Supervisor Can Vote on Malibu Project : Schabarum Stock Query Resolved

The Los Angeles County counsel’s office has declared that Supervisor Pete Schabarum has no financial interest in a company that is developing a controversial $150-million project in Malibu and that he can vote on the proposal if it reaches the Board of Supervisors.

In an opinion released Thursday, Assistant County Counsel Roberta M. Fesler also said Schabarum’s votes last year as a member of the Local Agency Formation Commission against Malibu cityhood were not a conflict of interest. Incorporation would be expected to greatly slow construction in the area.

Questions about whether Schabarum should vote on matters relating to VMS Realty, co-developer of the large Malibu project, were raised 10 days ago, when he disclosed in his annual statement of economic interest that he holds stock worth between $20,000 and $200,000 in a limited partnership managed by VMS Realty.

The Chicago-based company and the Anden Group of Sherman Oaks are partners in the Rancho Malibu venture, which would include 62 luxury homes, a golf course, club house, tennis courts and a restaurant along Encinal Canyon Road.

Although Schabarum’s investment in VMS Mortgage Investors Limited Partnership III has no direct financial link to the Malibu project, state Fair Political Practices Commission guidelines on conflict of interest generally consider parent companies and their subsidiaries as one firm.

Not ‘Closely Held’

Citing a 1983 FPPC ruling, however, Fesler said that since the limited partnership is publicly traded, not “closely held” by its managing company, Schabarum could vote on the VMS proposal without a conflict of interest.

When limited partnerships are publicly traded, “the individual limited partners are basing their investment decision on the viability and value of the business transaction, not on the skill of the general partner,” she said. “Thus, such an investment does not create a financial interest in either the general partner or any other business entities controlled by it.

“Your investment,” she concluded, “does not prohibit your participation in actions by LAFCO or the Board of Supervisors, which have a material financial effect on VMS or other business entities controlled by it, including the partnership for the proposed development” in Malibu.

Though the Malibu project is still before the Planning Commission and has not been considered by county supervisors, Schabarum twice voted as a LAFCO member against Malibu incorporation. In another LAFCO vote he opposed VMS/Anden’s request that its property be excluded from the area within the new city’s borders.

Ruth Benell, LAFCO’s executive director, has said she will also seek a ruling on Schabarum’s votes from the independent counsel chosen to handle the pending Malibu incorporation. But she said the issue may be moot, because a Superior Court judge has rescinded LAFCO’s approval of Malibu’s cityhood petition and the incorporation process must start over.