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.
In San Francisco, the memo says, Malcolm used his influence with Mayor Willie Brown and staff in an attempt to set up a deal to allow Duke to operate that city's Hunter's Point power plant. By April 1999, the San Diego Unified Port District had closed escrow on the South Bay plant and leased it to Duke. During another series of votes regarding Duke and the South Bay plant in May 1999, Malcolm was absent from the commission but continued to work on behalf of Duke offstage. He prospected on behalf of Duke for other power plants in Alexandria, Virginia, and Washington, D.C.
In May 2000, Duke and Malcolm's Public Benefit Power cut a deal. Malcolm's company received $20,000 a month for consulting services. He collected a total of $210,000 before the contract was terminated a year later. Under the contract, the port commissioner from Chula Vista advised Duke on the South Bay plant, lobbied for an enterprise zone to provide the company favorable tax treatment, and secretly agreed not to "assist any competitor or potential competitor of [Duke Energy], including, but not limited to San Diego Gas & Electric Company and the San Diego Unified Port District."
In the wake of Malcolm's guilty plea, prosecutors argued for a tough sentence. "Malcolm pursued an ongoing and flagrant course of conduct with the purpose of placing his personal interests over the public's interest," prosecutors wrote. "His behavior was deceptive and sophisticated. All attempts to reform or rehabilitate Malcolm should be of secondary consideration to the primary objective of imposing punishment on him."
Spurning that advice, superior court judge John Einhorn gave Malcolm (now 49 and balding) just 120 days in a work-furlough facility at 35th and Ocean View, which Malcolm entered last week. Malcolm will have to fork over $260,000 in fines and restitution. As a felon, he will no longer be able to vote or hold public office. The investigation yielded a mountain of e-mails, memos, and letters documenting how the former port commissioner masterminded his scheme with help from Peace, Willie Brown, and others, a selection of which follows.
September 11, 1998
- To: Bob Weisenmiller
- From: Paula Rosput [Duke Energy]
- cc: Richard Duzsynski
- Subject: Congratulations
I absolutely would like for you to set up the David Malcolm meeting -- just do it with Rick Duszynski. Frankly, we sat down with Sempra last week and they'd be eager to see us involved. Rick and I both agreed that this one could be worth the effort.
September 14, 1998
- To: David Malcolm
- From: Bob Weisenmiller [port energy consultant]
- Subject: Congratulations
David -- think about your availability for dinner. (I am on vacation from Sept. 23 through October 6, so while it would be best if I am there if it screws up the timing I'll have one of my colleagues there.) I had told Paula that I thought it was too late for the San Diego plays but that she should find a relationship with you to be very useful for their Northern California power plants.
September 16, 1998
- To: David Malcolm
- From: Bob Weisenmiller
- Subject: Duke
David -- I had a long talk with Rick Duszynski of Duke yesterday about meeting you. Rick indicated that he needs to pick Paula's brain between now and close of business Friday, when she leaves for her new job, and also Duke is going through its internal personnel process, so he could not leave Houston this week. Given your schedule, that pushes things back until late next week or the following week. I indicated that I was out after the middle of next week for two weeks, so I suggested that he contact you directly and work out a mutually convenient time rather than put everything on hold for a couple of weeks. I also indicated that my colleague Steve McClary would be happy to step in to facilitate things, since Duke is familiar with him. (While I am out, I have told Chris and Tom that they should deal with either Steve or Bill Monsen on Port issues. Steve is Mr. ISO/RMR issues and Bill is Mr. Cash Flow modeling and South Bay assumptions issues. They are both principals of the firm and I have relied upon them on the detail of these issues, so you are in good hands.) However, we at MRW are trying to facilitate the meeting rather than having my availability become an obstacle.
I was relatively clear to Rick that I thought you could help them on their PG&E assets and that there may or may not be an opportunity for them to help the Port on South Bay. Rick was pretty clear they would not hesitate for a second on ISO/RMR contract issues (and given Kent's noises lately you may need this card), Duke has world class engineering capability, and very deep pockets. He thought Don Felsinger was going to call you and say some good words about Duke...
October 15, 1998
- To: David L. Malcolm
- From: Richard J. Duszynski
- Re: South Bay Power Plant
I can imagine that everyone is in quite a festive mood out there in San Diego after last night's victory. Since Houston ended up having to lose, it is at least a small consolation that they did so to the eventual NL Champion. It would be even nicer if we could say "World Series Champion," so rest assured I will be lining up behind the Padres in their upcoming series.