D.A. says Baglin knew better

Barbara Diamond

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

$36,000 commission.

Baglin was indicted Oct. 30 after a grand jury hearing for what

Deputy District Atty. Jeff Winter described as a conflict of

interest.

“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

properties.

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 The first check was rescinded.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

prior transactions.

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.”