On July 30, 2001, the San Diego City Council unanimously voted to write a check for $1 million of the taxpayers' money to a nonprofit group called the San Diego Public Library Foundation, which had been incorporated only three months before.

Its president was James R. Dawe, a 58-year-old attorney and longtime lobbyist who is a familiar face in the corridors of city hall. According to lobbyist disclosure records, Dawe's clients include Pardee Homes and McMillin Communities of National City. Both are powerful developers who have long had their way with the San Diego City Council. McMillin built the controversial Liberty Station development on the grounds of the old Naval Training Center, which was conveyed by the city redevelopment agency in what critics argued was a sweetheart deal. The council has also approved millions of dollars in taxpayer payments for improved sewer and water lines for the development, over the objections of some Point Loma residents.

The library group's board of directors included Mike Madigan (another lobbyist and onetime chief of the city's ballpark-development program) and Mary Walshock, the head of the extension program at the University of California at San Diego.

Last year Madigan, a former Pardee executive, agreed to pay a $1000 fine to settle charges that he did not properly report his financial interests on city disclosure statements required under the state's conflict-of-interest law.

"[Madigan] failed to report his spouse's interest in MNA Consulting on Schedule A-2 of his annual statement of economic interests for the 2001 calendar year, as well as his leaving-office statement," the stipulation says.

"[Madigan] is a sophisticated businessman with extensive experience in municipal affairs," it continues. "[He] could have been more diligent" in determining the scope of his disclosure obligations, especially in light of the fact that he knew his spouse's company was representing the San Diego Padres Baseball Club and Centre City Development Corporation with respect to the ballpark and redevelopment project.

Listed as "executive director" of the library foundation was James Lewis Bowers, 75, a fundraising professional who was executive vice president of Scripps Memorial Hospitals and president of the Scripps Memorial Hospital Foundation from 1977 until his retirement in 1993.

A La Jolla resident, member of the board of the San Diego Symphony, and certifiable member of La Jolla's social set, Bowers is a partner in Laurel. The restaurant, located on the corner of Laurel Street and Fifth Avenue near Balboa Park, caters to some of the city's wealthiest diners.

In the foundation's hands, according to Mayor Dick Murphy, was nothing less than the future of public libraries in San Diego. Book budgets were being cut, and patrons were having to make do with a decrepit downtown library and shorter hours there and at other branches. Still, the million-dollar payment to Dawe's foundation was crucial, according to Murphy.

Using the payment, the foundation was supposed to launch a campaign to raise at least $50 million from private corporations and wealthy philanthropists for construction of a new main library downtown and branches throughout the city.

"For the first time since the main library was built in 1954, we're making solid progress, not only for a new main library but a branch system that is a package that will really give San Diego one of the finest library systems anywhere," Murphy proclaimed prior to the July 2001 council meeting. "My belief is that the ballpark site is the best remaining option. Furthermore, we need to move forward."

Murphy was joined by Seventh District city councilman Jim Madaffer, who along with the mayor argued that the million-dollar contribution was essential to the city's library building efforts. "This is going to send a message to the philanthropic community that we're serious," Madaffer told the Union-Tribune the day before the vote. "We'd like to raise $40 million or $50 million."

According to the plan presented to the public at the July meeting and later documented in a so-called memorandum of understanding (MOU) between the city and the foundation, the city's contribution would represent seed money. Only a limited amount could be used for expenses. The rest would ultimately go back to the city's public library system.

"The Mayor and Council of the City recognize that a world-class Library System requires not only public monies, but also private support," says the preamble of the agreement between the city and the foundation that was to govern how the million dollars of public money would be spent.

"As evidence of the city's good-faith desire to secure a world-class Library System and to enable the Library Foundation to begin operations, the City agrees to provide $1 million to the Library Foundation."

The city's million-dollar payment came with a few restrictions and accounting requirements to protect the funds from misappropriation. "The Library Foundation shall secure an annual independent audit of its books and records for compliance with the requirements of this [memorandum of understanding]," it said. "The Library Foundation shall ensure that an annual independent audit report shall be prepared and submitted to the city."

