Conflicts by Huntington Beach Mayor Alleged

The state’s political watchdog agency has been asked to examine possible conflicts of interest by Huntington Beach Mayor Dave Garofalo involving his publishing business, the profit he made on a real estate sale and approval of a redevelopment project near his home.

This week, Huntington Beach City Atty. Gail Hutton asked the state’s Fair Political Practices Commission to determine, among other things, whether Garofalo should have voted on matters involving companies that paid for advertising in the Local News and the city’s visitors guide. Garofalo told city officials he sold the newspaper in 1997 but county and state documents list the owner as David P. Garofalo & Associates Inc., which is owned solely by the mayor.

Hutton also asked the commission to rule whether Garofalo’s 1998 purchase and sale of a new home--and the profit he made on it--would affect his ability to vote on matters involving the builder, and whether he can continue to vote on a redevelopment project within 2,500 feet of his house that could boost his home’s value.

State law forbids elected officials who receive $250 or more from voting for one year on matters that would have a financial impact on the giver.

Hutton said her office separately will investigate the relationship between Garofalo’s company and the city-funded Conference & Visitors Bureau, for which Garofalo’s company has published the city’s visitors guide since 1994. Garofalo served on the board of the visitors bureau for several years and still sits as a nonvoting member.

State law also prohibits elected officials from having a financial interest in any contract approved by them or by a body on which they are members.

Officials Can’t Vote on Deals Affecting Them

Until the state makes a ruling, she said, Garofalo should stop voting on projects involving advertisers with the Local News and the Visitors Guide. She said he should declare a conflict of interest toward those companies, as well as the builder of the home he bought and the developer of the redevelopment project near his house, also an advertiser.

Garofalo said he has done nothing wrong. He said in a memo this week that he sold his splashy twice-monthly tabloid, the Local News, in December 1997 to Ed Laird, a community activist who owns Coatings Resource, a local paint manufacturing company. County documents reflect a change of ownership to Laird’s son in January 1999 but Garofalo was listed as owner again in April of this year.

In a surprise announcement Monday during the City Council meeting, Garofalo said he has divested himself of any remaining interest or activity in his publishing businesses. He has received $100,000 a year as a consultant to Coatings Resource as part of the terms of the sale.

Garofalo did not respond to a request Wednesday for comment.

In an earlier interview, he blamed the controversy surrounding his business deals on environmentalist enemies and jealous council colleagues. He said his past votes involving projects of advertisers were cleared by Hutton and that he was following state law.

However, in a memo earlier this week to Garofalo, Hutton said her earlier advice was based on his statement that he sold the Local News and no longer had a financial interest. Hutton said she learned recently that he was still listed as sole owner of the corporation that owns the Local News, and that he continued to sell advertising space and receive payments in connection with the 2000 Visitors Guide, and to receive payments.

Garofalo critic Debbie Cook, a Huntington Beach lawyer who filed a complaint with the FPPC on the mayor’s business dealings in May, said Garofalo has cast “dozens and dozens of votes” for projects involving advertisers in his publications since he took office in January 1995.

Her complaint listed 25 council actions since 1995 on behalf of the Waterfront Hilton alone, the biggest advertiser in the annual Visitors Guide and the Local News.

Critic Cites Favorable Votes for Advertisers

Cook, an attorney, said Wednesday she has faith that the FPPC and Hutton will “do the right thing” and disqualify Garofalo’s votes. However, she said, the mayor should step down immediately.

“He can’t vote on basically anything [the council] rules on,” she said. In fact, votes on two advertisers’ projects were considered Monday by the council, though Garofalo had left the meeting by then.

Hutton has asked the FPPC to resolve conflict-of-interest allegations raised by Cook and other local residents, including:

* Why a Santa Monica developer was asked to write a check to David P. Garofalo and Associates Inc. to pay for a half-page ad for the 2000 Huntington Beach Conference & Visitors Guide. Garofalo said this month that he deposited the $2,995 check from Commercial Investment Management Group, which is building the $46-million redevelopment project near his home, into an account for the Local News. Four months after the check was written, Garofalo voted to move forward with CIM’s project.

* Why Garofalo has voted on city grants to the Huntington Beach Conference & Visitors Bureau, which extended a no-bid agreement for the Local News to solicit ads and publish the annual visitors guide. In October 1996, Garofalo abstained from the grant vote, citing a “remote interest” in the contract because he sat as a voting member of the bureau, minutes show. But in ensuing years, Garofalo voted to approve the appropriations without mention of any possible financial conflict.

