David Malcolm was born to be a prince of San Diego politics. Malcolm grew up poor in Chula Vista and ached to be rich, as he repeatedly confided to reporters. In 1972, while still attending Chula Vista High, the then-18-year-old Malcolm got his real estate license. He never stopped selling. He leveraged one fixer-upper into 2, then 4, then 14 units, he once told the L.A. Times. In his early 20s, Malcolm started a mortgage company that he called Suncoast Financial. The company catered to the South Bay's monied elite -- eye doctors, surgeons, dentists, car dealers, and elected officials. Malcolm moved into an expensive home in Coronado Cays, the bayside collection of mini-mansions on the Coronado Strand.
Malcolm's wife Annie introduced him to her old high school chum Steve Peace, another young Chula Vistan, who later became an assemblyman and state senator. Peace got his start as an ambitious protégé of liberal Democratic assemblyman Larry Kapiloff. Others who counted as Malcolm's friends and business partners included Greg Cox, then Chula Vista mayor; developer Tawfiq Khoury; and George Gorton, Pete Wilson's chief political consultant who earlier served in Richard Nixon's Watergate-tainted 1972 reelection campaign. In 1982, at age 28, Malcolm was elected to the Chula Vista City Council. By age 30, he was on the state coastal commission, appointed by then-assembly speaker Willie Brown.
In October 1986, when Malcolm was 32, a disgruntled ex-partner surfaced and claimed he had a tape recording of Malcolm urging him to blow up a house for $1.3 million in insurance money. "Why couldn't somebody just go in and turn on the gas downstairs, leave the burner on upstairs with a candle burning, and when the gas gets to that, it would just blow up?" Malcolm was heard saying on one tape provided to the Los Angeles Times. Malcolm denied the charges and said he was "just playing along" with the man to gather extortion evidence against him. Malcolm said the tapes were doctored. Then-district attorney Ed Miller investigated and declined to prosecute.
That same year, Malcolm and Willie Brown arrived together by helicopter at a lavish groundbreaking ceremony hosted by developer Roque de la Fuente III in a 12,000-square-foot red-and-white tent to celebrate de la Fuente's 312-acre business park on Otay Mesa. Months later, the 33-year-old Malcolm was profiled by the Los Angeles Times as one of two "prominent swing votes" on the state coastal commission. The other was another Willie Brown appointee, Mark Nathanson, a 48-year-old Beverly Hills real estate investor.
Malcolm and Nathanson voted consistently in favor of developments favored by Brown's campaign contributors, and their votes frequently represented the margin of approval for controversial projects. Malcolm refused to talk about his fundraising relationship with Brown, other than to say that they were "real good friends." Nathanson was described by an unidentified legislator as "the one who gets Willie into Spago after hours." Later Nathanson was sentenced to five years in prison for extorting cash from developers in exchange for voting for their coastal permits.
Over the years, there were other brushes with notoriety. A 1988 investigation by the state's Fair Political Practices Commission (FPPC) into Malcolm's alleged conflicts of interest was dropped for lack of evidence. Termed out of his Chula Vista City Council seat in 1992, Malcolm was voted a seat on the San Diego Unified Port District board by his former city-council colleagues after leaving the coastal commission in 1995. In the port's world of loose-and-easy ethics, Malcolm survived repeated allegations that he used his position to peddle influence to a eager bidders.
In 1998, Malcolm was named to San Diego Magazine's list of "50 San Diegans to Watch," ranking just a bit behind singer Jewel. "A seasoned deal-maker, Malcolm sees the Port's future in terms of 'partnering,' " the magazine wrote in a glowing account of Malcolm's career. "We need to move away from trying to be our own complete little kingdom and think in terms of niche marketing -- doing what we do best," Malcolm was quoted as saying. "We need to compete with other ports less and partner more."
The full meaning of that quote only became clear this April, when Malcolm pleaded guilty to one felony count of conflict of interest following an investigation of his ties to Duke Energy and the South Bay power plant, located on the Chula Vista bay front. Under an arrangement with the state Public Utilities Commission, which allowed the merger of SDG&E and Pacific Enterprises, the plant was supposed to be auctioned off to the highest bidder. But Malcolm wanted it sold to the port and leased to an operator, to be chosen by port commissioners.
SDG&E initially opposed such a direct sale, but Malcolm intervened. In August of 1998, according to a sentencing memo, "Senator Steve Peace, a longtime friend of Malcolm, requested SDG&E President Edwin Guiles and SDG&E Vice President of Regulatory Affairs, William Reed, to come to Sacramento and meet with him and Malcolm. After several hours of negotiations at Senator Peace's office involving Malcolm, Guides, Reed, Senator Peace, and his aide, John Rozsa, the basic terms, including the price, were resolved under which SDG&E would agree to remove the [power plant] from the auction process and sell it to the Port District."
The port commission approved the deal on December 4, 1998, with Malcolm voting in favor. Prior to the vote, the memo says, "Malcolm had already commenced developing a personal relationship with Duke Energy." On November 16, he met with the city manager of Carlsbad to "facilitate Duke Energy's purchase of the Encina Power Plant." Two days later, he wrote a memo to Richard Duzsynski, a Duke vice president, which solicited the company's interest in taking over the plant. On December 1, 1998, the memo says, Malcolm, Peace, and Duke executives met for dinner at Rainwater's steakhouse downtown, the $432 cost of which Malcolm charged to the port.
The Encina deal fell through, but Malcolm continued to cultivate his relationship with Duke. He went to company headquarters in Houston, where he asked Duke to pay him for his efforts to find other power plants for Duke to operate. The company declined any "up-front money" but offered him a finder's fee if he succeeded at closing any transactions. Thus encouraged, Malcolm set up a corporation he called Public Benefit Power in January 1999, and enlisted the financial backing of two old associates: developer Tawfiq Khoury and investor Lawrence Cushman — the brother of Malcolm's fellow port commissioner, Jaguar dealer Steven Cushman.