Malcolm Made Own Tapes to Support Extortion Claims

David L. Malcolm, a Chula Vista city councilman and a state Coastal Commission member, was wired for sound by district attorney’s investigators earlier this year to secretly record conversations with a man he claims was trying to extort money from him in connection with the possible arson of a Mission Hills house, Malcolm’s attorney said Monday.

But the tapes Malcolm made failed to turn up sufficient evidence of any extortion plot by William M. Hirsch, who was advising Malcolm and his business partner, Dennis Schmucker, on how to remodel the Mediterranean-style villa on Presidio Drive, according to a source close to the investigation. Malcolm and Schmucker had taken over the home by foreclosing on a loan they made to a trust for which Hirsch was the agent.

Last week, Hirsch turned over to the district attorney copies of his own secretly recorded tapes--of conversations with Malcolm in January and February, 1985, during which Malcolm discussed blowing up the house to collect more than $1 million in insurance. On the tapes, Malcolm urged Hirsch to work quickly to find an arsonist. “We got to get that to burn,” Malcolm said.

District attorney’s investigators are now trying to establish whether the tapes demonstrate any wrongdoing by Malcolm and whether they are part of an extortion plot by Hirsch, or both. District attorney’s spokesman Steve Casey said Monday that he could not predict how long it will take before prosecutors know which direction the investigation will take.

Malcolm and his attorney, Charles Goldberg, have alleged that Hirsch was trying to use the tapes to extort money. Malcolm told the district attorney’s office about the alleged extortion six months ago, and investigators wired the politician several times, beginning last May, to record conversations with Hirsch, Goldberg said.

The latest purported extortion demand came last week, when Hirsch called Malcolm and demanded “several hundred thousand” dollars, Goldberg said Monday.

With the district attorney’s knowledge, Hirsch was invited to Goldberg’s law offices downtown last Tuesday, where secret recording devices had been placed in three rooms. Hirsch never arrived.

“We arranged to have my office wired,” Goldberg said, “and somehow, (Hirsch) got warned off. Maybe he realized that he was being investigated.”

Two days later, Hirsch went to the district attorney’s office with evidence of his own--two tape-recorded conversations with Malcolm in early 1985 and a taped conversation with Schmucker in April, 1985, that discussed construction matters.

Goldberg said he has “good reason to believe” that there are other tape-recorded conversations between Malcolm and Hirsch, and between Hirsch and “lawyers working for Mr. Malcolm.”

Casey has said the tapes furnished by Hirsch and his attorney, Michael J. Aguirre, became the first substantial evidence in the case and prompted prosecutors to declare a full-scale investigation into the matter.

Goldberg said that the tapes Malcolm made under the direction of the district attorney’s office show “Hirsch’s continued extortion demands and threats.”

Before one meeting, however, Hirsch “patted Malcolm down” and found a tape recorder. “I think that was probably the last” meeting, Goldberg said.

The tapes Malcolm made fail to provide concrete evidence of extortion, however, according to a source close to the investigation who asked not to be identified.

“Not all tapes produced in an investigation are relevant, helpful evidence,” the source said.

Aguirre said Monday that he was “not aware” that Malcolm had secretly taped his client, and he challenged Goldberg to make the recordings public.

“I wish that he would make a request to get copies of them and release them,” Aguirre said. “It doesn’t sound to me like there was too much evidence there for extortion if Mr. Hirsch hasn’t been prosecuted yet.”

Malcolm and Schmucker took over the luxurious home in early 1984 when they foreclosed on a $450,000 loan they had made to the owner, Chittenden Trust.

Hirsch represented the trust and coordinated the remodeling of the home. Aguirre said Malcolm and Schmucker made an oral agreement with Hirsch that allowed him to retain an interest in the property.

Aguirre confirmed that, when Malcolm and Schmucker foreclosed on the 7,200-square-foot home, Hirsch removed many of the building materials inside the house. But Aguirre said Hirsch later returned them.

To get the materials back, however, Malcolm and Schmucker entered into an agreement with Hirsch in the summer of 1984 that gave Hirsch, through an associate, an option to buy the house for $650,000 plus $10,000 a month through Dec. 31, 1985, when the option expired, a source knowledgeable with the agreement said.

“He couldn’t make it happen by Dec. 31,” according to a source familiar with the agreement.

Aguirre said his client believed he had a “legitimate” civil claim against Malcolm, although he added that he has no knowledge of his client ever asking Malcolm for any money.

“He put four years into this project and then got wiped out,” Aguirre said. “Malcolm had foreclosed but allowed Hirsch to have an interest in the property, by oral agreement, and that once they paid off the encumbrances, Hirsch would get the remainder” of the money.

However, Aguirre claims that Hirsch said Malcolm sold the property without notifying and paying him.

On the tapes made by Hirsch, Malcolm discusses his financial problems with the house, how it should be burned, how the insurance money would be divided, how the arsonist would be paid and the alibi Hirsch should use to throw off investigators. In most cases, Hirsch initiated conversation about the proposed arson.

At one point, Malcolm asked Hirsch: “Why couldn’t somebody just go in and turn on the gas downstairs, leave the burner on upstairs with a candle burning and when the gas gets to that, it would just blow up?”

At another juncture, Malcolm stressed that damage to the house must be total: “If that home burns down 25% . . . we’re all screwed,” Malcolm said.

Malcolm also agreed, on the tapes, that Hirsch would be a prime suspect in the arson and helped him fabricate an alibi. He told Hirsch to be back East visiting his brother.

“You know what?” Malcolm said on the tape. “They have to prove beyond a reasonable doubt. They aren’t going to find the arsonist. How in the hell are they going to prove that you did it?”

Malcolm has said he was leading Hirsch on during the conversations. No attempt was ever made to destroy the house, which eventually was remodeled and sold in June of this year for $900,000. It had been appraised at $2.1 million and was listed on the market for $1.75 million.

Malcolm and Schmucker each lost about $100,000 on the deal, according to a source familiar with the sale.

Malcolm, 32, is a real estate developer who was elected to the Chula Vista City Council in 1982. A Republican, he was appointed to the San Diego region of the state Coastal Commission in January, 1984, by Assembly Speaker Willie Brown (D-San Francisco).