefer was, at age 28, the youngest person ever elected to the San Diego City Council. Today, he is best known as a slumlord extraordinaire-- a rogue capitalist who made big money in real estate while subjecting his tenants to horrid living conditions and flouting the bureaucratic and legal systems that are supposed to prevent and punish such behavior.
Last April, a Los Angeles Superior Court jury awarded the former tenants of a mid-Wilshire apartment building he owned $1.83 million in damages. The judgment in Gallego et al vs. Schaefer, believed to be the largest ever in a landlord-tenant dispute, made headlines in Los Angeles, and it was easy to imagine landlords throughout the region choking on their morning coffee.
If some people found the size of the award hard to comprehend, many who know Michael Schaefer surely smiled and thought it was about time. His simultaneous careers in law and real estate, his detractors say, are studies in opportunism and manipulation, and the same is true of his increasingly quixotic forays into politics. Schaefer’s tactics as a slumlord are typical of the breed, tenant advocates say. But his personality--gregarious, publicity-hungry, sometimes astoundingly candid--is not. Even Schaefer allows that his methods are Machiavellian and his motives sometimes vengeful. “How does the saying go? ‘Don’t get mad, get even,’ ” he says. “If somebody does me dirty, I don’t easily forget it.”
Consider his reputation as a lawyer. His principal client is himself, and he estimates that during the last 10 years he has been involved in perhaps 100 lawsuits as either plaintiff or defendant. His usual strategy, opposing lawyers say, is to stall and clog the system with writs and motions that, regardless of their merit, drive up the other side’s costs, perhaps to the point that litigation is dropped or the case settled in Schaefer’s favor. Detractors say he abuses the legal system; Schaefer says he is merely using it to full advantage.
As a businessman, he has a knack--a “genius,” some associates say--for acquiring undervalued property. “He has absolutely no sense of embarrassment. He’ll go in and offer a price that another businessman would be ashamed to offer,” one former partner said. “But then he’ll walk out with a done deal.”
The problem is that Schaefer has kept the maintenance and operating costs in his apartment buildings very low--criminally low, according to the courts. His reputation as a slumlord dates to 1979, when a San Diego judge threatened him with 100 days in jail for fire-code violations but relented after Schaefer made some 11th-hour repairs. In 1982, Schaefer spent six days in Los Angeles County Jail for failing to repair a downtown building.
But for a man who cares deeply about money--”It’s nice to be a millionaire,” he says--those past troubles pale against the prospect of losing $1.83 million. An appeal is under way.
TO UNDERSTAND THE CASE against Michael Schaefer requires a look back to the first eight months of 1981, to the six-story, 61-unit apartment house at 757 South Berendo St. From the outside, it is a drab building in a working-class neighborhood not far from the Ambassador Hotel and the business towers that flank Wilshire Boulevard. The building provided functional, low-rent units when Schaefer bought it in 1977; by the time he sold it in 1981, it had deteriorated into a harrowing, violent place.
City inspectors called it a “a slum building in a non-slum neighborhood,” and the worst inhabited structure they had ever seen: Filth piling high in the halls. Cockroaches swarming the kitchens--”so big,” a tenant said, “they looked like mice.” Rats crawling over sleeping children. Gang hoodlums roaming the hallways, vandalizing, robbing, shooting. Once, in the simmering heat of August, raw sewage flowed from broken plumbing into the lobby and out the back door.
More than 100 men, women and children called 757 South Berendo home. Most were Latinos, many of whom did not speak English. Some left in disgust; some wanted to but had no place to go; some chose to stay and fight. Their complaints, court testimony showed, were answered with empty promises, eviction notices and even Schaefer’s threats that thugs would be hired to throw them out. City inspectors say Schaefer repeatedly defied their orders to make repairs and provide security.
