Garofalo Was VIP Buyer as He Cast Votes for Developer

Huntington Beach Mayor Dave Garofalo voted repeatedly in favor of a developer who at the time placed him on a VIP list to buy the most coveted lot in the company’s upscale housing project, casting eight of the votes while the home was in escrow.

Garofalo, then a councilman, was placed ahead of about 300 people on a waiting list to buy the first of 70 homes in the gated St. Augustine community, a development by PLC Land Co. called Holly Seacliff. Escrow closed in July 1998, and records show he sold the 2,730-square-foot home with four bedrooms and 3 1/2 bathrooms to a friend the next day for an additional $60,000.

Five people on the waiting list said recently that it took up to a year to be chosen for their homes, after a rigorous process that included pre-qualifying for a loan and attending mandatory drawings. At the first drawing in 1998, the 7,132-square-foot corner lot that Garofalo bought, with a sweeping view of the Pacific, already had a red “Sold” button on a miniature model of the development, they said.

“We found out right off the bat that [Garofalo] got it,” said Dave Hicks, an engineer and president of the neighborhood homeowners association. “Everybody rolled their eyes when we heard who got the best house. None of us had that opportunity.”

“There were some people who were upset and thought that there was favoritism,” said resident Victor Larey, who was No. 12 on the waiting list. “We were just so happy to be in the position we were in.”

Garofalo has denied getting favorable treatment. He said last month that he wanted to buy a house in St. Augustine “as soon as the plans were made public.” He said he called the builder in early 1998 when the first homes were being built.

“When it was my turn, I selected the lot that I most wanted,” he said. “It was available.”

Garofalo said in an interview with The Times last month that he attended the first drawing with other potential home buyers.

“I’ve never been told I was No. 1 on the list,” he said. “We all went to an open house Saturday morning. Everybody waited in line with their cars and we all went in and if the house you wanted was available, then that was the house that you got.”

However, four people on the waiting list who attended the first drawing said they didn’t see Garofalo--who they said they would have recognized--and that they never heard his name called.

“It’s an absolute fact that he wasn’t on the list,” said Timothy Wetzel, who said he put his own name on the list in summer 1997, several months before Garofalo said he called the builder. Wetzel started at No. 220 and rose to No. 110 before he finally bought a house in the development.

The home purchase is among several conflict-of-interest questions involving Garofalo and his relationships with people doing business with the city. Late last week, Dist. Atty. Tony Rackauckas’ office launched an investigation into Garofalo’s voting record and his involvement with several local publications he’s owned, as well as his purchase of the St. Augustine home.

Garofalo has denied benefiting from advertising revenue since December 1997 for his bimonthly newspaper and the city’s annual Visitors Guide, which he has published since 1994, the year he joined the council. He said he sold his publishing rights to Coatings Resource, a paint manufacturing company owned by a friend.

State law bars elected officials from voting for a year on matters involving those who have given them $250 or more. Officials also cannot be involved in votes or deliberations if it is likely that the outcome would have an “important impact” on the official’s economic interests.

In June, City Atty. Gail Hutton advised Garofalo to abstain on council matters involving advertisers--including PLC, which took out a full-page ad in the 1998 Guide--until the state Fair Political Practices Commission rules on the propriety of his votes. However, she said last week that she hasn’t yet sent her request to the FPPC, awaiting more information from Garofalo.

Quick Turnaround of Home ‘a Favor’

If Garofalo made money on the St. Augustine home sale, which he denies, his six votes alone in the year following that transaction could pose a conflict-of-interest problem.

Sales documents recorded with the county show that Garofalo opened escrow in March 1998 on 19031 Poppy Hill Circle in St. Augustine. He said he got the money from a friend, George Pearson, to whom he’d agreed to sell the house after finding another home on Main Street in a different part of town. He also said he couldn’t afford the house and was “doing [Pearson] a favor” by selling it to him. He also said he didn’t remember if he put down the $5,000 deposit required of potential home buyers.

On July 27, the Poppy Hill Circle house was recorded sold to Garofalo for $565,000. One day later, he sold it to Pearson for $625,000. He said the difference was for upgrades chosen by Pearson and that Garofalo’s profit was $1. An executive with Christopher Homes said upgrades are completed before sale and included in the original purchase price.

William Holman, director of planning for PLC Land Co., referred questions about the sale to Christopher Gibbs, a partner in PLC and president of Christopher Homes, which built the St. Augustine tract. After repeated attempts, Gibbs could not be reached for comment about whether Garofalo got preferential treatment.

However, in a Jan. 24, 1998, sales memo, Gibbs wrote that the company reserved the right to “sell properties to individuals, including employees, prior to sales to the general public.”

Garofalo said last month that he and Pearson agreed to the house deal after meeting for lunch.

“I’m having lunch with my priest and George Pearson and I’m saying, ‘You know, it’s crazy, I get so lucky in getting this house and now I have to turn it in because I found this house on Main Street,’ ” Garofalo said in the interview. “And George said, ‘Hey, I’m on the waiting list for [another part of the development]. That’s the house I want.’ ”

Garofalo bought his current house at 630 Main Street on Sept. 3, 1998, putting $82,600 down--a month after escrow closed on the St. Augustine house. Public documents show that Garofalo had sold his home of nearly five years on Fairway Lane on Sept. 4, 1997, for $220,500--a $5,500 profit. He lived at a motel in the interim.

