The long-simmering probe into the business dealings of Brea City Councilman Ron Isles hit a pivotal point last week when dozens of investigators searched his law firm and the offices of his now-estranged business partner, developer Don McBride.
Agents of the district attorney's office carried away stacks of documents for an investigation into whether the two shared an unholy alliance in which Isles cast votes and participated in talks that almost clinched a valuable development contract for McBride.
State conflict-of-interest laws look sternly upon such relationships. If charged and convicted, Isles could be slapped with a three-year prison term, a $1,000 fine and be barred from holding public office. Isles says he has done nothing improper, contending that he had nothing to gain if McBride won a contract.
The Isles investigation is the second major controversy to embroil the five-member City Council in the last few months. Although the impact on the council's effectiveness is debatable, some civic and business leaders have become worried about their local government at a key time in the city's redevelopment.
"We certainly are concerned about the quality of the people in office," said Bill Murray, a vice president of the Brea Chamber of Commerce. "Our particular concern is what, if any, will be the ultimate impact on the (downtown) redevelopment program. It is of vital interest to the business community."
Isles is not the only Brea official defending his actions. Mayor Wayne D. Wedin is under investigation by the state Fair Political Practices Commission for steps he allegedly took to benefit a planning firm.
The district attorney's office is also looking into other potential conflicts of interest by Isles, Wedin and other city officials, but investigators declined to discuss in detail the nature of the inquiry. Wedin says that he has done nothing wrong.
"Of course, it's disconcerting and disturbing to read all these negative articles about us and understand that people are investigating," said City Atty. James L. Markman. "But the projects we're working on, like our downtown redevelopment, everybody's energy and enthusiasm is still there. No one could characterize the place as being demoralized by this."
In February, McBride was abruptly pulled from the final phase of negotiating a contract to build an automotive service center on a 7.5-acre parcel when controversy erupted over his relationship with Isles. He has since initiated two lawsuits against Isles and the City Council.
Despite his upbeat outlook, Markman acknowledged that the lawsuits and the investigation have made other developers gun-shy about leaping into the void left by McBride.
With litigation pending against the city, the developer said, his once healthy business relationship with the City Council has soured, and he has been refused two city loans.
McBride, president of the local Rotary Club and past president of the Brea Chamber of Commerce, resents the taint the scandal has left on his reputation. He contends in one lawsuit that Isles misled him when he assured him that their business relationship would not conflict with Isles' duties as a councilman. He says Isles should resign from the council.
Affidavits filed at the Orange County Courthouse to support last Tuesday's searches of Isles' and McBride's businesses describe prosecutors' suspicions about their relationship. The probe focuses on how McBride came within a hairbreadth of winning a contract to build a carwash, tire store, hardware store and restaurant on a city-owned lot at the corner of Cypress Street and Brea Boulevard.
Investigators suspect that before he assumed office in December, 1988, Isles had "an ongoing business and partner relationship with Don McBride." Affidavits state that their relationship includes loans, interest payments and the sale of commonly held properties, as well as an attorney-client relationship.
"Ron Isles does have a financial interest with Don McBride and used his position on the City Council to participate in the process of awarding a contract to his partner, Don McBride," an investigator said in the affidavits. He added that documents seized from the law office, horse stables, McBride's offices and Charter Escrow, which handled the sale of the stables, might show that "a felony has been committed."
Deputy Dist. Atty. James J. Mulgrew said that under state law, public officials cannot participate in any discussions or votes that could benefit business partners. Such an act could be prosecuted as a misdemeanor or a felony.
Isles did not answer a Times request for an interview, but his lawyer, Thomas Avdeef, said there is "no evidence" that Isles acted to benefit McBride, since he did not actually vote to award the contract.
Avdeef said he is angry that the district attorney's office has turned the matter into "a political football" and engaged in "character assassination" by serving search warrants when Isles has been cooperating fully with the investigation.
The affidavits show that the probe concentrates on these events:
* In the fall of 1989, the city redevelopment staff decided that McBride Development Co. and one other developer, American Commerce Center, were the two best qualified for the project.