Legal Aid Foundation lawyers helped the tenants take Schaefer to court and ultimately passed the case on to California’s largest law firm--Gibson, Dunn & Crutcher--which provided free counsel. Suing Schaefer, the firm decided, was the essence of pro bono publico , litigation “for the public good.” What followed was an extraordinary, bitter legal battle, believed to be the most expensive pro bono case ever in Los Angeles. In the end, under a state law designed to encourage more volunteer legal work, Gibson, Dunn also asked the court to order Schaefer to pay $684,100 in attorney fees, raising his potential risk to $2.51 million.
Schaefer sees himself as persecuted. In his eyes, there are many villains: the “criminal element” among tenants and his own employees; meddling bureaucrats, politicians and do-gooder lawyers; even the jury that heard his lengthy testimony.
Standing outside his latest business venture, the small Schaefer Hotel in downtown Baltimore, he is asked if he considers himself to blame. “I’m not saying I’m lily-white,” he answers. “I’m saying I ran into some roadblocks.”
Does he ever feel shame or remorse? The question, it seems, is unintentionally amusing. Schaefer grins. “All this stuff doesn’t bother me, obviously, or I’d be on an island someplace crying my heart out.”
But look at him. Michael Schaefer--this divorced, Catholic, churchgoing father of two boys--seems harmless enough. He is 5 feet, 10 inches tall, slight yet somewhat paunchy, with reddish-brown hair, hazel eyes and a pallid complexion. The hair, he admits, would be grayish-brown but for the Clairol.
“I’m not happy about approaching the big five-oh,” he says, but there are no signs he is slowing down. He was a hyperactive child and seems to be a hyperactive adult. He works 80 hours a week, types 80 words a minute and talks at 78 r.p.m., able to leap five or six topics in a single breath. “I’m a Type A personality,” he says. “I wake up in the morning and it’s zip-a-dee-doo-dah!” Michael Olesker, a columnist with the Baltimore Sun, likened Schaefer to “Wally Cox on speed.”
Quick, mincing steps take him into the Schaefer Hotel lobby, past the workmen trying to restore the American Traditional charm, and down a flight of stairs to his cramped two-room living space / office / campaign headquarters in the basement. Schaefer bought the run-down, 130-year-old structure early this year and rechristened it not for himself but for William Donald Schaefer, the city’s very popular mayor and a runaway favorite to be Maryland’s next governor. Although the two men are not related and are barely acquainted, Michael Schaefer is trying to promote a connection in the public’s mind, hanging his political hopes on the coattails of the mayor’s good name.
In fact, he says his decision to move from San Diego to Baltimore, to buy and rename the hotel and to run for the Senate--all of this--was triggered by an Esquire magazine article two years ago proclaiming William Donald Schaefer to be America’s best mayor. The article told how the name Schaefer could be found on every bus bench and trash can in the city, and how the mayor would probably be Maryland’s next governor. “My eyes got big when I saw that,” Schaefer says, making his eyes get big.
“A lot of my friends were bi-coastal, and I thought it would be exciting to be involved in two areas. I began to take notice of the name Schaefer being on the landscape of Baltimore and, the more I read, (of ) how it was going to be on the landscape of all Maryland. I thought it was a golden opportunity . . . being involved in the political life of a state that is very comfortable with my name. If my name were Smith or Jones, I wouldn’t be running.”
His strategy seems ludicrous, and his tactics have earned the disdain of the mayor’s campaign managers. Yet an early poll of “likely Republican voters” showed that among the 11 GOP candidates for senator, Michael Schaefer finished first in name recognition (47%) and a close second in voter preference (10% to the leader’s 13%). Another poll released in early August still showed him holding second in preference.
It would be impolitic for the humble Schaefer Hotel, where rooms go for $29 to $39 a night, to be a slum. The proprietor is proud and vigilant. “We’ve got those Neutrogena soap bars--you know, those clear bars, about a quarter-inch thick? They cost me 10 cents each. I could get other soap for 3 cents. But I figure, what the hell, it seems like something that will make people remember us.” Visitors who use the lobby bathroom may also remember a note politely suggesting that if a guest would like a roll of toilet paper as a souvenir, please ask at the front desk. “I went in there to use the bathroom the other day, and there was no toilet paper,” Schaefer says. “If that happened to a guest, I’d fire somebody.” Does he believe a visitor had stolen the toilet paper? He nods. “People steal stuff like that.”
