Counselor Suspended for Paduano Testimony : ‘Outstanding’ Psychologist Pays a Price for Reports That He Dealt Cocaine for Suspect

A psychologist who runs a family counseling program at the Newport Harbor Psychiatric Institute in Newport Beach was suspended Thursday following published reports that he was a cocaine dealer and a key witness in the Robert Paduano drug and extortion case.

James Edward Millsap, 32, who has been a staff psychologist at Newport Harbor for a year and a half, told the grand jury, and repeated in open court, that he sold cocaine for Paduano for about a year. He also admitted he lied to the grand jury earlier when he denied knowing about Paduano’s cocaine traffic.

But Millsap told the grand jurors in his later testimony that he only lied because he was afraid of Paduano.

“I felt, and I still feel, that (Paduano) is a powerful man. . . . Basically I did not want to give any testimony that would make him angry at me,” Millsap said.

Paduano, 44, reputed to have underworld connections, is charged with 71 counts of robbery, burglarly and extortion, in a scheme prosecutors say was aimed at trying to expand his drug operation in Orange County.

In a telephone interview Thursday, Millsap said through tears that he was hurt and surprised at his suspension from the hospital.

“When everything is falling apart all around me, I was hoping that job, which I love so much, would be there for me to hold on to,” he said. Millsap and his wife are expecting their first baby in June.

Millsap had been arrested on a charge of selling cocaine between the time of his first grand jury testimony--which he admits was not truthful--in October and his testimony in January.

He told the grand jury he decided to come clean about Paduano because district attorney investigators had convinced him that “I was protecting the wrong people.”

In Thursday’s interview, Millsap added: “No one can ever know how difficult that decision was . . . to come forward with the truth. No one can know the fear I felt.”

Newport Harbor officials knew nothing about Millsap’s involvement in drugs, or the Paduano case, until Wednesday, when The Times published reports about his grand jury testimony.

Transcripts of the grand jury testimony had been made public for the first time Tuesday. The day Millsap had appeared at Paduano’s preliminary hearing in West Municipal Court in Westminster last week, no news reporters happened to be present.

Bob Green, administrator at the 38-bed psychiatric facility, said a group decision was made Thursday to suspend Millsap, with pay “until we can learn what all the facts are. This thing just came at us out of the blue.”

Green described Millsap as “an outstanding” psychologist in charge of a program staff of more than 30 people.

“We are quite concerned, not only for Jim’s sake, but (concerned about) how all this came about,” Green said.

Millsap is a former county probation officer who eventually got a master’s degree in counseling and a doctorate in psychology. Green described his role at Newport Harbor as “working with children.”

“We like him very much, this is all quite upsetting,” Green said.

Millsap testified on Sept. 30 and Oct. 1 that he first met with Paduano more than a year ago to discuss a friend’s robbery but that drugs had not been brought up at the meeting.

But in January, after Millsap was arrested on a charge of selling cocaine, he told the grand jury that he sold drugs for Paduano through Paduano’s sometime girlfriend, Marilyn DeFalco. The preliminary arrangements were made at that first luncheon, he said.

Law enforcement officials have praised Millsap for testifying against Paduano and were concerned about his role becoming public knowledge.

“We knew it was coming, but it’s rough. Here’s a guy trying to go straight and do the right thing and he gets hit like this,” one law enforcement official said.

Prosecutors claim that Paduano would mastermind the robbery of several independent drug dealers and their friends in the Newport Beach area to try and persuade them to either pay him for “protection” or to buy their cocaine from him. Paduano and his family deny all the allegations.

One of those robbed was Vinnie St. John, a former roommate of Millsap’s. Another was Eric Mendel, whom Millsap called a close friend.

After the Mendel robbery in November, 1987, Mendel called Millsap, according to the testimony from both men. Millsap got in touch with Dierdre O’Shea, a former girlfriend of Paduano’s. O’Shea knew about the St. John robbery, Millsap said, and he thought she might know who robbed Mendel.

According to Millsap, O’Shea arranged that first meeting between Millsap and Paduano.

Paduano, Millsap said, told him that Mendel would either have to buy his drugs from him from now on, or at least pay 10% for protection. Millsap also testified that he agreed during that meeting to deal cocaine for Paduano.

Deputy Dist. Atty. Wallace J. Wade asked Millsap why he agreed to sell for Paduano.

“I don’t know why,” Millsap said. “At that period of time, I was trying to get out of it (cocaine). . . . I felt threatened.”

Millsap said in Thursday’s interview that he began using cocaine because his friends used it. “We were young,” he said.

In his testimony, Millsap said that people who use cocaine tend to stick together. “When you become associated with people who literally are sucked into a group of people, after awhile you feel everybody does cocaine . . . you assume the world does it. With all the people I am associated with, cocaine is a common denominator. Wherever there is a party, there is cocaine there. Nobody is aware of the fact that’s why they are there and what they are doing.”

Millsap said he was trying to get away from the cocaine crowd when Mendel called him for help.

Millsap said he agreed to try to sell a half an ounce of cocaine a week for Paduano. At one point, when he wasn’t selling that much, Millsap said, Paduano called him in for a meeting to see what the problem was.

“I was trying to back out of it, but I just told him that friends had either moved from the area or no longer wanted it,” Millsap told the grand jury. “Then at that point he (Paduano) reminded me that he knows what’s going on out there,” meaning that Paduano knew who was selling and how much they were selling.

Millsap said he and DeFalco eventually became close friends. DeFalco, who had been robbed by the same people who robbed Mendel, according to prosecutors, is also a key witness against Paduano. She also admitted lying to the grand jury the first time when she denied knowing any connection between Paduano and cocaine.