The Laguna Beach city attorney warned Councilman Wayne Baglin that
taking a commission for the sale of property he negotiated with the
city could be in violation of state law, according to district
attorney testimony released by the grand jury last week.
Laguna Beach Councilman Wayne Baglin was arraigned last Friday on
six counts of violating a state law prohibiting elected officials
from financially benefiting from deals with the city.
Baglin pleaded not guilty.
The charges were based on the sale of two properties on Third
Street in Laguna Beach to the city, for which Baglin acted on behalf
of property owners Dorothey and Edward Hatfield and received a
Baglin was indicted Oct. 30 after a grand jury hearing for what
Deputy District Atty. Jeff Winter described as a conflict of
“For a City Council person to step back and engage in as a real
estate agent wherein he negotiates the contract, sale of the property
to the city on behalf of the Hatfields and thereupon, received a
$36,000 check as a commission, is something the law does not allow,”
Winter said to the grand jury.
Testimony from the grand jury hearing was made public after the
arraignment. Witnesses were prohibited from discussing the testimony.
The chronology of the testimony as presented in the hearing:
April 2000: A city representative approached the Hatfields about
the possible purchase of their two lots at 374 and 86 Third St.
November 2000: Baglin elected to the City Council.
December 2000: Baglin seated.
Jan. 12, 2001: City Council discussed buying the two lots at a
public meeting. Baglin did not vote on the item. City Atty. Philip
Kohn advised Baglin that if he took a commission on the sale of the
property to the city he could be in violation of government code
1090. Council directed City Manager Kenneth Frank to take steps to
acquire the property.
Next: Frank was informed that an offer had been made on the two
Jan. 19: The Hatfields signed a contract, naming Baglin as their
agent. The agreement included a terms of commission to Baglin, 2% of
the sale price.
Jan. 23: Frank sent a letter to the Hatfields that the city was
interested in buying the lots. He sent a second letter to Baglin Real
Estate with a $50,000 check to show intent and later a check to
Chicago Title Co. to open escrow. The first check was rescinded.
In closed session that night, the council instructed Frank to
initiate acquisition by eminent domain.
Jan. 24: Frank informed the Hatfields by letter of the city’s
intent, which would have required an appraisal.
Jan. 26: Hatfields sent a letter to the city, indicating they were
willing to sell and setting terms.
They said the eminent domain process wouldn’t be necessary because
the city was offering the full asking price of $1.8 million.
Jan. 29: The city agreed to the price.
Feb. 1: The grant deed was signed.
Feb. 26: Escrow closed.
Baglin has declined to comment on the case on the advice of his
attorney, Michael Molfetta of Newport Beach. However, public record
shows that Baglin never voted on the acquisition of the properties
nor participated in any discussion of acquisition strategies.
He allegedly told district attorney’s office investigator Tim
Craig that he did nothing illegal because elected officials are
occasionally allowed to complete contracts begun before they take
office. However, the Hatfields testified that they did not sign a
contract for the Third Street properties with Baglin until almost a
month after he was elected, although he had acted on their behalf in
Baglin also told Craig that he had a prior relationship with the
Hatfields and it was necessary for him to be their agent, Deputy
Dist. Atty. Winter said.
Council members Steven Dicterow, Paul Freeman and Cheryl Kinsman
all testified that they have no business dealings with the city in
their professional lives.
Kinsman agreed with Winter’s statement that it was her
understanding that she could not have any financial interest or enter
into any contracts with the city while sitting on the council.
“My obligations are to act in the best interests of the city with
an undivided sense of loyalty,” Dicterow said to the grand jury.
Baglin’s attorney, Molfetta, said the accusations against Baglin
are politically motivated. Questions were also raised about the
culpability of the other council members approving the purchase,
knowing Baglin was the agent.
“I am not aware of any facts or circumstances that would support
or substantiate any allegations of criminal wrongdoing in this matter
by any other council members,” City Atty. Kohn said.
Kohn and Mayor Toni Iseman were subpoenaed by the grand jury,but
not called to testify.
Frank represented the city in the negotiations for the two
parcels. He agreed with Winter’s statement that any commission paid
Baglin was between the sellers and their agent.
The city did not get an independent appraisal on the property.
Baglin had evaluated it in 2000 at the request of the Hatfields.
The city could not be sure at that time of the discussions with
the Hatfields that a lower price could be negotiated, Frank said.
“We felt the price was on the high side, but we didn’t know, and
somebody -- a good source -- had told me that there was an offer and
we couldn’t take the chance that somebody else would buy the
property,” Frank testified.
Edward Hatfield told the grand jury that he was never concerned
about Baglin’s possible conflict of interest.
“He, being recused, didn’t enter into the voting or conversations
with the rest of the council members,” Hatfield said. “So that to me
was my understanding that there was no problem.”