Schaefer is a study in contrasts. “I have two ‘Vettes--a Corvette and a Chevette,” he likes to say. “I think it’s better for a candidate to drive a Chevette, don’t you?” He also owns a BMW. In addition to his dreary hotel quarters, Schaefer has condos in Chevy Chase, Md., and in La Jolla. He likes to tell how he once took his two sons, ages 14 and 12, to see “their jailbird father” argue a case regarding write-in ballots before the California Supreme Court. Although even friends describe him as a social misfit, he is relentlessly social, never missing a Kiwanis Club meeting or a chance to talk with a perfect stranger. But the most intriguing contrasts can be found in his regard for money.
He eats at greasy spoons, sends legal correspondence on postcards and carries 17-cent stamps in his wallet. (“It’s 22 cents for the first ounce and 17 cents for each ounce after that.”) He boasts that through penny-pinching, mooching and party crashing, he journeyed from San Diego to Washington for President Reagan’s first inaugural, stayed a few days and returned to San Diego--for a total cost of $199.50. The recent trial revealed that in the same year of 1981, Schaefer’s total payment for pest control on three grossly infested buildings was $168.50--or about $1.50 per unit. (Schaefer says he was billed for more but refused to pay because of a dispute with the exterminators.)
And yet, Schaefer spends mightily to support his political habit. He says he expects to use about $50,000 of his own money on the Senate primary. In the last 15 years, he has invested tens of thousands of dollars on one failed campaign after another, for everything from Congress to Nevada secretary of state, to the California Legislature, to the State Board of Equalization. He is one of the 6,000 members of the Republican National Committee’s Inner Circle fund-raising club, contributing $1,000 annually. Without question, Schaefer’s most munificent act was a gift of $75,000 to U.S. Atty. Gen. Edwin Meese III. He sent the check to Meese last year to help defray the $225,000 in legal expenses Meese incurred during his difficult confirmation process. Meese returned the money with a gracious note.
By his own standards, Schaefer has many of the credentials of a successful life. He seems to have stepped out of a Sinclair Lewis novel. By junior high, Schaefer says, he knew what he wanted from life--”to make some money, belong to good clubs, to hold my own in society.”
A cherished childhood memory: age 7 or 8, riding in his father’s De Soto in downtown San Diego. “Dad points out an acquaintance walking along the sidewalk and says, ‘There’s a millionaire. Let’s give him a lift.’ I was impressed that this was an important man riding in our car. I grew up having a lot of respect for the wealthy families and their big homes out on Point Loma.” Another memory: the poster Mom made for his first fling at politics--running for class banker in the fifth grade. “It showed pennies marching into a bank and dollars marching out.”
The Schaefers--Michael also has a sister--were a comfortable middle-class family who lived near Mission Bay. Father, who died in 1960, was an insurance salesman who practiced what he preached. “He spent $300 a month on insurance premiums. Now, if he had put that $300 a month into 10 units someplace, then we would have had more money,” his son said. “But he didn’t understand real estate.”
While other teen-agers were trying to earn gas money, Schaefer was trying to earn investment capital. The Kiwanians who sponsored the high school Key Club took a shine to the bright young boy who wanted to discuss the stock market. Using money from odd jobs and some borrowed from his grandmother, 14-year-old Mike Schaefer bought 2,000 shares of a stock at $1 a share and gleefully watched it climb to $22.
The rigors of study--first at Notre Dame University for his freshman year, then UC Berkeley, then Georgetown Law School--did not get in the way of making money. At 21, he read the William Nickerson real estate manifesto, “How I Turned One Thousand Dollars Into Three Million in Real Estate--in My Spare Time.” It was a revelation; Schaefer bought his first rental units.
But to “belong to good clubs, to hold my own in society”--that was harder.
