Testimony Starts on Open-Land Transfer : Investigation: Two former Laguna Niguel officials instrumental in sign-over of 96 acres of open space to a developer may be under special scrutiny. Others involved appear before county grand jury.

Prosecutors on Tuesday stepped up the criminal probe into the transfer of control over 96 acres of open space to a South County developer and called key figures in the 1988 transaction before the Orange County Grand Jury.

While most of the local and county officials were summoned by subpoena to appear as witnesses, two former Laguna Niguel officials were notified of the proceedings by letter--but not subpoenaed--indicating their conduct may be under special scrutiny by the grand jury.

At the heart of the probe is a February, 1988, deed that transferred control of the 96 acres bordering the Salt Creek Corridor Regional Park to the developer of the Marina Hills Planned Community. At issue is whether the land--set aside for public use--was legally transferred.

In daylong proceedings, county land planners carted in a cardboard box of documents, while top Laguna Niguel city officials, appearing in response to subpoenas, paced the hallways waiting to be called before the grand jury.

Former Laguna Niguel Community Service District Manager James S. Mocalis and the district board’s attorney, James S. Okazaki, were offered an opportunity to voluntarily appear before the grand jury, instead of being subpoenaed, their attorney confirmed.

Law enforcement officials said that such letters usually indicate that recipients are considered potential suspects in a criminal investigation and that prosecutors do not want to jeopardize their rights by forcing them to testify under subpoena.

But the attorney for Mocalis and Okazaki--prominent Santa Ana criminal defense lawyer Allan Stokke--rejected any suggestion that his clients were targets of the grand jury probe. “There is no statement (in the letter) that he is a target,” he said, referring to the letter to Okazaki.

Mocalis did not appear at the proceedings. Okazaki came with Stokke, who, met with Deputy Dist. Atty. Wallace J. Wade in the hallway outside the grand jury room and then told reporters his clients will testify at later proceedings.

“At the present time I’m talking with Wally Wade,” Stokke said.

Wade declined to make any comment on the grand jury proceedings.

Okazaki, silver-haired, slight and bespectacled, initially talked with reporters, telling them he was “exceedingly surprised” that the criminal investigation launched last spring has progressed to grand jury proceedings. The brief interview was broken up by Stokke, who said his client would decline further comment.

More than six months ago, the district attorney began investigating events surrounding a deed, dated Feb. 11, 1988, which relinquished public control of 96 acres, previously set aside as open space, to Taylor Woodrow Homes California Ltd. The land bordering the regional park is now part of the Marina Hills subdivision and the site of about 100 homes, with more planned.

The deed was signed by Mocalis and then-district vice president (and now city councilman) James F. Krembas and was prepared and notarized by Okazaki.

Since questions first surfaced surrounding the land transfer, Taylor Woodrow Homes has maintained that the transaction was approved by both county and local officials and that Krembas’ signature on the deed was only ministerial.

Two top officials with the county’s Environmental Management Agency--Park Planning chief Eric Jessen and senior land planner Al Garrotto--were the lead-off witnesses at the grand jury proceedings. Garrotto, who wheeled a box of documents into the grand jury room, would say only that the records were “to back me up.”

Jessen, who has said in earlier interviews that county officials were “horrified” by the land transfer, declined all comment.

Okazaki and Mocalis have said they prepared the deed at the direction of a unanimous vote by the Community Service District, which administered local public land before Laguna Niguel incorporated as a city in December, 1989.

But Krembas has said he signed the deed under the mistaken belief it was part of another transaction. All other district board members--three of whom have been subpoenaed to testify--have said they were unaware of the transfer and would not have approved it.

Krembas, who has also been subpoenaed to testify, had initially been considered a focus of the probe in part because his wife was hired by Taylor Woodrow homes as a sales executive three months after the land transfer.

Krembas has maintained that his wife’s employment by Taylor Woodrow Homes was only a coincidence. He said Tuesday that she was laid off recently from her position as a regional sales manager because of the downturn in the economy.

The prosecutor’s decision to subpoena Krembas, rather than send him a special “target” letter, would indicate he is not now considered a focus of the criminal probe. Krembas, who testified late Tuesday, said he has never considered himself a suspect in the investigation.

“I’ve never even sought or gotten legal advice,” Krembas said in an interview before he testified. “There was never any reason to.”

Other former or current local officials subpoenaed to the grand jury Tuesday included Laguna Niguel Mayor Patricia C. Bates, Councilman Paul M. Christiansen and developer James Smith, all of whom served on the district board at the time of the transfer.

Bates said she had been instructed not to discuss her testimony. Christiansen, who said he will return Thursday to testify, also declined to discuss his upcoming testimony but said he was pleased that the grand jury proceedings had finally begun.

Christiansen, frequently at odds with Krembas, has been the City Council’s most outspoken critic of the land transfer. “I find it extremely refreshing that the process seems to be working--that the facts are going to come out,” Christiansen said.

Also appearing before the grand jury was Laguna Niguel City Clerk Juanita Zarilla, who is scheduled to complete her testimony today. Zarilla, who was asked to verify official city documents Tuesday, is expected to be asked today about a board resolution drafted by Okazaki and signed by Mocalis in early 1988.

The resolution indicates that the board approved the land transfer by a 4-0 vote on Jan. 20 with then-president Bates absent. Official minutes of the Jan. 20 meeting, subsequently approved by the board, show that Bates was present for the entire session. The minutes reflect no such resolution being discussed or approved.

Zarilla is expected to tell the grand jury that the resolution does not appear in a master file that includes the originals of all resolutions passed by the board during its three years of operation.

After an initial search of the files turned up empty last summer, a copy of the resolution was found filed among other city records, she said. Zarilla, who took over as city clerk last summer, said that it was not unusual for records to be misfiled.