The agreement also required that "from time to time during the Term [of the agreement], the Library Foundation shall submit to the City a written proposal for use of the City's Contribution for the Library Foundation's expenses. This proposal shall describe in detail the anticipated use of the City's Contribution."

Finally, it placed a cap on how much of the city's $1 million contribution could be used to cover the foundation's overhead. "The Library Foundation's expenses shall be payable first from Campaign funds, if available," the agreement says, referring to the proceeds of the foundation's anticipated fundraising appeal to the private philanthropists.

If that money was insufficient to cover the expenses, the agreement said, they could be paid from "City's Contribution in an amount not to exceed $150,000. The City shall have no other obligation to pay the Library Foundation's expenses."

Thus did Mayor Murphy and the city council vote 9-0 to approve the agreement. "It's time to move forward. The bottom line is a world-class city deserves a world-class library." Added Madaffer, "This is finally, actually going to happen after years of false starts."

But with little or no progress to report, the main-library matter was back before the council again on July 30, 2002, almost a year to the day after the original vote setting up the foundation. This time the council approved yet another version of the Murphy city-library plan, including the downtown main library. According to the mayor, the vote was "an opportunity for this council and the people of San Diego to provide a lasting legacy for future generations of San Diego."

But financing details, which were supposed to include sales of municipal bonds as well as private contributions, were being left for later that year, Murphy said. Observed ex-councilwoman Judy McCarty after the meeting, "Tonight is the feel-good vote." No mention was made of the library foundation or what it had done with the $1 million the council had given it the year before.

Then, last October Murphy scored a major coup when a state committee voted to give the city a $20 million grant, earmarked for the new main library. Before the vote, the Union-Tribune editorialized in favor of the grant and outlined how Murphy was then proposing to pay for the library proposal.

"Mayor Murphy's financing plan relies heavily on three separate bond sales, totaling $177.7 million, to pay for new construction," the editorial said. "City redevelopment funds would be tapped for another $42.9 million. An additional $21.7 million would come from developer fees, and federal community development block grant funds would make up another $8.8 million. Private donations and grants would account for $53.3 million.

"That is where the state Library Construction and Renovation Board comes in. On Tuesday the six-member panel will award $110 million in Proposition 14 grants for libraries statewide. San Diego has applied for a maximum award of $20 million for its new central library.

"By approving the city's application, the library board would make an invaluable contribution to this region's quality of life because the funds quite simply would become the catalyst for San Diego libraries' entry into the information age."

In the months since it received the $20 million grant, however, the city has been hit with a blizzard of bad financial news. A federal criminal investigation of city financial practices has reportedly stalled issuance of any new municipal-bond debt. The state financial crisis has only added to the uncertainty.

Under the most recent plan, tentative details of which surfaced in May, a mix of redevelopment-agency money from the city-owned Centre City Development Corp. (CCDC), hotel taxes, and funds from a liability settlement with tobacco companies would be used, along with the $20 million state grant and $53 million in private donations to be raised by the library foundation. The $177 million of municipal-bond sales are reportedly now off the table. "CCDC is funding everything we need [for the library] for the next 12 months," Murphy was quoted by the Union-Tribune as saying.

But library backers fear that the latest plan is only an election-year ploy to get Murphy past the November election, in which he faces a challenge by county supervisor Ron Roberts, who wants to stall the downtown-library proposal. The skeptics argue that Murphy's previous failures to produce on his downtown-library pledge are strong evidence that he is not dedicated to its construction and would, if reelected, ultimately back away from the latest financing scheme. Murphy chief of staff John Kern did not return phone calls.

All of which makes the fate of that $1 million city contribution to the library foundation of special interest.

City officials and foundation boardmembers have failed to respond to repeated telephone requests for information about how the $1 million has been spent. The San Diego Foundation, to which the funds were turned over for management and "safekeeping" in the fall of 2001, has refused to provide any information on the status of the money, referring all questions to Library Foundation attorney and executive director Bowers and Dawe.

Contacted by phone at the multimillion-dollar home on El Paseo Grande in La Jolla where he lives, Bowers, who apparently has collected sizable fees from the foundation, also declined comment, saying that only Dawe would speak for the organization. Katie Sullivan, a library activist from Rancho Bernardo who said she joined the foundation board "earlier this year," also refused to talk about its financial position or anything else about the foundation's activities, referring a caller to Dawe and Bowers. Madigan, too, has remained mum.