“I’ve never been one into coolness. Never the most popular dancer. I was somewhat of a square. It dawned on me that all the elections were won by Johnny Popular, the best-looking guys with the fanciest cars. I was a late bloomer.”
Schaefer set out to make friends and influence people with a shrewd approach to student politics. His first victory was for president of his freshman dorm at Notre Dame. His two opponents, he says, were popular young men who belonged to rival cliques. Under the preferential voting system, students listed both first and second choices. The new kid from California campaigned hard, asking friends of both rivals to make him their backup choice. (His campaign promise: a pencil sharpener on every floor!) When the tabulation was complete, Schaefer had fewer first-place votes than his two rivals, who split the vote, but so many second-place votes that he was declared the winner. “Here I was, certified as popular,” he recalled. “It was a jury of my peers liking me, and that was important.” At Berkeley, he was active in student politics and president of the Young Republicans.
Several years later, he went home to San Diego as a young lawyer. He had spent a year in the city prosecutor’s office when, in 1965, a change in the City Charter created two new council districts, including one in Southeast San Diego. Six weeks before the filing deadline, Schaefer moved from his La Jolla home into a rented room in a friend’s house in Southeast. With nine candidates in the race, Schaefer campaigned door-to-door and filed a minor elections-code violation lawsuit that failed but succeeded in making headlines. He finished first with a small plurality and faced a runoff against a car dealer named Herbert Watson.
He couldn’t have picked a better opponent. Watson had lived in the district only three weeks himself, so carpetbagging was never an issue. More important, those were the days when San Diego’s political fortunes were largely controlled by financier C. Arnholt Smith. Smith was indifferent to the 28-year-old prosecutor but loathed Watson. (Schaefer once overheard the fund-raising plea of a Smith crony: “If Watson was running against a dog, we’d have to support the dog.”) With Smith’s support, Schaefer won. In office, Councilman Schaefer prided himself as a “champion of the little guy” and won reelection by a large majority in 1968.
Then, in 1971, a grand jury indicted Schaefer and several other San Diego officials on charges of bribery and contract-fixing for the local Yellow Cab Co. In the end, Schaefer and most of the others were acquitted. But the ordeal was trying, and Schaefer declined to seek reelection, moving with his new bride, Cynthia, to Las Vegas, where he opened a practice in divorce law.
A few years later, Schaefer says, his wife left him, taking the boys back to San Diego. Schaefer, by then worth about $3 million, returned to his hometown to be close to his sons and his business holdings, and before long the boy who made good had a new persona: slumlord and political eccentric.
“Mike is a very unusual man,” says Bill Brotherton, a retired public relations man who has been Schaefer’s friend for 20 years. “He’s a very honest guy and he has a lot of courage. The reason he gets into trouble is, unfortunately, Mike never seems to understand how his behavior affects other people.”
For Michael Schaefer, 757 South Berendo seemed to be yet another shrewd investment. In 1977 he bought the 61-unit building and a smaller building next door with $50,000 down for a total price of $565,000. The property was deteriorating, but its value soared in an escalating real estate market. In December, 1980, Schaefer took out another mortgage on the building and made a down payment on another low-rent apartment house downtown on Grand Avenue. That same month, a woman named Suzanne Norman moved into a one-room, $260-per-month apartment on the top floor of 757 South Berendo with her common-law husband, Craig, and their 18-month-old daughter, Suzy. The living conditions she described under oath help explain why courts later affirmed that the building was, in a legal sense, “uninhabitable.”
There was never any heat, seldom any hot water. When the rains came in January, 1981, water leaked through, peeling the plaster from the ceiling. A section of it caved in, exposing the crawl space and the underside of the leaky roof. To catch the rainwater, the couple lugged a three-foot drum up the five flights of stairs. (The elevator was usually out of order.) That helped--but rain was the least of Suzanne Norman’s worries.
