In Indian Wells, banker’s comments to council rattle City Hall

When Haddon Libby stepped to the podium at the Indian Wells City Council meeting last summer, he didn’t think his questions were particularly difficult. Rumors were floating through the wealthy desert city about the salaries and benefits that city leaders were drawing, and he wanted to know if they were true.

Dressed in a brown suit and open-collared shirt, Libby knew most of the council members, and he addressed them by their first names.

Did the city manager and council members receive free use of VIP rooms at Eisenhower Medical Center? What about free golf for life at the two city-owned pro-level courses? Was it true that council members got free carwashes?

Libby said that by his calculations, City Manager Greg Johnson could receive $9 million in pension payments. “While you could be the greatest city manager in the history of mankind,” Libby said, “I think that’s high.”

In his eight minutes in front of the council, Libby, a well-known banker who had served on the boards of the Palm Springs Film Festival and the Living Desert Zoo and Botanical Society, had dived headfirst into the overheated politics of Indian Wells.

Within days, Johnson sent Libby’s boss the first in a series of emails, complaining about Libby’s “inflammatory and disrespectful” behavior.

“I am requesting a public apology from Mr. Libby for his comments,” Johnson wrote. “As a representative of First Foundation Bank, Mr. Libby will be held accountable for his comments now and into the future.”

A few weeks later, Libby was fired. Indian Wells is a manicured city of just 5,000 permanent residents, best known for its professional tennis tournaments and groomed country clubs. In the cool months, its population more than triples as people stream in to enjoy the golf courses and spas. Even the city’s federally required low-income housing is located in gated communities.

Years before Libby’s Aug. 4 turn at the podium, politics in the retirement community had turned contentious. There were allegations of sweetheart deals for developers, and a councilman was investigated for allegedly insulting a waitress at a city-owned golf course restaurant, a probe that cost the city $30,000 and laughingly became known as “Hamburger-gate.”

But Libby’s comments whipped up a political storm that rattled City Hall.

The day after the council meeting, Libby filed a public records request seeking information about the pay and benefits for council members and the city manager, invoices for city-paid carwashes, expense reports. He posted his calculations for Johnson’s future pension on his Facebook page.

Johnson, who’d been on the job nine years and was earning $262,500 a year, responded by sending Libby’s boss, Scott Kavanaugh, chief executive of First Foundation Bank, a series of emails, copies of which were obtained by The Times. Almost immediately, Kavanaugh sent Libby an email informing him that Johnson had called and was upset.

Libby then emailed Johnson: “I was trying to calm things down. Sadly, you want to attack.”

Johnson replied by email: “If this is how you calm things down by lying in public about matters then I guess we will have a problem.”

According to Libby, Kavanaugh called him and told him to “tread carefully.” If he spoke to Johnson, sued him or ran for council, he’d be fired, he said he was told.

Libby said the city manager’s emails and calls to Kavanaugh had come at an especially delicate time for First Foundation, which was trying to buy a small desert bank, and Kavanaugh was worried the clash with Johnson could blow up the deal.

Kavanaugh and the bank, through their attorneys, declined to comment.

On Sept. 7, Johnson’s emails resumed. “By this email,” he wrote, “I have also copied Mr. Kavanaugh to keep him in the loop since you have chose to post on Facebook and make public comments. I think this is fair.”

Minutes later, Libby wrote his boss: “...the reason he is being a bully is because this information appears to show a series of violations of law or tax evasion by him, the Mayor and Mayor Pro-tem.”

And minutes after that, Libby sent an email to three council members complaining about Johnson. “To involve my CEO and put my career in jeopardy is wholly inappropriate and possibly a violation of law.”

Several hours later, Johnson sent Libby another email, with a copy to Kavanaugh.

“It’s difficult to trust a community banker like yourself. The proof is in your request and actions. Please don’t cry wolf when you choose to get involved in politics.”

The next day, Libby was fired.

His bosses at First Foundation, he said, didn’t give him a reason. But a month later, he said he received a letter saying he had been fired for not meeting goals.

A week after losing his job, Libby spent three hours on local talk radio, broadcasting outside City Hall during a council meeting. The Haddon Libby saga had become the talk of the town.

Johnson was forced to resign in October, leaving with a $427,592 severance package. The city issued a statement saying it had been forced to make the payment because Johnson’s contract said he could be fired only for “serious misconduct,” and the Libby affair didn’t qualify.

Neither Johnson nor his attorneys would comment.

Libby is now suing First Foundation and Kavanaugh for wrongful termination and defamation. He’s also filed suit against Indian Wells, Johnson and former Mayor Patrick Mullany.

Mullany, a former FBI agent, blamed the explosive city politics on a small group of troublemakers. “They sat around looking for ways to get to us, to get under our skin,” he said. “And if I sound paranoid, it’s because I am.”

Stepping into the fray now is former Los Angeles County Supervisor Peter F. Schabarum, an Indian Wells resident for 20 years. Schabarum, 83, is sponsoring a November ballot initiative to limit council compensation to $1,000 a month, with no benefits.

The council has put its own proposal on the ballot, which would keep the council salary at its current $2,300 a month and include retirement and medical insurance.

As for those questions Libby had asked the council, city leaders no longer get free carwashes or golf. The $9,000 a year they were receiving to attend social events has been cut. As for the VIP rooms at Eisenhower, which the hospital describes as “private five-star accommodations,” hospital spokeswoman Lee Rice said any high-profile patient would have access to them and that they would be free for elected officials.

And Libby is running for City Council.

jeff.gottlieb@latimes.com