Reached at his downtown law office over a month ago, Dawe initially said he would produce a full accounting of the fund's operation. "I need to speak to Bowers first," said Dawe. "I'm trying to find him now." But Dawe did not phone back as promised and subsequently failed to return numerous phone calls seeking the information he had pledged to provide.

Compounding the difficulty in attempting to piece together the activities of the foundation and the fate of the million-dollar city contribution, city officials have been slow to release documents and accounting records requested under provisions of the California Public Records Act.

In the eight weeks since the documents were first requested, the city has produced only a small number of the records sought. In one case, e-mails written by city librarian Anna Tartar that were clearly relevant were withheld. Later, a reference to them was found in another document, and they were expressly requested.

The few records that have been turned over suggest that city officials were extremely lax, if not criminally negligent, in failing to hold the library foundation to its obligations under the contract.

The records show that on May 9, 2002, Dawe sent a hand-delivered letter to deputy city manager Bruce Herring requesting the city's million-dollar contribution. A city check in that amount, dated June 10, 2002, was made out to the library foundation and deposited in a fund run by the San Diego Foundation.

In a letter dated November 7, 2002, to Herring, Dawe discussed a September 27 meeting the pair had with "Jim Bowers, consultant for the San Diego Library Foundation." The purpose of the meeting, according to the letter, was "to review the Foundation's proposed maximum use of funds for the Library Foundation expenses -- including the City Contribution -- for the next 12 months. Please note that the Foundation Board members are committed to controlling costs during the campaign as to come in below the proposed maximum use funds described in the attachment."

The attachment, titled "Preliminary Plan," has never been made available to the public. In apparent violation of the $150,000 expense cap imposed by the city's memorandum of understanding, the document itemized a total of $629,000 in foundation expenses projected to occur over a "one-year plan."

Of that, $195,000 was allocated to "Salaries and Benefits (Executive Director/Administrative Asst.)," $70,000 for "consulting services," $160,000 for "Publications and Public Relations," including $45,000 for "Agency services," $50,000 for "Banners," and $25,000 for "video," $25,000 for "organizational meetings," $15,000 for "office equipment and furnishings," and $15,000 for "board related activities."

Whether or not Herring or others on the city manager's staff signed off on the spending plan is not documented in the material turned over by the city. Herring did not return phone calls. But according to a series of documents on foundation letterhead, each labeled "Financial Report," the foundation quickly began spending down the city's contribution.

During the period from January 1, 2002, through December 31, 2002, according to the documents, the foundation spent $8515 for "Foundation Support" and $66,242.18 on "Charitable Expenses." Another expense, labeled "Beginning Distributable Balance on January 1, 2002," was listed as $11,950. The fund closed out the year with $920,123.89, which included $6832.66 in "Earnings on Investment Activity."

The next quarter, from January 1, 2003, through March 31, 2003, the foundation report says it spent $3632.82 for "foundation support" and $72,269.10 for "charitable expenses." It earned just $2061.07 on "Investment activity," ending the quarter with $846,283. A similar pattern prevailed through the next three quarters. Nowhere in the documents provided by the city is any clue to who received the money or details as to how it was spent.

By the fourth quarter, ending on December 31, 2003, the remaining balance of the taxpayers' million-dollar contribution to the library foundation was down to $564,187.99. During 2003, a total of $12,907 worth of "foundation support" and $348,665.65 of "charitable expenses" had been paid out. Just $5636.77 of "investment activity" earnings on the balance were paid in during the entire year, according to the document.

According to an undated document provided by the city, the library foundation provided an "income report" listing two contributions it was apparently claiming credit for: $3.5 million from the "Hervey Family" for construction of the Skyline Hills Library, and $100,000 from the "Reuben H. Fleet Fnd. Fund" for the Point Loma Library. The document also listed the city's million-dollar contribution, as well as the $5636.77 it earned on that money. The statement concluded that "Total Income" of the foundation was $4,605,647.56.