The roaches were tough and big--”so big you could saddle them,” a city inspector said at the time. The infestation made kitchen cupboards useless. “I tried bug spray and those Roach Motels,” Norman was to recall in testimony, “but they used to get full so fast that I couldn’t afford to keep buying them.” At night the rats and mice crawled through the holes in the walls and cabinets, from behind the stove and refrigerator. At bedtime, she would huddle with Suzy on the bed. “If I felt any mice crawling across, I could get them out of the way before they could get to her.”
Misery fed upon misery. Tenants later testified that, as disgusted neighbors started moving out, street hoodlums started moving in, attracted by the lack of security. They did not bother to sign leases or pay rent. Vandalism, drug deals, burglaries and robberies soared. Garbage piled up in the halls. The tenants, some of whom were illegal aliens, were afraid to call police.
The problems on the sixth floor could be found throughout the building. Marjie Gallego lived in a $282-a-month one-bedroom unit shared with her two teen-age sons and two younger daughters. The bathtub one floor up had no pipe for drainage; when the plug was pulled, dirty bathwater came through a hole and rained down into the Gallegos’ tub. One day, Gallego said, her daughter was bathing when something else plopped into the tub. A mouse had fallen through the hole above.
Schaefer came up from San Diego often, and he insists he tried to respond to the complaints of tenants and of the city inspectors, who cited the building for an array of health, safety and fire-code violations. The landlord complained that his efforts at improvement were undone by vandals and fraudulent contractors. Inspectors say that Schaefer was recalcitrant, that his attempts at improvements were token at best.
Instead of hiring licensed plumbers and electricians, he typically paid tenants to act as handymen. Among these employees were two men that tenants knew to be hoodlums. Schaefer once hired a hitchhiker as a plumber. Unauthorized, the man collected that month’s rent, then disappeared with the cash. Before long, the relationship between Schaefer and his tenants escalated into a feud. Several tenants, counseled by Legal Aid Foundation lawyer Dick Osumi, withheld rent on the grounds that the building was uninhabitable. Schaefer acknowledged in court that on occasion he threatened to hire gang members to forcibly evict them, although he insists that the threat was never carried out. Osumi, who now works for the state fair-housing office, had encountered many slumlords in his work, but he came to think of Schaefer as the worst--a man who was “vicious” and “irrational.”
Jose Camacho, who lived in a furnished one-room apartment with his wife and four children, was one tenant who withheld rent. Schaefer maintains that Camacho promised to pay rent after the landlord provided various repairs. Schaefer insists the repairs were made, but that Camacho still refused to pay and told the landlord that the family would be moving.
“That told me they were dishonest,” Schaefer says, his temper flaring. “I figured when they left, my furniture would walk out of there, so I took it into protective custody.”
Under the law, removing appliances from a furnished apartment is tantamount to shutting off a tenant’s utilities, and thus illegal. Osumi secured a court order prohibiting Schaefer from re-entering the apartment and removing the refrigerator and stove that remained. But the landlord ignored the order, sending in workmen to remove the appliances. In March, city fire inspector Bill Wakeland, fearing the potential of fire, ordered Schaefer to place security guards in the building to discourage arsonists who prey on unwatched structures. Schaefer refused, city officials say, choosing to challenge the order in court.
A few days after the order, Marjie Gallego’s 15-year-old son, Eddie, was standing in the lobby talking with friends. “Three boys came in and asked, ‘Where are you from?’ ” Marjie Gallego says. “He said ‘No place’ and they slapped him and said, ‘Don’t lie, punk.’
“They shot him when he was running toward the back of the building.”
The shotgun blast struck his shoulder. Eddie Gallego was hospitalized for a month. Some weeks later, Wakeland ordered that a round-the-clock “fire watch” be established at the building. Schaefer was billed for the cost.
Eddie Gallego was luckier than some. During the first eight months of 1981, two persons were killed in the gang violence that swirled on and near Schaefer’s building. Schaefer himself says he was punched on one visit and had his car vandalized.
Schaefer maintains he was persecuted by then-City Atty. Ira Reiner, now the district attorney. As often happens, he becomes impassioned, his voice reaching a higher pitch, his narrative dwelling on minor code violations.
