"How the System Works"

HB's Pacific Liberty Bank controversy offers a rare look at politics, Orange County-style

It's holiday-party season, and in HuntingtonBeach, the guest of honor with the round belly and jolly face is City Council member Dave Garofalo—soon to be hizzoner, the mayor. Huntington Beach's city charter prescribes that the mayoral role be rotated among council members, and beginning this month, it's Garofalo's turn to take the title for a year. But this simple round-robin is being heralded as a coronation by Garofalo and some of his rich, influential supporters.

Garofalo instructed a city secretary to mail out 850 invitations to a reception in his honor at City Hall. The party will occur during a break in the Dec. 6 City Council meeting, where Garofalo will move to the center seat on the seven-member panel. Festivities will carry on into the meeting, including local high school bands and cheerleaders, speeches, and a slide show chronicling how Garofalo, a grocer's son from Cranston, Rhode Island, has risen to become mayor of the 96th largest city in America.

Six days later, Garofalo's political ascension will be celebrated in a gala Sunday brunch at the Waterfront Hilton Hotel and Resort. Invitations for this Dec. 12 event, although privately funded, are even more troubling.

Among the hosts of the affair, which will both honor Garofalo and raise money for his office-holder's account, is megadeveloper George Argyros.

This is the latest in a series of connections between Garofalo, the mayor-in-waiting, and Argyros, who's among the most politically influential developers in Orange County. They share an interest in the 6-month-old Pacific Liberty Bank, where Garofalo is on the board of directors and Argyros is one of the largest founding investors. They also share a vision: they'd like to see a Wal-Mart erected on the site of the old Crest View School, a project Garofalo's vote helped the City Council approve and which Argyros' company, Arnel Retail Group Inc., would construct.

Garofalo insists there is nothing improper about these connections.

"It's just part of the political process," he said. "I consider myself a loyal Republican. I've worked hard to gain the respect and support of people who believe in the free-enterprise system. If he [Argyros] admires me for that, I'm honored to have that respect. I have respect for him, too. I consider him an honorable man."

But Garofalo maintains that this mutual-admiration society is a long-distance relationship. "To the best of my knowledge, I've never met Mr. Arygros in my life," he says. "We have no compelling personal relationship."

Besides Garofalo, two other council members who voted for the Wal-Mart project, Shirley Dettloff and Pam Julien, are also founding investors of Pacific Liberty Bank. None of them mentioned this financial connection during the often-acrimonious debate over the Wal-Mart project, which is opposed by the Crest View United neighborhood association and headed for a citywide vote in the March 7 election. Only Julien mentioned it in her state-mandated personal-disclosure form, which all public officials must complete annually. All denied the business arrangement constituted a conflict of interest; they were supported in that opinion by city attorney Gail Hutton. The three characterize their investment in Pacific Liberty as akin to a charitable contribution, a show of support for a community-based bank.

"I don't do anything on a profit level," Dettloff insisted, the extensive and varied financial portfolio—which is chock-full of varied business and real-estate investments—revealed on her personal-disclosure form notwithstanding. "I do things because I care."

However, others who were contacted about investing in Pacific Liberty say altruism was not part of the sales pitch made to them.

"It was promoted to me as a good investment," says Mike Ramsey, 48, who owns Ecology Tires in Huntington Beach. "They said I'd be on the ground floor and at the forefront, situated to make a good profit when the stock climbed as development and business got going."

When informed of Dettloff's comments, Ramsey broke into laughter. "I have a hard time believing that," he said. Ramsey said he declined to invest in Pacific Liberty because "I don't have that much confidence in small banks like that.

"You don't know how those people will invest your money, how much knowledge or experience they really have. And knowing that Dave Garofalo is on the board of directors, well, I don't have any confidence in him at all."

The profitability of Pacific Liberty is probably more important to Garofalo than to any of the other City Council members. His investment is the largest ($50,000), and he acknowledges that it was made with borrowed money—a five-year loan from a San Francisco bank for what he vaguely described on his disclosure form as "stock in a start-up company."

It's doubtful Argyros, a Newport Beach resident who heads a Costa Mesa-based business, had to borrow money for his $100,000 investment in a small start-up bank in Huntington Beach. He's used to investing on a much larger scale, as is another OC investor, major developer Chris Gibbs, whose Newport Beach-based company, PLC Land Co., built the immense Holly-Seacliff residential development. He, too, is a founding investor in Pacific Liberty Bank, also to the tune of $100,000.

For now, it is Garofalo's political stock that seems most promising. Along with Argyros, the host committee for his Dec. 12 brunch is a who's who of Orange County Republicans, including Congressman Dana Rohrabacher; Assemblyman Scott Baugh; Orange County Supervisors Jim Silva and Chuck Smith; Orange County Republican Party chairman Tom Fuentes; and Garofalo's longtime benefactor, Huntington Beach planning commissioner Ed Laird.

Donations between $99 and $300 will be accepted for Garofalo's office-holder account, and since he'll be prevented by term limits from running for re-election in 2002, there's speculation that he's considering a run for Silva's spot on the Board of Supervisors, which will also be open because of term limits. "If I'm alive and worthy and people want me, I'm sure I will [run for higher office]," Garofalo said. "This is the public process. If you look at anybody's campaign statement, this is how the system works."

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