Chula Vista Mayor Admits 'Oversight' on Loan

San Diego County Business Editor

Chula Vista Mayor Greg Cox said Friday his failure to list a $2.2 million loan from Home Federal Savings on his statements of financial interest was an "oversight" but he denied any improprieties in voting on Home Federal real estate projects after receiving the loan.

Cox also defended his personal appeal to Home Federal Chairman Kim Fletcher to get the loan approved after the savings and loan had initially rejected the loan request.

Cox spoke at a news conference called to respond to a letter from the state Fair Political Practices Commission saying Cox should have listed the August, 1985, loan on his 1985 and 1986 statements of financial interest. The FPPC letter was a response to Cox's request for advice on his disclosure obligations regarding the loan.

"Clearly, the opinion of the FPPC is that there was an obligation on my part to disclose the loan," Cox said. "It was an oversight on my part and I regret the error."

Issue Unresolved

Cox said he was "disappointed" that the FPPC letter did not resolve the issue of whether the loan represented a conflict of interest in light of Cox's subsequent favorable votes on issues concerning Bonita Long Canyon and El Rancho del Rey, two residential projects being developed by a joint venture of Home Federal and builder Corky McMillin.

In the letter dated June 16, FPPC legal counsel John G. McLean told Cox that although the loan formed the "basis of disqualification" by Cox on votes affecting the Home Federal projects, the FPPC lacked "sufficient facts to determine whether the loan was received in the due course of business on terms available to the public without regard to official status."

The FPPC said Thursday that it is continuing to review the Cox loan to see whether "further action should be taken." Violations of the state Political Reform Act, which requires politicians to disclose loans over $10,000 when the lender has business dealings inside a jurisdiction, can result in a fine and jail term.

Cox said he plans to provide additional information to the FPPC so that it can conclude its investigation. "It's in Chula Vista's best interest to have this thing behind me," Cox said.

The loan in question was a 1985 refinancing of a 123-unit apartment complex in Austin, Tex., that Cox and 10 other investors acquired in 1979 and then sold to a partnership headed by Patrick Judd in 1983. The loan co-signed by Cox and Judd enabled Judd to pay off all but $75,000 of a $238,000 promissory note that Cox's co-investors took back to facilitate the 1983 sale. Cox personally received a $117,000 note from Judd's group that is still outstanding.

In Default on Loan

Cox and Judd have been in default on the Home Federal loan since late last year and the apartment building is scheduled to be sold at foreclosure auction July 7. If sold, Cox stands to lose the $117,000 investment represented by the note.

Cox spent much of the press conference defending his 20-minute meeting with Fletcher in the spring of 1985. Cox said the meeting--which he arranged--did not constitute "preferential treatment."

Prior to that meeting, the Cox and Judd loan application had been turned down by Home Federal and two other San Diego lenders, Great American First Savings Bank and Coast Federal Savings.

Cox said Fletcher agreed to resubmit their application to a Home Federal loan committee after Cox agreed to "add my net worth" to the loan security by co-signing the loan. Cox, who retained ownership of the apartment land after selling the buildings to Judd, also agreed to subordinate his security in the property to Home Federal.

Asked whether an "average citizen" could expect to receive a private meeting with Home Federal's Fletcher to discuss a loan, Cox said: "I can't answer that." He said the loan, which he described as "conservative on a loan-to-value basis," was made on the same terms available to the market at large.

Fletcher was unavailable Friday for comment on the meeting with Cox. A Home Federal spokeswoman said it was not "out of the ordinary" for Fletcher to meet with business and social acquaintances to discuss loan applications. Cox had said he made Fletcher's acquaintance prior to the loan meeting through his involvement in United Way.

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