Garofalo’s first vote as a councilman involving the St. Augustine property was in March 1995, when the city approved a routine review of the development agreement for the Holly Seacliff development. PLC first appeared before the City Council in 1996, when the company requested the purchase of 448 acres of Holly Seacliff. The council approved the sale of homes in the St. Augustine tract in January 1997.

Overall, Garofalo voted 56 times on approvals needed by PLC for Holly Seacliff between March 1995 and this past April. Of those, 26 votes were cast after Garofalo said he called the developer to say he wanted to buy a home. All but seven of the council votes were unanimous.

In December 1996, Garofalo was one of three council members placed on a committee to meet with staff, PLC officials and neighborhood property owners over reimbursement issues for Holly Seacliff. At stake were millions of dollars: PLC wanted the city to reimburse or reduce costs totaling at least $32 million for street, sewage, storm drain and water improvements, according to a report prepared for the city by Boyle Engineering. Boyle ultimately recommended less than $2 million in reimbursements and PLC sued Huntington Beach over the amount.

Council members Tom Harman and Shirley S. Dettloff, who also served on the committee, said it disbanded in late 1998 when PLC filed its suit. They said they didn’t remember Garofalo favoring PLC. Only one page of brief minutes could be found in the city clerk’s office for the committee’s work over two years, and Harman and Dettloff disagreed whether they took any votes.

Garofalo Said Deferential to PLC

Mike Ramsey, owner of Ecology Tires in Huntington Beach, said he attended every meeting of the council committee because he wanted to fight potential tax or fee hikes to cover the costs of the public improvements. In 1994, a consultant recommended that the city create a reimbursement district to cover some of the costs--a proposal that wasn’t pursued.

Ramsey said Garofalo was deferential to PLC, nodding in agreement whenever the developer made a point.

“You could see how he was totally for the developer,” Ramsey said of Garofalo.

On the council, Garofalo opposed the majority only once on PLC: On Sept. 2, 1997, he was the lone dissenter in a 5-1 vote for the city to use its powers of eminent domain to condemn PLC property for a water reservoir and fire station. Garofalo said it was an improper use of eminent domain and that the land was “a bad location for a fire station,” according to the clerk’s minutes of the meeting.

In April, Garofalo joined in a unanimous vote to settle the developer’s lawsuit by agreeing to pay PLC $6.4 million. The bulk of the money was repayment of a portion of PLC’s cost in building a 9-million-gallon reservoir.

In a May 8, 2000, memo to Hutton, the mayor asked Hutton to look into the conflict-of-interest allegations involving the house sale and “use any and all authority needed to first vindicate me.”

* Times staff writer Meg James contributed to this story.

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GAROFALO VOTES

Huntington Beach Mayor Dave Garofalo voted 56 times on items related to the Holly Seacliff project, developed by PLC Land Co. In the months before his 1998 purchase of a home in PLC’s St. Augustine neighborhood, he sat on a committee to hash out the amount of city reimbursements for street, sewage and water improvements worth millions of dollars. Below is a history of Garofalo’s votes on the Holly Seacliff project:

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Nov. 1994: Garofalo elected to City Council, takes office a month later.

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March 1995: Garofalo casts first vote on Holly Seacliff, approving a report on the project’s development agreement. PLC Land Co. later buys 448 acres of Holly Seacliff for development.

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Dec. 1996: Garofalo joins council committee to resolve reimbursement issues for extra public services built by developer.

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Jan.-Dec. 1997: Garofalo casts 27 votes involving Holly Seacliff, including St. Augustine tract overlooking the Bolsa Chica wetlands.

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Sept. 1997: Garofalo is the lone vote against the city condemning property from PLC for a water reservoir and fire station. He calls the 5-1 vote an improper use of the city’s eminent domain powers and a “bad location” for a fire station.

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Jan. 1998: PLC runs a full-page ad in the city Visitor’s Guide, published by Garofalo’s company. State law requires officials who receive $250 or more to abstain on votes involving the giver for a year.

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March 1998: Garofalo begins escrow on a home in St. Augustine, using money from friend George Pearson. He gets the prime lot, jumping ahead of about 300 people on a waiting list.

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March-July 1998: Garofalo votes seven times on Holly Seacliff approvals while home sale is in escrow.

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July 27: Grant deed is recorded on Garofalo’s home with a sale price of $565,000.

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July 28: Garofalo quit-claims the home to Pearson for $625,000. He says later that the difference in price was for upgrades and his profit was $1.

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Jan.-Dec. 1999: Garofalo casts 10 votes involving Holly Seacliff.

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Jan.-April 2000: Garofalo casts six votes involving Holly Seacliff, including approving a settlement agreement on April 17 with PLC for the city to pay $6.4 million for public improvements.

Source: Huntington Beach City Clerk, Orange County Clerk-Recorder