Senator’s Deputy Aided Firm That Gave Him Loan
After receiving a $20,000 loan from a City of Industry company, the top aide to state Sen. William Campbell (R-Hacienda Heights) intervened last year on behalf of the firm as it sought a million-dollar state contract, records and interviews show.
Jerome M. Haleva placed a telephone call to John S. Babich, deputy director of the state’s office of procurement, last June to inquire why United Packaging Corp. faced disqualification even though it was the low bidder on a contract to supply garbage bags to state agencies.
The call came 16 months after the company and its president, Frank E. Raper, gave Haleva a $20,000 mortgage loan at 8% interest--a rate that industry experts say was 2% to 3% lower than those available through conventional lendings institutions.
Babich said last week that the timing of Haleva’s call was “unusual” because it came after the bids were open and the firm was facing disqualification.
“It kind of stuck in my mind because of the dollar value and the sensitivity of the contract,” Babich said. “I’m sensitive about plastic bags because we spend so much money on them.”
The procurement official said Haleva’s inquiry had no effect on the way his office handled the garbage bag contract. But he acknowledged that he subsequently directed his staff to amend the bid specifications, which allowed United Packaging to eventually win the $1.6-million contract.
Haleva, a veteran political figure who receives $80,000 a year as Campbell’s chief assistant, declined to comment.
Raper did not return repeated calls to his United Packaging office.
And last week, when reached at his Hacienda Heights home and asked about Haleva’s actions, Campbell hung up on a Times reporter.
Disclosure Process
While Haleva disclosed the loan on state economic interest forms as required by law, he did not report receiving any benefit from the below-market interest rate.
A spokeswoman for the state’s Fair Political Practices Commission said this week that such a discount on a loan of that size would generally have to be disclosed by a legislator or aide as a gift.
“If the person is receiving a loan on terms that are not available to the public,” FPPC spokeswoman Sandra Michioku explained, “the difference in value is considered a gift and would have to be reported if the total value is $50 or more.”
Haleva’s call on behalf of United Packaging was at least the second time in 1988 that he contacted state contract officials on behalf of a company with financial ties to himself or his boss.
The first instance involved calls placed by Haleva to the state architect’s office on behalf of Asbestos Environmental Controls, a Louisiana company that contributed $27,000 to Campbell’s election committee during 1987 and 1988.
Haleva’s discussions with the state architect occurred as the Louisiana company was in danger of losing its asbestos-removal consulting contracts because it had failed to receive state certification for the work. After Haleva’s calls, the architect’s office withdrew its threat to cancel the contracts and waited for the firm to properly register.
Besides the political donations, the president of Asbestos Environmental Controls provided Campbell and Haleva with the use of a car and driver during the 1988 Republican National Convention in New Orleans. Neither the senator nor Haleva reported the gifts, valued at $600, until after it was revealed in newspaper reports in June.
State records show that United Packaging’s Raper has also been an active political contributor, giving nearly $15,000 last year to Republican legislators and committees. He also gave $1,000 to Campbell’s campaign committee on June 30.
But the firm’s dealings with Haleva date back to at least Feb. 19, 1987. Sacramento County records show that the company lent Haleva $20,000 at 8% annual interest, securing it on that date with a second trust deed on his house.
Deed Rescinded
At the time, conventional lenders were offering home equity loans at an average of 12% interest nationally and 11.37% in Southern California, according to statistics compiled by the Meyers Report of Chicago, a national financial newsletter. In addition, three large California banks separately told The Times that they were offering such loans at 10% to 10.5% interest at about that time.
Property records do not disclose the term and conditions of the loan or how Haleva planned to use the money. But they show that Raper rescinded the second trust deed on June 2, 1987, indicating that the debt had been extinguished.
United Packaging has sold twine and garbage bags in bulk to the state since at least 1983, purchasing records show. The garbage bags are acquired by the state’s Department of General Services, which in turn supplies them to all state agencies from warehouses in Sacramento and Fullerton.
Records show that procurement officials have sent numerous written complaints to United Packaging about late shipments and claims that many of the deliveries have fallen short of the number of bags ordered.
Despite those concerns, United Packaging was in the thick of the competition for the fiscal 1988-89 contract to supply garbage bags when bids were opened in May, 1988. United Packaging’s $1.47-million proposal was the lowest of 10 companies submitting bids.
But United Packaging’s offer contained at least one variation: Company officials wrote that they needed 12 weeks to make deliveries, rather than the six weeks specified in the contract requirements.
While the other companies said they could meet the six-week requirement, United Packaging said its shipments would be delayed because an explosion at a Louisiana resin plant had created a shortage of material used to make the polyethylene trash liners.
The company’s stated inability to meet the six-week specification prompted state officials to consider disqualifying the firm from the competition--a decision that brought a protest from Raper.
In a letter on June 21, 1988, Raper wrote to a procurement official that he was “surprised to hear that you consider this to be more than a minor deviation from the request of the contract. . . . The most surprising thing to me is the fine lines being drawn when evaluating bids of this kind, using the Standard Policies and Procedures you made reference to, which we haven’t been confronted with in the past.”
Deputy procurement director Babich said that at about the same time, Haleva called on behalf of the company.
“Jerry Haleva called by telephone and said that one of his constituents had a problem involving a bid with plastic bags and he (Haleva) wanted to know what the circumstances were,” Babich recalled. “And I listened to him and explained the facts of the bid, that the low bidder took material exception” to the six-week deadline.
Quiet Response
“I think he was seeking information for the constituent,” said Babich. “In other words, ‘Why isn’t the constituent’s bid acceptable?’ ”
Babich said when he explained the problem with United Packaging’s bid, Haleva answered: “ ‘Fine. Thanks for the information’.”
Babich stressed that he did not feel any “undue influence” on the part of Haleva, but added that it is unusual for anyone from a legislative office to call the procurement office after bids have been opened for a contract. Most of the time, legislative aides call before bids are even taken to see what companies must do to qualify for state contracts, he said.
Since the next lowest bidder on the garbage bags was about $300,000 higher than United Packaging, Babich asked his staff to conduct a telephone survey to investigate whether the City of Industry company’s complaint was valid. The survey concluded that a six-week delivery deadline was “not realistic,” Babich said, so state officials canceled the first bids and ask for new quotes on the contract.
This time, the contract specifications allowed for a 12-week delivery. Of the 12 companies that competed, United Packaging, at $1.6 million, was again the lowest bidder, but this time at $1.62 million--$150,000 more than its initial bid. The company was awarded the contract to supply trash liners through October of this year.
Even with the extended deadline time, United Packaging has been cited by the state five times since March for late shipments.