“Everybody gets an office hearing except Michael Schaefer. It was Ira Reiner showboating! He said, ‘I want to take the slumlords off the golf courses and put them in jail.’ Well, this slumlord--uh, this investor in real estate spent his time in hardware stores getting good values for my tenants. I’m a shopper! I don’t play golf. Well, I have played miniature golf with my kids. But I’m not a country club person. I bought $8,000 worth of hardware and I was so proud of my new green plastic trash cans with black lids on them. And then the inspectors come around and I get cited because they’re the wrong kinds of cans. That doesn’t seem fair, does it? It’s the bureaucracy versus the individual.”
At times Schaefer sent memos to tenants, such as one dated July 23, 1981:
“We were fined $1,310 because of the cockroaches and holes in the wall, and the check bounced that was used to pay the fine. Those of you who complained to the inspection department got us a $1,310 fine that we would prefer to have spent on repair of the stairways and plumbing.” He went on to tell of a $2,000 payment to the manager and $500 to another worker to take care of plumbing and other problems--paltry sums in light of the building’s needs. “I am doing all that I can do as an owner to take care of things. I need your cooperation too.”
A few days later, Schaefer, whose net worth was then more than $4 million, circulated what opposing lawyers came to call the “week of darkness” letter:
“Please eat whatever food you have in your refrigerators because our electricity is being turned off (in) . . . all apartments for non-payment of bills. . . . If you have food in your refrigerator it will spoil, thus you are given this advance notice. We regret this is necessary. The owner does not have $5,000 to pay the gas, electric and water bills. . . .
“Thus we will be going out of business, for a few days or maybe a few weeks or months. After a week of darkness, the fire and health department will probably board up the building and everyone will have to move out.”
Schaefer contended that the only way to make meaningful improvements would be to close the building and remove the tenants. “I’m aware it’s against the law to turn off the utilities,” he said in the midst of the furor. “But I’m not turning off the utilities; I’m just not paying the bill.”
Under pressure, Schaefer decided it was time to get out. He tried to sell the building to a Korean immigrant, but the deal was voided in court because of the dubious terms of the contract designed by Schaefer. A short time later Schaefer sold his Berendo investment for $1.2 million--more than double his purchase price of 4 1/2 years earlier.
When James Patrick Clark read the newspaper stories about the slumlord named Mi chael Schaefer, the thought never occurred to him that he might someday square off with Schaefer in court. Like other attorneys at Gibson, Dunn & Crutcher, Clark doesn’t normally delve into the gritty emotionalism of landlord-tenant disputes. Clark, at 38, looks very much the part he plays in life--a handsome, polished, high-priced Gibson, Dunn partner who jets about the country rendering antitrust advice to such corporate clients as RCA and 20th Century Fox. That type of law provides an intellectual challenge and an excellent living, but it doesn’t do much for the soul. Coincidentally, he and Schaefer were both graduates of Georgetown. Clark had spent his undergraduate years at the school--he had been the student body president and a campus anti-war leader when Schaefer was a young, conservative San Diego councilman.
Clark wasn’t present in late 1981 when Public Counsel, a nonprofit clearinghouse for pro bono legal services, approached Gibson, Dunn about the Schaefer matter. Dick Osumi, realizing that suing Schaefer would take him away from other indigent clients, had referred his impressive stack of evidence to Public Counsel. Indeed, it was obvious that to challenge Schaefer would require a major firm able to absorb high pro bono costs. “This isn’t a case of trying to kill a flea with an atomic bomb,” says Ann Haskins, associate director of Public Counsel. “Schaefer is a bull elephant--and a rogue elephant. We went after him with a bazooka.” When the Gibson, Dunn hierarchy, in turn, asked Clark to consider supervising the case, he accepted. “The issues of good and evil,” he says, “were pretty clearly defined.”
