Newport City Haul

The latest scandal in the city conservatives built

In January 1993, within hours of Bill Clinton's first inauguration, a Newport Beach family made its stately way to Balboa Pier to do a most Newport thing: enjoy the sun, picnic at the beach, and while they were at it-what the hell?-call for the ouster of the new Democratic president. A banner flapping from one of the family's beach chairs read "IMPEACH CLINTON."

In other words, conservatism gets some of its leading-edge ideas right here in Newport Beach. It also gets some of its biggest campaign contributions here. That makes the city the frequent site of state and national Republican gatherings.

You'd think Newport Beach would be the very mirror of conservative-style good government: low taxes, vigorous public oversight, a lean-and-mean public bureaucracy. You'd be wrong. Political scandal visits the city of Newport Beach the way the plagues did Egypt-regular as locusts, humiliating as boils. A few years ago, schools finance chief Stephen Wagner siphoned away millions of dollars before he was caught and jailed. Then there was the high-profile sex scandal at the Newport Beach Police Department, where racism has been an on-again, off-again worry.

For those reasons and more like them, the "surprise" resignation last August of city manager Kevin J. Murphy shouldn't have been much of a surprise. Intelligent minds ought to have guessed immediately that Newport Beach was about to be visited by another political plague.

Details of Murphy's abrupt Aug. 11 resignation remain well-guarded secrets. For the past five months, both the ex-city manager and the council have steadfastly refused to disclose publicly what happened. But what's no longer a secret is that Murphy resigned without another job lined up when it became clear a council majority was prepared to fire him.

What's also now clear is this: using a young local reporter, the city's power brokers masked the real controversy around Murphy's departure. In a city that prides itself on conservative, businesslike government, Murphy presided over a bureaucracy designed to serve the interests of Newport's business elite-at the expense of its mostly Republican taxpayers.

That's not how the story unfolded in the pages of the Los Angeles Times-owned Newport Beach/Costa Mesa Daily Pilot. As the forced resignation piqued community interest late last summer and into the fall, Murphy's supporters launched a three-pronged disinformation campaign.

An immediate objective seemed to be insulating the ex-city manager from questions and criticisms. Establishment heavyweights-many of whom received plum government contracts and entitlements-stepped from their mansions and high-rise offices to reassure the public that Murphy, who was paid $146,500 per year, did well in a tough job. The Irvine Co.'s Gary Hunt, a mastermind of behind-the-scenes politics, said Murphy "will be sorely missed." John Yeager, a political insider who quit his post on the city's aviation committee in protest of Murphy's ouster, chided "elected leaders [who] would waste such an incredible human resource as Mr. Murphy."

But the sweetest accolades poured from the Pilot, which exhaustively declared Murphy "bright, highly competent . . . easygoing . . . somewhat of a workaholic . . . [a] decent, genuinely nice man [with] skills and talents and basic goodness."

A second smoke screen portrayed the motive for getting rid of Murphy as petty or even sinister. Insiders close to the ex-city manager have argued strenuously-but off-the-record-that Murphy may have been on the threshold of exposing unsavory acts tied to certain council members (Norma Glover, John Hedges, Tom Thomson and John Noyes), who then sought his quick removal. But no serious information has emerged to support those allegations.

Nevertheless, Murphy's supporters plowed ahead. "We have a City Council that works for their own personal agenda, and we all deserve better than that," said Rush Hill, an outspoken local business lobbyist. The Pilot followed blindly with an Aug. 13 headline: "Murphy, Citizens Deserve Better." If the Pilot was to be believed, evil lurked. The paper dramatically observed that city employees were "afraid to even give compliments about their old boss for fear of council retaliation-though their tears say a lot."

Diversion efforts also included putting a face on the supposed evil. Although four council members pressured the city manager out, the Pilot inexplicably targeted just one of them for criticism: Glover, who represents the city's 3rd district, which includes the bayfront restaurant row on PCH. The day after the resignation announcement, Pilot editor Bill Lobdell wrote, "it's hardly fair" that Glover-who ran unopposed in the November election-would not be held responsible. Lobdell didn't mention retaliation against Hedges, Noyes and Thomson, whose anti-Murphy sentiments were equally potent. On the second day of the scandal, former school-board president, Pilot columnist and Lobdell confidante Jim de Boom said he was contemplating forming a Glover opposition committee. The paper carried that news prominently.

The resignation mystery was less than 72 hours old, and the Murphy story had become the Glover story in the Pilot. Day after day, Glover's name and mug shot appeared with sensationalistic articles. The thick-skinned Oklahoma native with a pronounced drawl earned additional Pilot wrath in September, when she told a Balboa Island gathering that an unspecified "situation or incident" worthy of investigation had led to Murphy's ouster. The ex-city manager vigorously denied the claim. Rather than probe, Lobdell said he "waited and hoped" for "three months" that the assertion would be proven false. In early December, he got his wish when an embattled Glover unconvincingly recanted. As soon as the councilwoman capitulated, the de Boom-led recall effort disbanded. (A knowledgeable source said the moves were a behind-the scenes quid pro quo.)