* The City Council, sitting as the Redevelopment Agency, conducted closed interviews with the two developers on Feb. 2, 1990. Isles and the four other council members queried officials from both companies.
* When those talks ended, the council directed Sue Georgino, the director of redevelopment services, to arrange for McBride to have the "exclusive right to negotiate" with the city for the contract.
* That right was formally awarded to McBride in a public meeting on March 6, 1990. Isles abstained on that vote and gave no reason for his abstention, the affidavit said.
* As the city redevelopment staff negotiated with McBride over the parcel, the City Council received periodic updates and offered direction, and Isles participated in those discussions, Georgino said.
* On Oct. 16, Isles voted with other council members to extend McBride's exclusive negotiating rights.
City Atty. Markman told investigators that Isles continued to participate in discussions about McBride's proposal until late December, 1990, when Markman, learning of the district attorney's investigation into a possible conflict of interest, told Isles to bow out, according to court affidavits.
McBride's court papers say that at a Nov. 27, 1990, meeting, the Redevelopment Agency had agreed to draw up the final contract awarding the project to him.
Isles has said in the past that his vote to extend McBride's exclusive negotiating rights was a mistake, a vote inadvertently cast on routine agenda items.
On Feb. 5, 1991, the city formally terminated McBride's right to negotiate on the parcel, concluding there was a possible conflict of interest because Isles and McBride shared a business relationship.
Investigators point to a general partnership of Isles and McBride, Town and Country Partners, which built a 100-unit apartment complex at 800 S. Brea Boulevard in 1985 and a business mall on Berry Street in 1986. It owns a horse stable in Carbon Canyon that is leased to Isles under the business name Giddy Up Inc.
Authorities also note that Isles leases the Lambert Road building housing his law office from McBride. On a 1989 public disclosure form, Isles listed McBride as the source of more than $10,000 in income, court records show. Prompted by a "cursory check" by the FPPC, Isles later amended his 1989 form to include a $10,000 loan from Town and Country Partners as well, the affidavit said.
Markman told investigators that Isles represented that he had been McBride's lawyer and did have an interest in Town and Country Partners but had severed his financial ties to McBride before his election in November, 1988.
But McBride contends in his lawsuit that the partnership was never formally terminated and even bought two additional properties. McBride also told The Times that Isles continued to work as his personal lawyer until February, 1991.
Mulgrew confirmed that the district attorney's office is looking into additional possible conflicts of interest by Isles and other Brea officials but would not provide further details. McBride said one of the investigating agents told his wife that the investigation is "a lot deeper than you are aware of."
City Manager Frank Benest expressed support for Isles, saying Brea's "wonderful reputation" has been built in part on "the long-term actions of leaders such as Ron Isles. He has helped produce a marvelous city government."
In recent years, other possible conflicts of interest have been alleged against Brea officials. Brea Electric Co. contends that the council's vote to seize large portions of downtown for redevelopment was improper because members "conveniently" excluded their own holdings from the area to be seized.
Brea Electric, which owned property in the targeted area, argued that the vote constituted a conflict of interest but abruptly withdrew that claim when the plan was revised to exempt the company. Markman said it was easier to exempt Brea Electric and others from the plan than to "tie up city resources in litigation."
Wedin is still under investigation by the FPPC for allegedly taking actions to help Costa Mesa-based Keith Cos. win a city contract to study the best ways to develop a 6-square-mile area around Tonner Canyon at the Los Angeles-Orange County line.
City planners at first rejected Keith and an affiliated firm because their proposal was too costly but later chose the pair for a $320,000 contract with the active support of Wedin.
The Times found that during the period in which Wedin was pushing for Keith Cos. to get the Brea contract, he was a subcontractor on a Keith project to redevelop a downtown neighborhood in San Diego. He earned at least $41,000 from that work.
Wedin admitted earlier that the relationship "caused an appearance of impropriety" but contends that he did nothing wrong because Brea stopped short of signing a contract with Keith as soon as the FPPC raised questions.
"There was no conflict of interest," Wedin said. "Not one penny changed hands. The relationship that was being discussed was terminated before it even began."