With Clark dictating overall strategy, the team’s key players included associates David Stevens and David Wiechert, both of whom left to join the U.S. attorney’s office during the pretrial period, and in the end included two young associates--Brian Monkarsh, just out of Stanford Law, and Daniel Swanson, a graduate of Harvard Law--as well as paralegal Craig Minami.
To Monkarsh fell the task of responding to Schaefer’s many pretrial motions, and on Monkarsh fell the brunt of Schaefer’s scorn. When the first-year lawyer complained to the court that Schaefer was improperly trying to persuade tenants to drop out of the suit--a complaint upheld by Superior Court Judge Max Deutz--Schaefer responded with a letter to the State Bar, accusing Monkarsh of unethical conduct and asking that he be disbarred. The shadow over Monkarsh’s reputation lingered for a year before the bar finally reviewed and dismissed the allegations.
Schaefer at times approached other attorneys who served on Public Counsel’s board in an effort to obtain representation--acts that Public Counsel interpreted as an effort to create a conflict that would force the group to withdraw from the case. He ran ads in legal newspapers soliciting complaints about Gibson, Dunn. And in 1984, after gunman James Huberty killed 21 people in a McDonald’s restaurant in San Ysidro, he wrote a letter to the editor of the San Diego Union. “I hope and pray that the San Ysidro Survivors’ Fund,” the letter stated in part, referring to a charity established to help the victims’ families, “can do without the legal counsel of Gibson, Dunn & Crutcher . . . or else the survivors will probably end up owing the lawyers.”
Clark was flabbergasted. Gibson, Dunn had no connection with the charity, as he pointed out in a cold, formal rebuttal letter to the Union.
A few weeks before the trial, Schaefer says, Gibson, Dunn offered to accept a settlement of $200,000. “I thought that was ridiculous,” Schaefer says. “I thought they’d be laughed out of court once I got a jury of my peers and showed it was the tenants who were the gangsters who ruined the building.”
Inside Gibson, Dunn’s Century City offices, there had been occasional jokes and murmurs about the big landlord-tenant case that would generate no profit. The lawyers believed strongly in their clients and their case, but, Monkarsh said, “there was no way of knowing how a jury would react to the character assassination of the tenants.”
The trial, in retrospect, was a sound thrashing. Once inside the courtroom, Schaefer bore little resemblance to a bull elephant. A parade of tenants and city inspectors offered damning testimony. The jurors examined photos taken in 1981 of 757 South Berendo--and then toured the building and found that, under the new ownership, it was clean, safe and in good repair.
In some instances, Schaefer himself proved to be the most damning witness of all. An analysis of his finances, for example, proved intriguing. His 1981 financial statement had showed a net worth of $4.8 million, with total assets of $7 million. But his new financial statement showed a net worth of only $1.2 million. The estimated value of 707 acres of San Diego mountain land had fallen from $210,000 to $75,000, and another holding from $245,000 to $140,000. Similarly, the Schaefer Hotel, purchased in 1985 for $450,000, now carried an estimate of $275,000. But mostly, Schaefer’s ostensible net worth had fallen drastically because in 1985 he had put $2 million of property into trusts for his sons as well as $600,000 into a charitable trust under his control.
On the witness stand, Schaefer blurted out the point Clark was trying to make--that he was trying to shield his wealth from the litigation. “Mrs. Gallego has the power to destroy my ability to provide for my children’s education in the future and I have given them a million dollars. . . . That’s their future no matter what you do to me.”
Schaefer, for a change, had hired legal counsel for this case, an old friend and colleague. Floyd Morrow, a former San Diego councilman and recent unsuccessful candidate for San Diego mayor, sought to buttress the claims that Schaefer had made in 1981. Defense witnesses--including a police officer, a former manager and Schaefer himself--described various tenants as criminals.