Lobdell was elated. The next day's headline read, "Glover Does Right Thing Clearing Murphy's Name."

With the ex-city manager at least superficially redeemed, the disinformation campaign then claimed it had solved the mysterious resignation-and that the answer was nothing to alarm residents. Again, the Pilot was indispensable.

Enter 23-year-old reporter Jenifer Ragland. In a Dec. 2 front-page Pilot column (grandly-and preposterously-titled "What Really Happened in Murphy Saga"), Ragland noted that after "hundreds of off-the-record conversations" with city insiders, she had decided that "the most logical conclusion you can reach is this: four council members, for a variety of reasons, had philosophical differences with their city manager and wanted to see him go. . . . They really don't have to have a good reason."

The Newport Beach establishment would love for citizens to swallow Ragland's verdict: four irrational council members-working against the public good-caused one of the city's most notable crises in half a decade. There is, however, substantial reason to believe that the Pilot's villains-Hedges, Noyes, Glover and Thomson-acted as conscientious elected officials who had more than good reason to can Murphy.

Kevin Murphy was a rising star in 1983, when at the age of 29, he was named Alhambra's top administrator. Before his 40th birthday, he hit the public sector big-time, replacing longtime Newport Beach city manager Bob Wynn. Wynn, who had been in power for two decades, left in 1992 to work for the real-estate developers, lobbyists, government contractors and local corporations who had roamed his City Hall. Nowadays, he can be found taking a financial chunk of such city-enhanced deals as the Bonita Canyon upscale-housing development near the toll road.

There is little doubt that much of the respect Murphy has maintained over the years was earned as soon as he replaced Wynn. In his first years on the job, he deftly handled several ugly crises with origins in Wynn's administration: a notorious sex scandal involving two ranking police officers, a $1.8 million employee-embezzlement case, and a massive, state-caused budget shortfall. During more than six years in office, he also tackled precarious issues, even improving employee morale while reorganizing and downsizing city departments.

But by the time Murphy was forced out in August, his $100 million-per-year bureaucracy was far from a model of efficiency and ethics. In June, for example, the city ignored protests from Noyes and Hedges and paid a ridiculous $35 per-square-yard ($65,000 in total) for institutional-grade carpeting at the police station. Bureaucrats claimed they had gotten the best deal possible. However, according to several local carpet outlets, the city spent double the fair market rate and wasted $32,000 of taxpayers' money.

As the city's ranking bureaucrat, Murphy had a responsibility to protect local taxpayers financially as well as ensuring open-government decision-making. That obligation was particularly important when it came to valuable real-estate arrangements involving public property-property such as the Newport Bay tidelands. Part of a state-granted public trust administered by the City Council, the tidelands trust includes part of Lido Marina Village, specifically a breathtaking 3,925-lineal-foot area of bayfront commercial space and boat-slip area. The property, potentially worth millions of dollars in annual profits, is visible to drivers crossing the Old Newport Boulevard bridge at PCH. Yachting enthusiasts hold a popular-and posh-boat show there each year.

For several years, the City Council has wanted the area redeveloped. At 4 p.m. on June 19, Murphy "dumped" on council members, who were preparing for their weekends, a proposed non-competitive 50-year lease for Lido marina. Even though the then-city manager later conceded the deal was "very complicated," he wanted the council to approve the lease two days later-prior to a public forum and without seeing the critical appraisal report. Murphy proposed awarding the deal to LJR Lido Partnership, a venture between Riverside-based developer Jim Ratkovich & Associates and Wall Street investment banking firm Lehman Brothers Holdings.

More suspiciously, Murphy placed the proposal on the council's discussion-free consent calendar, where items that are allegedly not worthy of scrutiny are routinely placed. He had worked behind-the-scenes with Ratkovich for nine months but told startled council members that they were under a "drop dead" deadline of a matter of days-if not hours-to study the 50-year lease and then vote.

"I'd say it was unusual," Noyes said. He pulled the item for discussion from the consent calendar, a move that infuriated then-Mayor Tom Edwards, a Murphy ally who had met privately with Ratkovich and wanted the city to quickly accept the developer's terms. Minutes into the council hearing on the topic, Edwards grew visibly annoyed with Hedges' efforts to thoroughly discuss the deal. "Let's not waste my time . . . the staff's time or [Ratkovich's] time," he said bitterly.

Councilman Dennis O'Neil-who once served as Newport Beach city attorney and today is the mayor-recoiled at the effort to rush the deal. He said he was being asked to approve a "complicated and sophisticated action tonight. . . . It distresses me to have to be able to receive this over the weekend and digest it and be able to comment on this today." O'Neil looked at Murphy and added sternly: "I wanted to point that out."

