Grand Jury Transcripts : Diversion of Funds Cover-Up by Ortiz Alleged

Prosecutors concluded that former San Diego County Registrar of Voters Ray Ortiz engaged in bid-rigging and mismanagement and attempted to cover up a scheme to divert county funds to himself and associates when investigators began to probe the operations of his office, grand jury transcripts released Friday reveal.

Investigators were unable, however, to prove that Ortiz acted criminally in the “sham bid” that gave a $100,000-plus contract for verifying signatures on a petition for the June, 1986, ballot to an Escondido firm, Deputy Dist. Atty. Douglas Gregg acknowledged to the county grand jurors after leading them through seven days of testimony.

Despite presenting testimony to the grand jury about how Richard Stephens, the owner of the firm, Election Data Corp., obtained surplus paper and padlocks from the county at Ortiz’s direction, Gregg also did not seek indictments against either man for those transactions--because, the transcripts say, investigators again did not have proof of either man’s criminal intent.

The grand jury indicted Ortiz last month on 27 felony charges of grand theft, misappropriating public funds and other charges. His longtime friend, Maria Caldera of Chula Vista, was accused of three counts of grand theft, and Lance Gough, an elections consultant occasionally employed by the county, was indicted on a single count of grand theft.

Testimony recounted in the nearly 1,000 pages of transcripts outlines an alleged scheme in which Ortiz used the county’s contract with a Los Angeles-based printing firm, Jeffries Banknote Co., as a cover to pay for trips for himself and staff members, as well as to divert funds to himself, Caldera and Gough. On one occasion, prosecutors contend, circumstantial evidence suggests that Ortiz used part of a $4,000 payment that Caldera received from Jeffries in order to buy a car for his daughter.

Gregg told the grand jurors that even after the district attorney’s office had begun investigating Ortiz’s conduct, the former registrar was in contact with Jeffries Banknote, orchestrating a “cover-up” of earlier transactions to conceal the alleged diversions of funds.

” . . . It is fair to conclude from all the evidence that Mr. Ortiz discovered and used Jeffries Banknote Co. as a vehicle to accomplish his desires,” Gregg told the grand jurors.

Other evidence presented to the grand jury indicated:

- Co-workers at the registrar’s Kearny Mesa office believed that registrar’s spokeswoman Maggie Edwards subtly warned them at a staff meeting that there would be adverse consequences for employees who had provided information about Ortiz to investigators.

Edwards--the mother of Merle Schneidewind, Ortiz’s defense attorney--issued “a veiled threat,” Gregg told the grand jurors, but prosecutors were not prepared to charge her with any crime.

- In 1984, long before Ortiz--in apparent violation of county policy--allowed Stephens to cart away the county’s used ballots for recycling, his administrative assistant, Judith Nelson, had suggested that the county itself recycle the paper, thus recovering a substantial portion of its outlay. Nelson testified that Ortiz told her that he had checked into the situation and that the county was uninterested in the waste paper.

- Early last year, Stephens was allowed to attend weekly meetings of the administrative chiefs of the registrar’s office, despite the fact that, according to Nelson’s testimony, several employees were “very uncomfortable” about his presence. According to Nelson’s testimony, Stephens got advance notice about the office’s plans to use outside contractors for certain work by attending the staff meetings.

The contract that Gregg described as the “sham bid” between the registrar’s office and Stephens’ Election Data Corp. stemmed from a project involving the verification of more than 170,000 signatures on a June, 1986, ballot initiative petition.

Ortiz had actually orally awarded the contract to Stephens, who in turn subcontracted with Gough to perform the signature verification checks. However, at the same time that he was helping county officials prepare the bid documents, Ortiz failed to inform the county Purchasing Department that the work was already being done.

William Burke Crofton Jr., a buyer for the county, testified that Ortiz helped him prepare the signature verification bid in mid-June. At the time, Crofton said he believed that there were three individuals qualified to bid on the contract--Stephens, Gough and Howard Doulder, a Huntington Beach handwriting specialist who serves as a consultant to the Chicago Board of Elections.

