CASE: 10 Off Hook in Phone Scandal : County Phone Scandal Case Is Tossed Out

A federal judge Thursday dismissed charges against 10 men about to stand trial after being indicted four years ago on accusations of fraud involving a $24.5-million San Diego County telephone system.

Prosecutor Lantz Lewis, a county deputy district attorney serving as a federal prosecutor, said Judge Earl Gilliam’s ruling throwing out the indictments against two former county employees and eight other defendants in the long-delayed case came “like a lightning bolt out of the sky.” Lewis said the decision would be speedily appealed.

The prosecutor said that Gilliam based his action on a recent ruling by a federal appellate court that narrowed the scope of mail-fraud prosecutions to those in which indictments specifically spell out money or property losses caused the victim--in this case, the county taxpayer--as a result of the alleged bid-rigging in a l982 contract award for a new county telephone system.

Gilliam ruled that the recent decision and a l987 U. S. Supreme Court decision restricting prosecution under mail fraud charges made it impossible for a federal court to take jurisdiction in the case, Lewis said.

Ten defendants, charged with fraud and wrongdoing in rigging the award of a proposed space-age telecommunications system contract by the county in the early 1980’s, were scheduled to go on trial before Gilliam next week. Three other defendants had pleaded guilty earlier to reduced charges.

The case involved a county bid award for a sophisticated microwave communications system to an Orange County firm, Telink Inc. After irregularities in the process surfaced, business leaders called for a county grand jury investigation of the Telink contract, and the inquiry soon expanded into a joint probe by federal and county investigators and prosecutors.

The contract scandal became public in October, l982, when law enforcement officers, armed with search warrants, burst into the homes and offices of a dozen county employees and telecommunications officials, seizing records.

The investigation later showed that the plot to rig the bid-award process began in l980, when Abraham Stein, former county chief of communications, proposed a plan to assure that one of the firms bidding would be selected for the lucrative contract in return for kickbacks and favors to those involved in the scheme.

Eventually, Telink and its parent company, Florida-based Burnup & Sims, pleaded no contest to charges of fraud and racketeering and repaid the county $3.6 million for its losses and about $1 million in estimated prosecution costs to government agencies.

The federal indictments in the Telink case rocked county government, causing the resignations of half a dozen top county administrators. The indictments contained descriptions of use of cocaine, prostitutes, threats, money bribes and kickbacks in the successful attempt to influence the contract award.

Dist. Atty. Edwin Miller, who had called the Telink case “the most massive fraud and public corruption case ever perpetrated against the county of San Diego” when indictments were handed down by a federal grand jury in 1984, said Friday that he was “quite disappointed” by Gilliam’s action.

Miller added that he, with the concurrence of U. S. Atty. William Braniff, will proceed to obtain approval of the U. S. solicitor general to appeal Gilliam’s ruling to the 9th District Circuit Court of Appeals.

Dan Wallace, chief deputy county counsel, said the county is still pursuing a multimillion-dollar civil action for damages against a number of the Telink case defendants and does not know what effect Gilliam’s latest ruling will have on the suit.

The 10 men who were scheduled to go to trial next week included H. Larry Gonzales, former county director of general services; former county communications chief Stein, now serving time for an unrelated crime of conspiring to import heroin from Nepal; Don Woodaman and Michael Sage, former officials of the now-bankrupt Telecommunications Design Corp. (TDC) of Orange; Jim Linder, former Telink chief of marketing; Bobby Hendrix, former Telink president; Robert Palmer, former manager of Telink’s San Diego office; and Robert Schreiber, Bernard Campbell and Henry Richter, former top officials of Telecomm Consultants Inc.

Stein Called Mastermind

The indictments charged that principals in the two county-hired consulting firms, TDC and TCI, joined in a scheme with Stein to rig bids for the county’s phone system so that Telink would be selected. Stein was described in the indictments as the mastermind of the plot.

Last year, Gilliam declared a mistrial after 4 1/2 months of testimony in the trial of five of the defendants because of the U. S. Supreme Court ruling that public officials may not be convicted in mail-fraud cases unless prosecutors prove that the public taxpayers lost money. Previously, mail-fraud convictions could be obtained if it were proven that public officials had enriched themselves or their associates.

In a March decision, Gilliam ruled that the trial against the 10 remaining defendants could proceed.

Lewis, the government prosecutor, said he believes the existing indictments are sufficient to show loss to the taxpayers and “we hope the decision will come rapidly” from the federal appeals court allowing the case to go to trial.

Mario Conte, attorney for Stein, said he was “a little bit surprised” at the dismissal of the indictments but feels that Gilliam “made the correct decision.”

Attorney Ramon Castro, representing Hendrix, was not surprised at Gilliam’s action and said he will wait to see what steps the government takes to attempt to restore charges against his client.