Hedges (who left office in November because of term limits) noted, "This is hardly the way to do business-especially when you're talking about a 50-year lease of city tidelands in conjunction with a redevelopment."

Murphy lamely defended himself before the council. "Frankly, time-sometimes-is an aid for the staff in reaching certain conclusions," he said. (He did not mention the importance of elected officials having adequate time with an agreement that would still have been operative in 2048.)

His remark was met with expressions of disbelief on the council. He added, "I guess we, um, apologize."

A dapper Ratkovich attended the hearing, complimented Murphy for doing "a wonderful job" and reassured the council that he "believed" that city residents (not he and his partners) would be the true "beneficiaries" of the lease. Jim Landis, a real-estate agent with a financial stake in Lido Marina Village, said the deal was "certainly the most challenging" in his quarter-century career, but he urged the city to immediately approve the lease because "time kills real-estate deals." The "potential" for Ratkovich, he said, was "off the map-I've never seen a greater opportunity on a piece of property in my life."

Noyes didn't appreciate the pressure tactics. "[Landis] said this is the most challenging deal of his career, and we're supposed to make a decision in less than a week?" he asked incredulously at the hearing. "This is probably one of the biggest deals that will ever happen in Newport Beach, and we're going to have to have more time with it. What's happening here is the people who are trying to put this deal together are trying to pressure us. . . . We're talking about the public's property."

You wouldn't know the public owned the property by the way Murphy and the city staff tried to lease it. In May, when it came time to value the land, the city manager let Ratkovich unilaterally select an appraiser-and then agreed that the lease value of the property would be whatever Ratkovich's appraiser said it was. When Ratkovich's handpicked appraiser came back with his valuation, Ratkovich-without official explanation to city officials-rejected it. Murphy allowed him to find another appraiser.

When the Weekly asked Assistant City Manager Sharon Woods for the first appraiser's conclusions, she said neither she nor anyone in the city knew that answer. "We never saw that appraisal, so I can't speak to it," said Wood, who heads the city's economic-development efforts. "I do know that Ratkovich said he didn't like that appraisal." Asked if it was standard procedure for the city to let buyers and renters of public property determine values, Woods would only say that city employees were "apparently very busy" at the time. They were also apparently too busy to get their own appraisal or to hire outside legal counsel with real-estate expertise to review the lease.

With Murphy's consent, Ratkovich required that the second appraisal be "limited," that its assessment exclude comparable nearby bayfront-property leases. Ratkovich liked the second appraisal. He would have to pay the city a laughable $2,900 per month in rent while keeping more than $50,000 per month. The second year of the proposal further required the developer to pay 9 percent of his gross receipts from the boat slips. Similar city and county deals call for greater base rents coupled with 25 percent-sometime even 31 percent-of gross receipts. In a memorandum to the council, Woods portrayed the financial terms of the deal as "negotiated," even though official records shows that Murphy's administration was proposing to concede to each of the developer's key demands.

Thomson, who is a real-estate broker, hinted that the deal screwed local taxpayers. "This deal is a homerun, it's the World Series, it's everything all in one [for Ratkovich], and we're deciding this over a weekend," said Thomson. "Can you imagine what the right to own all those boat slips would be worth over a 50-year period? It's certainly worth a whole lot more than $35,000 per year or $2,900 per month, plus the 9 percent. Something good can happen to this property, but it doesn't mean we have to give it away."

Noyes said he found it "surprising that anyone would vote for that deal."

On June 24, the Murphy-Ratkovich arrangement died when it was rejected in a 4-3 vote. Two weeks later, a council majority met in a closed session and forced Murphy's resignation.

What role the proposed lease played in his departure remains unclear. Murphy did not respond to the Weekly's request for an interview before deadline. But for all of those citizens who were wondering if their council had had good reason to dump Murphy, the Murphy-Ratkovich deal suggests the answer is an unqualified yes.

Fastforward to January. Murphy-who received a generous $70,000 severance package-works for a Costa Mesa firm that does business with local government agencies. Newport Beach has yet to find another city manager. The Pilot continues to publish editorials that cast Murphy as an outstanding public servant who was victimized by petty elected officials. Ragland refuses to concede that the ex-city manager's performance in the Lido Marina Village ordeal-the details of which Pilot readers are oblivious to-was even remotely questionable. She wrote in a December column that she dismissed that possibility "after a few quick phone calls."

In the pages of the Pilot, the city that presents itself as a model of John Wayne values-rugged individualism and common sense-emerged from the Murphy affair with its image intact. A relationship so lucrative for many of the city's elite remains unchallenged. The most horrifying possibility to conservatives-that there may be little to distinguish the governments of Newport Beach and any urban Democratic city-was banished.

The masses are grateful. On Jan. 5, the Pilot published a letter from Newport Beach reader John Buchanan, who wrote: "Thanks to Ragland's follow-through and that of the Daily Pilot, Murphy's children or grandchildren won't do an archival search one day and be left with the notion that their father or grandfather may have done something unethical."

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