Carona Revises Campaign Documents

Orange County Sheriff Michael S. Carona on Monday filed amended campaign contribution reports to reflect the cost of a 2000 fundraiser thrown by a Newport Beach businessman who funneled money into the sheriff’s political war chest using a stock swap that experts say probably was illegal.

The sheriff was responding to an escalating scandal that was touched off last week when Charles H. Gabbard said he persuaded dozens of investors in his company to contribute $1,000 to Carona’s 2002 reelection campaign in exchange for company stock.

Gabbard made the admission in the wake of county and federal investigations into alleged influence-peddling in the Orange County Sheriff’s Department. This month the sheriff fired a top aide, George Jaramillo, who worked for Gabbard as a consultant in 2000 and 2001.

Carona could not be reached Monday. But Michael Schroeder, a lawyer and former head of the Republican Party in California who stepped in to help the sheriff deal with the crisis, said the amended campaign finance statement corrected the mistakes that have been revealed by the controversy.

The sheriff also has asked the state attorney general and Orange County district attorney’s office to determine if his campaign received illegal donations.

Schroeder said the revised campaign statement reflects the $2,200 that Gabbard spent to host the birthday party and fundraiser May 18, 2000, at the Villa Nova restaurant in Newport Beach. Because Gabbard had already contributed the maximum of $1,000 to Carona’s campaign, that “in-kind” donation exceeds the legal limit and may be returned, he said.

Schroeder said Carona’s campaign learned about that contribution from recent newspaper reports. The amount was based on records of the event kept by Villa Nova owner Andy Crean.

Gabbard, however, has said he spent $45,000 on the bash, including payments for entertainment and other services not provided by the restaurant. On Monday his lawyer, John Gladych, said Gabbard arrived at that figure by including $39,000 in donations he passed on to Carona’s campaign about that time. Of that sum, at least $32,000 came from investors to whom Gabbard had promised stock in exchange for their political contributions.

Several investors contacted by The Times -- most from out of state -- have confirmed this account, although some say their money was diverted without their knowledge.

Gabbard, who hoped to strike it rich with a laser device that could safely shut down the engine of a speeding car, was seeking Carona’s help in promoting the device. The sheriff, along with other law enforcement officials, signed a letter asking the Legislature to support the technology that underlies the device, but apparently did nothing to directly promote Gabbard’s company, CHG Safety Technologies. Experts say exchanging stock for contributions amounts to campaign money-laundering, an offense that the Fair Political Practices Committee considers the most serious of all campaign finance-law infractions.

“I don’t think it makes any difference whether the person is being paid back in cash or in stock,” said Jim Knox, executive director of California Common Cause, a nonpartisan organization that advocates open government.

The practice would be illegal in part, he said, because “the true source of the contribution has been concealed.” Also, Knox said, Gabbard would be violating the law by effectively giving more than a single contributor is allowed to donate. But Carona and his campaign officials aren’t liable if they were not aware of the scheme, Knox and other experts said.

“Whomever orchestrated the contributions would be legally liable,” Knox said.

Whether Carona and his campaign officials knew about the stock scheme at the time is unclear.

Shirley Grindle, an outspoken political watchdog who helped craft the county’s campaign reform ordinance decades ago, said she alerted the sheriff’s campaign in 2000 that something was wrong. Grindle filed a formal complaint Monday asking the Orange County district attorney’s office for an investigation into the contributions arranged by Gabbard.

Grindle said she noticed in 2000 that residents of Wisconsin, Ohio, Michigan and Pennsylvania had donated to Carona’s campaign.

Grindle said she called Lisa Jaramillo, who was a Carona campaign fundraiser and wife of Carona’s former top aide, and asked “why these individuals would be making contributions to an Orange County candidate, and how did they even know who Sheriff Carona was?”

Lisa Jaramillo acknowledged Monday that Grindle “thought it odd” that Carona had contributors outside California, but that she never suggested the donations might be illegal. Jaramillo said she never called any of those donors to ask if they had been reimbursed.

Jaramillo acknowledged that she did call a local hairdresser and a plumbing business after Grindle questioned their $1,000 contributions.

“She was concerned that [the donors] may have been reimbursed for their donations,” Jaramillo said. “I called those two people, and both personally told me they had not been reimbursed.”

Jaramillo said Gabbard is solely responsible for any errors in the campaign’s contribution reports. “He picked the restaurant. He arranged it. I don’t even want to try to understand what Gabbard did or tried to do,” she said. “It’s all very confusing.”

In light of the recent news about Gabbard’s contributions, Grindle took another look at Carona’s campaign reports and concluded that Carona’s campaign also failed to report to the IRS $29,000 in interest accrued between 2000 and 2003.

Schroeder said the amount is closer to $14,000, according to the campaign’s calculations, which is what they are now reporting in the amended statements.

Schroeder also said campaign officials have taken the questionable contributions they have identified so far and put them in a special account until state and local investigators can determine whether the money should be returned to donors or deposited in the state’s general fund.