Sometimes these claims turned back on Schaefer. At one point, Schaefer said he was unaware that when he hired an electrician--a man nicknamed Verdugo, a Spanish term for “Hangman”--that the man was a gang member. In an effort to dispel allegations that Schaefer had gang members in his employ, Morrow then introduced into evidence a letter showing that Schaefer had later tried to evict the electrician. But Schaefer’s letter, written to a Municipal Court judge, also carried the threat that, unless he received cooperation from authorities, he would “hire vigilantes from the 18th Street Gang” to perform the eviction. A few jurors broke into laughter.
Schaefer says he never carried out the threats. “If that was true, then I’d be some kind of hypocrite. I was a prosecutor. I’ve always been a friend of law enforcement. I give a pint of blood several times a year for the police officers’ association.”
After the first two phases of the trial, one to establish a rent rebate and the other to establish emotional-distress damages for tenants, the jury’s sympathies were clear. It ordered Schaefer to refund $87,900 in rent and $143,000 in damages--including $23,500 for Suzanne and Suzy Norman, $19,000 for Marjie Gallego and her two daughters, $20,000 for Eddie Gallego and $35,300 for the four Camacho children.
Toward the close of the punitive phase--intended to decide the appropriate punishment--Clark walked up to an easel holding butcher paper, uncapped a felt-tipped black marker and did some rudimentary accounting. Schaefer’s capital gains on the Berendo building, the Grand building and some smaller transactions added up to $1,010,000, he said. Now compare $1 million to the $64,000 in fines levied by the city, which Schaefer still had not paid. And compare $1 million to the few days he spent in jail. Is it any wonder, he asked, why people become slumlords?
“I submit to you from this testimony that he doesn’t think like most other people. He really doesn’t,” Clark said in his closing argument. “I think it takes a particular kind of person to run a slum, to create a slum. Those people didn’t have to live that way. It wasn’t necessary. It was simply a matter of putting the money into Mr. Schaefer’s pocket.
“We are not asking you to subject Mr. Schaefer to the punishment his tenants suffered. To have a child shot. To have dirty bathwater dripping on him. To have rats crawling over him. Maybe that would be more appropriate. But here all we are saying is to make an example. Make it hurt enough. Take that million-dollar profit away.”
The jury, on a vote of 10 to 2, set punitive damages at $1.6 million. The two holdouts later explained that they thought $1.6 million wasn’t enough.
Months later, Michael Schaefer sits in a Baltimore diner, nervously scribbling on a paper place mat. Just to prove he can do it, he lists the 23 counties of Maryland in the chronological order in which they were founded. “I bet none of my opponents can do that.” Then he writes down five names: Chavez, Sullivan, Haley, Nonnemacher, Schaefer.
In some ways, the Senate primary is similar to his 1965 campaign for San Diego City Council. This time there are 11 candidates; none are household words. But only these five, Schaefer says, are worthy of analysis.
Schaefer handicaps the race: Linda Chavez, a former White House and U.S. Civil Rights Commission aide, is the early favorite, but she used to be a Democrat. Richard Sullivan, a businessman, has money but is not well-known. George Haley and Nicholas Nonnemacher are just well-known enough to drain votes from Chavez and Sullivan.
That leaves the man with the million-dollar name. As always, Schaefer promises to campaign hard, to visit every county and Kiwanis Club in the state. True, he says, the Baltimore Sun and the Washington Post will duly report about his record as a slumlord. But having political baggage isn’t that bad. “It’s an attention-getter,” Schaefer points out. “Kurt Waldheim has more baggage than I’ll ever have. And he won.”
Later, Sullivan would quit the race, enhancing Chavez’s chances. The best finish Michael Schaefer can hope for, the political pros say, is second. But if he somehow pulls it off, Schaefer has no doubt he would prove he is worthy.
Schaefer smiles, dreaming of himself as Sen. Michael Schaefer (R-Md.). “I’m willing to take a fresh look at problems. I’ve always been concerned for the little guy. What I like about politics is it gives you a license to talk to people, to find out what they think. I cut my teeth in politics on bar mitzvahs, ice cream socials, golden anniversaries. . . .”
His voice is warm and sincere.
“I am somebody,” he says, “whom the voters would feel at home with.”
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