San Diego When former port commissioner David Malcolm -- long known for mixing business with politics -- pleaded guilty to violating state conflict-of-interest laws last week, establishment members sighed with relief, "It's behind us."
Sotto voce, they were no doubt saying, "Back to dirty business as usual."
Maybe not. In investigating and nailing Malcolm, the district attorney's office used the very broad Code 1090 of state law, which has been on the books for a long time. It says that a public official can't have a financial interest in a contract entered into by government. By contrast, the Political Reform Act of 1974 "is a checklist of specifics," says Robert Fellmeth, director for the Center of Public Interest Law at the University of San Diego. "There are lots of holes in the Political Reform Act, and you have to use 1090 to fill them."
He is enthusiastic about the DA's office using 1090 in the Malcolm stench, and so is Deputy DA David Stutz, who is now in charge of ethics and election enforcement. Under DA Bonnie M. Dumanis, "We are taking a harder look at all statements of economic conditions with public officials," says Stutz.
By contrast, there is the sorry case of the Valerie Stallings gift-giving scandal. She got off lightly because the U.S. Attorney and DA offices used the Political Reform Act.
As a councilmember, Stallings had received thousands of dollars in gifts and other benefits from John Moores and his San Diego Padres. Moores had cut Stallings in to the "friends and family" list of stock in a hot initial public offering of Neon Systems, a Moores-controlled software company. She was one of a few who got in at the initial price of $15 a share. After the stock zoomed, Moores tipped her off to sell within $1.10 of the all-time high of $50.25.
And Moores, who was lobbying the city council for a downtown ballpark as well as low-priced development rights to 26 downtown blocks, showered other gifts on Stallings.
Months before the case's resolution, Stutz had commented that if there was a quid pro quo, if Stallings got inside information not available to others, and if she performed services beyond those of a normal councilmember, then it might be bribery. However, Stutz doubted that his boss, then-DA Paul Pfingst, would touch it.
Well, Pfingst and then- U.S. Attorney Gregory Vega touched it -- but barely. They pulled out the minutiae-laced Political Reform Act and focused on itsy-bitsy things. Stallings was given misdemeanor wrist-slaps for not reporting the gifts under the act. Moores skated. "She got off easy, and he got off easier -- completely," says civic activist Mel Shapiro, who still doesn't understand why the bribe issue didn't come up.
But it could have been a felony case against Stallings if 1090 had been invoked. Why didn't the DA and U.S. Attorney's offices use the broader 1090? "You have to look at the players," says Stutz. "[Former acting U.S. Attorney] Chuck LaBella representing the Padres, negotiating with his friend, [then-U.S. Attorney] Greg Vega." The third leg of the triangle was Pfingst.
"After an extensive investigation using the FBI, the only crime they can find is a misdemeanor in state court, so they have to get Paul [Pfingst] involved," recalls Stutz. "He won't touch it, so he brings in an assistant U.S. Attorney [Thomas W. McNamara, who headed the U.S. government investigation] and made him deputy DA for one day." Then followed the puny charges for violation of the Political Reform Act.
Following the whitewash, Vega (who represented Malcolm in the case resolved last week) and LaBella backed Pfingst for re-election, and McNamara formed a law firm with LaBella, with Moores's Peregrine as the major client. Nice round-trips, huh?
Later, Mayor Dick Murphy named both Vega and LaBella to the ethics commission. Hmmm.
Vega and LaBella claim the Stallings case was properly handled. LaBella explains how he came to back Pfingst. "Greg Vega asked me if I would be listed in support of the work [Pfingst] did, and I said yes, I supported the law-enforcement work he had done."
Did the U.S. Attorney's office look into 1090? "I don't think commenting upon internal decision-making processes is appropriate," says Vega indignantly.
At the press conference announcing the action in early 2001, Vega refused to say whether Stallings had passed confidential information to the Padres and claimed that there was nothing wrong with giving money to a politician. I asked him and Pfingst if that was true when the gift-giver stood to gain extremely valuable real estate. Pfingst quickly changed the subject. Today, Vega says, "I am not going to answer that."
"I suspect that if the DA's office today had all that evidence, it might have been handled differently," says Stutz. Alas, the case was immediately sealed in 2001, and Stutz doubts it can be reopened. Still, "I would love to have that grand jury transcript and see if state crimes occurred and who broke the state laws."
However, 1090 was not dead when the records were buried. San Diego attorney Bruce Henderson brought a civil suit in Superior Court stating that the courts had concluded for years that a public official's interest in a contract could be indirect. Henderson argued that Stallings and Moores had a clear-cut arrangement: She received gifts and got promises of future gifts, and in return, she cast votes that benefited Moores and the Padres to the tune of more than $100 million. This quid pro quo arrangement also violated City Charter Section 94, argued Henderson.
Not surprisingly, the City Attorney's office argued that a councilmember receiving gifts from a developer seeking favorable votes did not constitute a conflict of interest. Also not surprisingly, the Superior Court sided with the city.
However, the Fourth District Court of Appeals shot down the city's argument. The Stallings/Moores relationship was prohibited under both 1090 and City Charter Section 94, said the appellate court, calling the city's main argument "disingenuous." However, since the court upheld the validity of city council actions to reaffirm votes taken while Stallings was present, the case was moot, said the court. Also, the appellate court took its option of not having the opinion published, so it didn't become a precedent.
"The Fourth District Court of Appeals is big on not publishing opinions," says USD's Fellmeth. "If they did, they would get many reversed. But that's another issue."
In any case, if the DA's office under Dumanis will use 1090 as a weapon and also focus on gift-givers and what they receive, San Diego can start making a crack in the institutionalized, establishment-dominated white-collar crime that historically has fleeced the populace and slid untouched through the cracks of local law enforcement.