Another undated one-page foundation document turned over by the city, entitled "San Diego Public Library Foundation Contributions and Goals," lists a "Goal of $53 million from 'other than City' funds." The document goes on to itemize "2002-03 commitments" of $43 million, including $5.35 million for "Logan Heights," $5.7 million for "Point Loma," $5.2 million for "La Jolla," $3.5 million for "Skyline-Hervey Family," $2.5 million "Skyline-Foundation pledge," and $20 million for "New Main."

The document also lists an "additional" $10 million for "New Main" in "March 04," another "additional" $5 million for "New Main" in "June 04," and an "additional" $5 million for "New Main and Branches" in "December 04." The document provided no other details.

With city officials remaining mum and documents scarce, it is difficult to know whether they were satisfied with the foundation's representation of its fundraising performance. Former city libraries development director William Sannwald, who was recently forced into retirement during a downsizing move, says that in his estimation the library foundation played only a minimal role, if any, in obtaining the Hervey money for Point Loma and Skyline.

In fact, the record shows that the $5 million Hervey contribution to the Point Loma Library, listed on foundation documents among "2002-03 commitments," was officially announced in February 2001, about two months before the foundation was incorporated and 16 months before it received the city's million dollars. Another contribution claimed in part by the foundation -- $1 million from Harle G. Montgomery for the La Jolla Library -- was first reported in June, 2001 by Union-Tribune society writer Burl Stiff. The Jacobs family contribution of $3.5 million for the La Jolla branch had also been announced well before the June 2001 groundbreaking, about a year before the city issued its check to the foundation.

The biggest contribution claimed by the foundation in pursuit of its $53 million goal, the $20 million for the "New Main" library, is not even from a private source. Instead it is a grant from the State of California.

One sign that city auditors began to raise questions about the library foundation's excessive expenditures and accounting practices is contained in an e-mail dated last December 11 from assistant city auditor Phil Phillips to city librarian Anna Tatar. The subject was "Library Foundation Funds," The e-mail says, "Would you please provide me with the status of obtaining the required financial status reports regarding the $1 million we provided as seed money for the Library system's donation campaign. As we had discussed previously, it is important that this be obtained as soon as possible."

Apparently Tatar did not reply, because Phillips e-mailed again, this time on February 2 of this year, renewing his request for the information. "Have you received the required reports yet? If not, I will seriously need to discuss scheduling of an audit of use of the funds and to determine the remaining balance. I will also be discussing these funds with Lisa in relationship to the budget bowl."

The same day, according to the records released by the city, Tatar replied to Phillips via e-mail, saying, "I will hand deliver the report to you tomorrow afternoon. I am meeting with Jim Bowers, the staff member who put the report together. Thanks for your patience."

Three days later, on February 5, Phillips e-mailed Tatar. The subject was "Library Foundation Financial Reports."

"I will be submitting the provided reports to our internal audit division to review for inconsistencies, potential noncompliance and violation of the terms of the MOU," wrote Phillips.

"A few immediate questions:

"1. Did they provide you with the required independent audit for '03?

"2. Did they provide statements for activity prior to 1/1/03?

"3. Did they get pre-approval of the budget as required? Are you familiar with the $150,000 cap on expending the City's contribution?

"4. What is the line item on the fund activity statement 'Charitable Expenses.' There is no reference to this in the MOU.

"5. Did they provide you with statements and an audit report for the campaign funds, if any [were] actually received [?]"

Bowers apparently responded to the request by forwarding to Tatar a letter dated February 26 of this year from Duane Drake, chief financial officer of the San Diego Foundation, which was managing the library foundation's money. The library account had never been separately audited by the San Diego Foundation, Drake acknowledged.

Then he added, "In response to the questions regarding budget approvals and the $150,000 cap on expending the City's contribution outlined in the MOU, we were not aware that there was a MOU between the City and the San Diego Public Library Foundation, a separate legal entity from the San Diego Foundation.

"Therefore we were unaware of the conditions mentioned above. We did require the fund's advisor to submit a budget to the San Diego Foundation for its board approval, and we pay invoices from the fund only with the written approval of the fund advisor or you as the person responsible for the Library foundation's day-to-day operations."