* What was Garofalo’s interest in the 1998 sale of a new home in the St. Augustine tract of Huntington Beach that Garofalo owned for three days. He agreed to buy the two-story home, which overlooks the Bolsa Chica wetlands, for $565,000 on March 26, 1998. He closed escrow on July 27, 1998. The following day, Garofalo sold the home to gas station and oil-well tycoon George A. Pearson for $625,596. Garofalo said he was offered a home by the developer and that he agreed to sell it to Pearson. In a statement he issued to the council on Monday, Garofalo said that after paying for upgrades, his net profit on the house was $1.

Critics also wonder why Garofalo borrowed $50,000 from a Bay Area bank to become a founding director in Pacific Liberty Bank, an independent institution opened last year, then continued to vote on matters involving fellow directors of the bank. The bank has been at the center of a political firestorm with some opponents of a proposed Wal-Mart project alleging that developers bought stock in the bank to curry favor with Garofalo, two other council members and two Huntington Beach planning commissioners who are investors.

The Orange County district attorney and the state Fair Political Practices Commission didn’t initiate investigations into the conflict-of-interest allegations involving Pacific Liberty Bank. The county grand jury decided there was no conflict after examining the allegations but it was later learned that the grand jury foreman was also a bank investor.

But allegations of Garofalo’s conflict of interest between his publishing businesses and his role as lawmaker have persisted.

The Local News, which he founded, runs ads for restaurants, bowling alleys, doctors, hotels, real estate firms and car dealers in Huntington Beach, Fountain Valley and Westminster. It also prints glowing front-page articles about charity galas, golf classics, towing companies and other retail projects as well as Garofalo’ front-page column called “The Bottom Line.”

Garofalo said this week that he sold the Local News in late 1997 to his friend Laird and agreed to stay on as publisher/consultant for $100,000 a year for three years. Laird said he agreed to pay Garofalo $200,000 for the business.

When asked by The Times, neither could produce any contract or other documents outlining the terms of the sale or the date.

Documents Garofalo filed with the county are contradictory.

In February 1998--three months after he said he sold the business--Garofalo registered with Orange County as owner of the Local News. That filing was followed nearly two years later with a similar form, submitted on Dec. 28, 1999. This form, signed by Jeff Laird, Ed’s son, said the Laird’s Air Quality Consultants firm assumed ownership of the Local News in January 1999.

Then, on April 25, Garofalo reregistered the Local News with the county, with David P. Garofalo and Associates listed as the owner.

“To this day we don’t know if he sold the paper or not,” said Tom Harman, a councilman who has urged Garofalo to disclose the details of the sale. “It causes me a great deal of concern. All of this casts a dark cloud on the entire council, and it tends to increase the public perception and mistrust in government.”

Visitors Bureau Ties Also Draw Complaints

The relationship between Garofalo and the city-funded Huntington Beach Conference & Visitors Bureau also has angered critics.

The bureau receives all of its funding--$235,000 this year--from the city. No city money is used for the production of its visitors guide, with advertising revenue covering costs. Any money left over goes to the Local News.

Though the bureau’s contract with David P. Garofalo and Associates to produce the guide expired three years ago, the group has continued to award the job annually to the company.

“We’ve been really happy with the guide,” said Diane Baker, the bureau’s president. “We’ve always been glad it was done in town with someone with knowledge of the community. We thought that we were doing a good thing by having it published locally.”

Dave Sullivan, one of Garofalo’s critics on the council, questioned the contract.

“[Garofalo is] voting for their funds, then he profits from publishing their guide,” Sullivan said. “There is a law that says a public official cannot profit from a contract let by the city.”

Garofalo has supporters on the council, including Councilwoman Pam Julien, who said he is “innocent until proven guilty.”

John Given, vice president of the CIM Group of Los Angeles, said too much has been made over his advertising check to Garofalo’s company. It was the first time the firm--which still needs final city approval for its project--advertised in the guide, he said, and it has never advertised in the Local News.

Given said Garofalo approached the company last fall about buying an ad, then sent a rate sheet but didn’t specify who should receive the money. He said someone in his office called the Local News and an unidentified staff member told them to write the check to Garofalo.

“In hindsight they should have had us write the check to the Local News,” Given said recently. But the company wasn’t pressured to buy the ad, he said.

“We didn’t do it because he was the mayor or because he was on the City Council,” Given said. “We thought about [placing an ad] and decided that it made sense because the guide helps convey a good impression of the city.”