By Matt Coker
By R. Scott Moxley
By Charles Lam
By Nick Schou
By Gustavo Arellano
By Gustavo Arellano
By Steve Lowery
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Photo by Amy TheiligIn January 2001, at the peak of California's energy-deregulation crisis, Larry Agran began drafting plans to create a public-private utility that would power his city's fast-growing new residential and commercial developments. Agran is Irvine's mayor and a man once heralded by liberals as a visionary where municipal government is concerned. But the Weekly has learned the mayor is attempting to steer the lucrative monopoly power contract to a company with unpublicized ties to his top political adviser: Edward Dornan.
The FBI is looking into the arrangement, but Agran has told supporters the deal is legal. Not everyone is appeased by that claim. Some of the mayor's closest allies are so disgusted--one of them says the deal "stinks"--that they've left the fold, driving Agran's once all-powerful political machine to the verge of collapse.
Dornan, who has worked as an English teacher at an Orange County community college, has no known business or utility expertise. He's Agran's longtime personal confidante, political consultant and campaign fund-raiser.
News of Dornan's connection to ENCO Utility Services, a 1997 Edison International spin-off now owned by Apollo Real Estate Investments IV LLC., worked its way in hushed tones around the top echelons of City Hall during recent months. A government contract would give Anaheim-based ENCO tens of millions of dollars in profit and highly lucrative paydays for the company's lobbyists.
Neither Agran, Dornan nor ENCO president Dennis A. Eastman returned phone or e-mail messages, but the behind-the-scenes deal troubled city Councilman Chris Mears so much that last week he announced "ethical" considerations were among the reasons he will not rejoin Agran's candidate slate for the upcoming November elections.
"Ed Dornan knows absolutely nothing about utilities or energy," said Mears. "Ed's only value to the deal is his personal access to Larry and the presumption that he could deliver three votes [on the five-member council] for the contract. If the deal gets done, the mayor's best friend [Dornan] has told me he stands to make more than a million dollars because he has an interest in ENCO. . . . I don't want to be part of a political machine looking for financial opportunities to sustain itself. What they're trying to do doesn't pass the smell test. Frankly, it stinks."
Neither Dornan nor Eastman would comment on the precise nature of their relationship. But the Weekly obtained internal city of Irvine records that show Dornan "accompanied" ENCO executives Eastman and Robert deKorne to a private City Hall meeting in June 2002. There, the three men lobbied Agran, City Manager Allison Hart and staff for the exclusive electrical pact for new residential and commercial developments. Dornan also appeared with ENCO representatives during several other occasions including March 14 and March 18, 2003, meetings.
State laws generally prohibit public officeholders from voting on projects in which they have a financial interest. Laws also require officials to declare any role they may have in companies, particularly businesses seeking government subsidies or contracts. But the law contains a glaring loophole: an elected official's close friend or top political operative, as Dornan is to Agran, can reap undisclosed monetary rewards from government contracts.
Mears said he confronted Dornan and Agran about the arrangement. "I told them to think of the headlines if reporters find out about this," said Mears, chairman of the city's Great Park board, acting chairman of the California State Athletic Commission and a 2003 finalist for a judicial appointment to the state Superior Court. "Ed wasn't shy about his part of the deal, at least in private talks with me, and Larry said, 'Hey, this is just the way business gets done.' I refused to go along with it. It's just wrong. That was the end of my role in the machine. From there on, Larry has treated me like a redheaded stepchild."
A source who knows Agran's version of events says the mayor feels betrayed that Mears would accuse him of sleaze and is emphatic that neither he nor any of his advisers has done anything unethical in the ENCO proposal.
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No matter who is right, the Agran-Mears rift has huge implications. The ENCO contract, which would call on the city to borrow and spend tens of millions of dollars to create a municipal utility in partnership with the private company, is certainly in jeopardy.
But there's also public policy and campaign fallout. In a county in which Republicans dominate, Irvine has been the lone city controlled by a liberal alliance. For most of the past four years, Agran relied on Mears and fellow Democrat Beth Krom to give him a consistent three-person council majority over conservatives Christina Shea and Mike Ward. Whether it was the Great Park--the largest quasi-public-works project in Orange County history--or a pet-zoning ordinance, Agran has usually gotten his way. Several veteran city staffers who requested anonymity say the triumvirate's power allowed the mayor to operate with arrogance.
That arrogance was in play at a key Feb. 24 City Council meeting. Agran had planned to advance the massive, complex ENCO deal with little public debate and no meaningful guidance from Shea and Ward. The two Republicans on the board hadn't even been fully briefed. But Agran's plan fell into chaos.
"I have a major question: Are the representatives from ENCO here because I have never met them, seen them?" Shea asked. "Are they here tonight?"
"Not that I'm aware of," replied Deputy City Manager Judy Vonada.
"Why aren't they here?" asked Shea. "I mean, they are asking us to expand and to work with the city of Irvine to create a very large utility. I don't understand why they're not showing up. I have a lot of questions to ask them."
Agran volunteered nothing--no comment about Eastman's absence or anything about the proposal--and moved the agenda to the public-comments period. Former City Councilman Ray Quigley stood and stared at Agran.
"Throughout the history of the country, we have had municipalities that have been affected by political machines," said Quigley. "These machines have had almost total domination of the political process in a community. That domination rewards its friends and punishes its enemies. Those kinds of influences have proved corrupting; the parceling out of goodies to those in favor has become a way of life for many cities across the land. I recommend that this council not permit even the appearance that such a thing could happen in this town."
Having had his integrity questioned, the famously thin-skinned and feisty Agran--who made a failed bid for the 1992 Democratic presidential nomination--could have fired back, offered a defense or a denial. Instead, he ignored Quigley. The mayor believed he had three votes. But Mears stunned Agran.
"I think Councilwoman Shea has raised a good point about ENCO not being here this evening," said Mears. "It's hard for me to imagine moving forward in any fashion without having ENCO here to answer questions. I suggest we continue this matter."
Agran, Dornan and ENCO had been robbed of a quick victory. In hopes of keeping the deal alive, ENCO's Eastman eventually wrote a letter to the city, apologizing for his absence but offering no reason for the slight. It was too late. The mayor's unchecked reign at City Hall was over.
The electric plan could be discussed at a late-August City Council meeting. Both Mears and Shea say they want company executives to detail any past or current relationship they have had with Agran's friends or advisers.
"I was aghast at the way it was being pushed through," said Shea. "Why wouldn't the head of the company show up to answer our questions? And then there is Ed Dornan's connection. I've never seen anything like this before in Irvine. It is really fishy."
Fishy and also hypocritical. Since he arrived on the Irvine political scene in the 1980s as a liberal idealist, Agran and his allies have righteously blasted conflicts of interest involving Republicans. For example, in 2000, then-Councilman Dave Christensen was ridiculed for voting on projects tied to a real-estate developer who'd loaned him $30,000. Said one Irvine insider, "What's really crazy about the ENCO deal is that the Agran camp has been so critical about other politicians feathering the nests of their friends, and now it looks like they're playing the same game."
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Nowadays, Mears finds himself questioning Agran and his agenda. In response, the mayor is--with the aid of Dornan--scrambling to build another successful slate of City Council candidates: himself, Krom (for mayor), businessman Suhkee Kang and school-board official Debbie Coven.
"I'm sure he's going to do everything he can to save his machine," said Mears, who won't seek elective office in November. "The truth is that Larry sees the world very simply: you are either with him or against him. He likes to crush his opponents, but I don't think he's necessarily an evil guy. I really don't. Yet I've learned that [government] can be an incredibly corrupting process, and I no longer have faith in Larry."