A month later, on April 29, library-foundation chairman Dawe wrote a letter to Bruce Herring, the deputy city manager, which memorialized the results of a March 1 meeting between Dawe, Herring, library-foundation boardmember Mary Walshok, and executive director Bowers. In the letter, Dawe provided his version as to why the foundation had so greatly exceeded the $150,000 cap on expenses.

"In response to the Auditor's question regarding the $150,000 amount in paragraph 1.12.1.2 of the Memorandum of Understanding, this letter is to confirm that we have kept you informed in connection with our preparation of budgets and have expended additional monies based upon our expanded support of the San Diego Public Library System -- for example, our support of the successful efforts to obtain Proposition 14 funds for the Logan Heights Branch and the Main Library."

In response to questions about the low return being provided by the San Diego Foundation on the remainder of the million dollars it had on deposit, Dawe wrote, "We will request that the San Diego Foundation Transfer some of the City Contribution into Fund B." An attachment provided by the San Diego Foundation showed that "Pool A," where the money had been previously kept, was a straight money-market fund, earning returns of less than one percent as of December 2003. "Pool B," said to have a small equity exposure, was said to be producing returns of about 4 percent at the end of 2003. No mention was made of the "charitable expense" overhead that the San Diego Foundation was charging.

"If you have any questions regarding this approach or this letter, please contact me."

As of press time, Dawe's letter was the most recently dated document provided by the city; no city response to Dawe's assertion that the $150,000 spending cap could be changed at will by the library foundation has been made available. Nor have any accounting documents describing the foundation's operations over the previous two months of this year been furnished.

Reached by phone earlier this week, Tatar said that she would provide no further information or documents concerning the foundation's finances or operations beyond those furnished by the city attorney's office. She defended the foundation, echoing its claim that Bowers had assisted the city in getting the $20 million state grant. She added, "It takes time to lay the groundwork" for obtaining private philanthropic contributions.

The city attorney's office was also less than forthcoming regarding a request for detailed financial documents made under the state's public records act. In an e-mail last Friday to William Sauer, an attorney for the Reader, deputy city attorney Catherine Bradley wrote, "Your request on June 9, 2004, for 'any emails, correspondence, or written documents in the possession of the city or Ms. Tatar that deal with the disposition, expenditure, audit or other use of those library funds' is overbroad and does not identify a specific record. As you know, we are not required to search every document in the City for a possible responsive document."

Less than two weeks ago, the foundation issued a news release announcing that two new members had joined its board of directors: Barbara Bry, a former Los Angeles Times reporter who was once married to La Jolla developer Patrick Kruer, and Judith Harris, another La Jolla socialite. No mention was made of former director Michael Madigan, the ethics-commission-sanctioned developer who apparently has been dropped from the board.

Harris is frequently mentioned in Burl Stiff's Union-Tribune society column, most recently on April 13, when she was pictured beside U-T publisher David Copley at a party in his suite at the downtown baseball stadium.

The press release goes on to maintain that "the Foundation's charge is to raise $53 million in non-city funds to support the program." That is at variance with the group's memorandum of understanding, which calls for it to raise "private support" for the library plan.

Without mentioning the taxpayers' $1 million contribution or its fate, the release said, "The foundation, formed in 2002, already partnered with the City Library administration to win a $20 million grant of state Proposition 14 funds for the new main library last November."

The release also takes credit, in part, for raising funds that others -- including former city library development chief William Sannwald -- say the foundation had little or nothing to do with.

"Additionally, thanks to the cooperative efforts of branch friends and supporters, the Library administration, and the Foundation, a total of $17 million in private contributions already has been received, including $8.5 million from the family of the late James Edgar and Jean Jessop Hervey, $3.5 million from Irwin and Joan Jacobs, and $1 million from Harle Garth Montgomery."

City librarian Tatar is quoted as saying, "The Foundation's efforts are vital for our library system to grow and expand. Most major cities have benefited from separate library foundations and we are pleased that San Diego is doing so, as well."

The release concluded by quoting Dawe as saying, "We are well on the way to achieving our goal and hope to have additional, major announcements in the very near future. It was important that we first create a Board of Directors including many well-regarded and recognized community leaders. That done, we can move on to the next critical steps."