Both Gough and Stephens informed Crofton that they were willing to bid on the contract, but Doulder told the county official that he was not interested in competing for it because “there wasn’t enough time to do the job.” When Crofton told Ortiz of Doulder’s disinterest, Ortiz said that he would talk to Doulder.

“I then called Mr. Doulder back, and Mr. Doulder said, ‘I can bid on the requirement,’ ” Crofton recalled in his testimony.

Prosecutor Gregg asked Crofton whether he was aware that, at the time he was discussing the bidding process with Ortiz, Gough “was already on site at (the registrar’s office) conducting the petition verification?” Crofton said he was not aware of that.

Stephens’ Escondido firm eventually submitted a bid offering to verify the signatures at the rate of 67 cents per name, while Doulder bid 95 cents. Gough, despite his earlier comment to Crofton, ended up not bidding on the project.

“Had you known before the opening of the bid that Mr. Gough was already in place conducting the verification, would you have stopped the bid process?” Gregg asked.

“Yes,” Crofton said. When asked why, he added, “Well, it’s rather obvious. How can you go out to request for bid if one of the people . . . that (is) going to bid on it--how can it be a fair bid if somebody else is already doing the job?”

Prosecutors obtained further proof of the alleged bid-rigging from Doulder, who received immunity in exchange for his testimony.

Doulder testified that he was never interested in receiving the contract, both because of his concern that the project could not be completed in time and because he was going through a divorce.

However, Doulder said that Gough told him that he had to submit a bid in order to get his name on a mailing list for future county contracts. When Doulder told Gough that he had no idea how much to bid on the contract, Gough told him to submit the 95-cent figure, Doulder testified.

Still concerned that he might be awarded a contract that he did not want, Doulder asked Gough how he could be certain that he would not receive the project. Gough’s reply, Doulder testified, was, “Don’t worry--you won’t get it.”

Much of the grand jury proceedings focused on another series of alleged transactions in which Ortiz ordered Jeffries Banknote to make payments to Caldera, his close friend since childhood, and then arranged for the firm to recover its money by submitting falsified bills to the county. In particular, prosecutors contend that six transactions between May, 1984, and July, 1986, resulted in a loss to the county of about $7,300 and a $4,000 loss to Jeffries Banknote.

Three of the transactions involved money that Ortiz allegedly directed Jeffries’ Vice President Lynn Kienle to pay Caldera or Gough, a computer specialist who has done work for the county, for consulting work purportedly done for the registrar’s office. Kienle testified that he did not personally know whether that consulting work had actually been performed, explaining that he simply submitted the bills to the county based on Ortiz’s assurances that they were appropriate.

Prosecutors contend that Ortiz--who allegedly received at least $2,900 of the money paid to Caldera--arranged for Jeffries to recover the money paid to Caldera and Gough by billing the county for false miscellaneous expenses associated with a contract under which the firm printed the county’s sample ballots from 1983 to 1986.

The three other transactions concerned expenses that Jeffries paid for trips taken by Ortiz and others to Chicago, New Orleans and Redding, Calif. As in the case of the other transactions, those expenses also were recovered by Jeffries via false bills submitted to the county, allegedly at Ortiz’s direction.

Jeffries executive Kienle, who also received immunity from prosecution in exchange for his grand jury testimony against Ortiz and the others, explained that Ortiz instructed him to lump in the payments to Caldera with other expenses listed on the invoices that the firm submitted to the county. At Ortiz’s direction, the payments to Caldera were concealed on those invoices in general categories such as “technical assistance” or “changes in ballot generation system,” prosecutors noted.

“Is there any way for somebody who was not present when you and Mr. Ortiz sat down, and he provided you with the specific billing language as to where to include, let’s say, the Caldera (payment)--is there any way a grand juror or just a citizen or even an accountant could tell that the Caldera billing is somewhere built into that billing?” Gregg asked Kienle.

“No, no,” Kienle responded.

“Would it be fair to say that the actual billing is at least concealed within . . . the invoice?” Gregg asked.

“Yes,” Kienle said.