State Official Says Mayor, 2 on Council May Have Violated Conflict Law

Mayor Maureen O’Connor and two San Diego City Council members may have violated state conflict-of-interest laws in a decision Tuesday involving communications companies in which all three have financial interests, a spokeswoman for the state Fair Political Practices Commission said Wednesday.

Sandra Michioku, stressing that she could not make a determination without a formal complaint or an official version of the facts, said state law requires public officials to disqualify themselves from decisions that may have a foreseeable financial effect on companies in which they have investments.

As defined by Michioku, a council vote Tuesday that breathed new life into competition for a lucrative city government telephone contract meets all the criteria of a decision from which O’Connor and council members Abbe Wolfsheimer and Bruce Henderson should have distanced themselves under state law.

City Atty. John Witt’s office Wednesday began a review of the vote after a Times article detailed financial interests held by the mayor and the two council members in parent companies of the bidders. Witt said he would not comment on the matter until the review is completed.

Panel Acted Under Threat

Under state law, the three could face misdemeanor criminal penalties, administrative fines of as much as $2,000 each and a civil suit.

The council Tuesday accepted a recommendation that all seven bidders for the $12- to $18-million telephone contract be reconsidered. The recommendation came from the city’s data processing corporation--a nonprofit agency established by the city--under pressure from the council.

The data processing corporation had selected Tel Plus Communications for the pact and had been prepared to begin negotiations with the company until the council intervened May 16 because of some members’ concerns that the decision-making process was faulty. Council members, led by Ron Roberts and Abbe Wolfsheimer, threatened to disband the data processing corporation if all seven bidders were not reconsidered.

There appears to be no way that the three council members could profit from their vote, which involved corporations that earn billions of dollars in revenue each year. However, state law also requires them to disqualify themselves when their votes could affect the financial situations of firms in which they have an interest.

O’Connor, Henderson and Wolfsheimer denied Wednesday that they are guilty of any conflict. The mayor’s press secretary and an aide to Henderson cited their strong opposition to interference in the data processing corporation’s decision-making role, and noted that neither was present for the May 16 vote at which the council first intervened to force a change in the selection process.

All three also argued that the council has no power to award the telephone contract, a decision that, even with the new bidding procedure, will be left to the data processing corporation’s board of directors.

“The point is that the council didn’t direct anything,” said Paul Downey, the mayor’s press secretary. “They affirmed what data processing is going to do.”

Wolfsheimer, who was present for both votes and has supported the move for reconsideration of the bids, argued that she was entitled to vote on the selection process. She said she had been advised by the city attorney’s office that she is not required to disqualify herself from matters in which she will not gain financially.

Used Ruled of Thumb

“There’s a general rule of thumb . . . which states you may not vote on a matter if you think it will cause you to have a 10% increase (in the value of an asset) or 10% in profits. That’s been the general rule of thumb I have been using.”

However, according to the state’s Political Reform Act, as explained by Michioku, public officials must disqualify themselves from decisions directly affecting business entities in which they have an investment of $1,000 or more.

All three council members have sizable investments in parent companies of two of the bidders. In his 1988 statement of economic interest, Henderson reported holdings of $10,000 to $100,000 in GTE Corp., parent company of one of the bidders, General Telephone Co. of California. Wolfsheimer owns 600 shares of GTE, which closed at 53.125 on the New York Stock Exchange on Wednesday.

O’Connor owns more than $100,000 in bonds of General Electric Capital, a subsidiary of General Electric Corp., which is the parent company of one of the bidders. That bidder is RCA. Before last October, she and her husband, Robert O. Peterson, owned more than $100,000 in General Electric stock.

The mayor argued that, because the bonds have a fixed rate of return, she will not benefit regardless of whether RCA is picked for the contract. However, the state code treats bonds as an investment in a company.

Even if the companies are considered to be “indirectly” involved in the council vote under state law, the $12- to $18-million size of the telephone contract up for grabs still would require any public official with an investment in the firm to disqualify himself, Michioku said.

To be guilty of conflict of interest, it also must be proven that the mayor and council members could “foresee” that their actions would have a financial impact on the companies--that it is likely that their vote could materially affect the firm’s financial interests, Michioku said. The council vote also appears to meet that standard.

“By requiring the consideration or reconsideration of a particular decision, there could be the likelihood that they materially affected (the companies’) financial interest,” she said.

Downey said that, if Witt’s office indicates that O’Connor is guilty of a conflict, the mayor will abstain from future votes and may even attempt to undo Tuesday’s decision.