By On the occasion of our 20th anniversary
By Gustavo Arellano
By R. Scott Moxley
By Alfonso Delgado
By Courtney Hamilton
By Joel Beers
By Peter Maguire
By Charles Lam
Somehow, for 24 hours during the summer of 1998, Huntington Beach Mayor Dave Garofalo owned a lavish dream house in the No. 1 location in the No. 1 neighborhood in the city's crown-jewel Holly-Seacliff development.
Yeah, it was only for 24 hours. But Garofalo is a man of modest financial circumstances—and the house was worth more than a half-million bucks.
"Obviously, I don't have those kinds of assets," Garofalo acknowledged this week.
That raises questions about how Garofalo got the house from Christopher Gibbs, vice president of the PLC Land Co. Gibbs' company built all 2,000 homes in the sprawling Holly-Seacliff project, and for some reason, he grant-deeded one of those houses to Garofalo on March 20, 1998, for no money down.
Gibbs failed to respond to several requests for an interview. But Garofalo insisted the nothing-down deal was common. "No buyer had good-faith money down," he said—and then added, "I don't think."
What makes the deal even more interesting is the timing: as the house moved through escrow between March and July 1998, then-City Councilman Garofalo was sitting on a city committee negotiating a deal worth millions to Gibbs and PLC. And it's worth noting that Garofalo helped honor Gibbs with a ride down Main Street in an open convertible during the 1998 Huntington Beach Fourth of July parade.
Then, on July 28, 1998, the day after escrow closed on Garofalo's little mansion by the sea, he suddenly quit-claim deeded the house to George Pearson, a wealthy Huntington Beach businessman and landowner, for $625,000. Garofalo and Pearson go to the same church.
"George is a great guy. He takes priests on vacation," Garofalo explained. "He takes kids to camp. He does all kinds of great things. Since I don't have those kinds of resources, since I can't compete with [him], this is what I did for the guy."
A few weeks before, Garofalo had moved into another, smaller house near downtown Huntington Beach. Like most people, he paid for that house by taking out a mortgage. His Cinderella story had ended.
What did Garofalo learn from his 24 hours of livin' large? How did he get first dibs on a property that now ranks as the most expensive in the development? How did he get it without a down payment? Did he ever pay anything for it?
Despite repeated requests, Garofalo failed to provide the Weekly with documents that would explain this strange and serpentine land deal. Requests for copies of canceled checks were met with conflicting, often contradictory excuses.
On April 20, for example, Garofalo faxed the Weekly a statement claiming, "I don't have a copy of that paperwork." Yet on May 1, Garofalo faxed us copies of three inconclusive documents, all bearing an April 20 fax date at the top—the same day he had denied having any "paperwork" on the deal.
Earlier on the April 20, Garofalo had left a recorded phone message thanking the Weekly for raising the issue of his potential conflict of interest. In that statement, he explained that he had not publicly disclosed buying the Seacliff house because he "took it for granted that any primary residence was exempt from any of those issues." That would be interesting if it were true: state law suggests that Garofalo should have disclosed his interest in the property before taking any official action on the development.
But in the subsequent faxed statement (the one in which he claimed he didn't have a copy of the paperwork), Garofalo reversed course, claiming that "during the time I entered escrow . . . I found the house I really wanted in another section of Huntington Beach."
Finally, in an April 28 phone interview, Garofalo explained his failure to disclose his interest in Seacliff this way: "Since the house was acquired and sold in the same year, it didn't need to be reported."
Contacted at the Seacliff home that is now his residence, Pearson claimed Garofalo was a straw buyer—that Pearson used the mayor's prime position in the sales process to get the house he wanted. "Dave was me," he said. "All the money was put up by me. I have every canceled check to prove it."
Pressed for that proof, Pearson said he would pass along the documents to Garofalo. "I'm going to give them to Dave," he said. "If he wants to give them to you, he can."
Garofalo subsequently refused to provide that documentation, denying he had received it from Pearson.
"I don't lie for a living," he said. "If I say I don't have any, I don't have any."
Whatever the explanation for Garofalo's real-estate adventure with Gibbs, Garofalo's simultaneous role in pushing the city to "refund" millions to Gibbs is clearer.
That role started in 1996, when Gibbs was demanding the city reimburse his company for infrastructure related to the Holly-Seacliff development. Developers commonly build and pay for water, sewage and other facilities as part of their projects. But PLC later claimed that it had built excess capacity into the improvements. The company demanded a refund and financed two studies it said showed that the city should cough up $40 million. But on Dec. 16, 1996, the City Council decided it wanted another study, this one free of PLC influence. That study ultimately showed the city might conceivably owe something like $5 million.