House of the Rising Sum
Huntington Beach Mayor Dave Garofalo pushed for millions of dollars in developer rebates and voted in July 1998 to approve Seacliff developer Chris Gibbs' request for new project permits, three and a half months after Gibbs grant-deeded Garofalo a lavish house in a nearby Seacliff development. Property records obtained by the Weekly show that Garofalo sold the house for $625,000 on July 28, 1998—one day after escrow closed.
It is unclear how much, if anything, Garofalo paid for the property from Gibbs, the vice president of OC Ventures and its parent company, PLC Development. The grant deed between the men made no mention of a purchase price or lender, and Garofalo refused to disclose it. In any case, records suggest Garofalo paid more than half a million dollars in cash for the house. He responded to the Weekly's request for an interview with a voice-mail message and two faxes describing the deal as "a real-estate transaction."
Garofalo, then a city councilman, did not disclose his stake in the valuable property and did not recuse himself from the council's vote to approve Gibbs' new permits at Seacliff.
"I took it for granted that any primary residence was exempt from any of those issues," Garofalo said in a voice-mail message.
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That explanation is contradicted by evidence that Garofalo never lived in the Seacliff home and by his own claim that by the time he voted, he had already purchased another home. He was living in a Huntington Beach hotel when he acquired the Seacliff property in March 1998 and had moved into another brand-new home near downtown Huntington Beach a few days before he voted to approve Gibbs' permit request on July 6. In fact, Garofalo listed his downtown house as his primary residence in a 1998 financial-disclosure form the state requires from government officials.
The Seacliff transaction occurred in the spring and summer of 1998, during a flurry of financial activity for Garofalo. He was trying to secure a loan for $35,000 to invest in the start-up of Pacific Liberty Bank in Huntington Beach, where he is a bank director. On July 24, he announced the $200,000 sale of his small newspaper, The Local News, to businessman Ed Laird—although recently discovered records show no one filed any paperwork until December 1999. And he was purchasing that new home in downtown Huntington Beach for $329,000.
In contrast to these figures, the only mention of money on property records regarding the Seacliff house shows that on March 20, 1998, Garofalo paid $621.50 in transfer taxes—making its value roughly $565,000, according to real-estate experts.
The house in question is on Poppy Hill Circle, located in the exclusive, gated St. Augustine community in Huntington Beach's sprawling Seacliff development. It sits on the corner of the neighborhood, on a mesa overlooking the ocean and oil fields. Current data from the county assessor's office show that it is the most valuable on the street.
Using the newspaper he publishes as a promotional vehicle, Garofalo penned a glowing article on Seacliff 10 days after he sold his house there. The neighborhood is characterized by "a mixture of old world charm and nostalgic coastal ambiance," he wrote in The Local News on Aug. 7, 1998. Records bearing Garofalo's signature show he understood at the time of purchase that the house is built on a former oil field—that "oily dirt" and "residual contamination" known to cause "cancer and birth defects" exist under the property. None of that was mentioned in The Local News' front-page tribute to the development, which was headlined "Huntington Seacliff Selling Out Fast! HERE'S WHY!"
On July 28—one day after escrow closed and the first day Garofalo could legally move into his Seacliff house—he sold the house to George Pearson, an Orange County property owner and president of G & M Oil Inc. The transaction was executed by a quitclaim deed that lists the sale price as $625,000; an Aug. 13, 1998, document lists the exact price as $625,596.32. Asked to explain the $60,000 jump in price, Garofalo insisted the price reflected the cost of upgrades and a "symbolic" $1 profit.
"During the time I entered the escrow at St. Augustine and the completion of the home, I found the house I really wanted in another section of Huntington Beach," Garofalo explained via a fax to the Weekly. "In a casual/social conversation with a friend I mentioned that I had reserved a home at the first location" but that he was "giving my position up" on the Seacliff waiting list.
Pearson, who told the Weekly in an interview that he knows Garofalo because both are parishioners at St. Bonaventure Catholic Church, said he expressed an interest in buying the home. "But the developer wouldn't let me have his place in the buying process, so we had to let [Garofalo] finish buying it," said Pearson. "There were other houses for sale, but I wanted the one he picked out because it's a prime spot. So I put up money to finish escrow and then let him quit-claim it to me."
However, the Weekly could find no public records indicating that Pearson assisted Garofalo with escrow payments. In his fax to the Weekly, Garofalo said he did not have paperwork on his purchase of the Seacliff house. In the same statement, Garofalo inexplicably refers to a quit-claim deed as a "Quick Claim Deed."
Real-estate experts contacted by the Weekly raised a number of objections to Garofalo and Pearson's explanation. First, it's odd that Garofalo never retained the records of the Seacliff transaction. And in the unlikely event that he didn't, Garofalo could easily obtain them from his former lender or the escrow firm. Garofalo ignored the Weekly's offer to pay the cost of retreiving the documents.
With the Seacliff house going through escrow, Garofalo voted to approve a series of permits for PLC—the same development company that built his house. The July 6, 1998, vote—which passed 7-0—concerned a series of permits for residential and commercial developments that PLC needed to continue building Seacliff.
As the high-profile vote came off without a hitch, PLC was engaged in lower-profile negotiations with a city subcommittee on which Garofalo was a member. The subcommittee's task was to work out how much money the city would rebate to PLC for infrastructure improvements near its projects. The proposed rebate schedule would, according to one City Hall source, send "millions of dollars" in rebates to Gibbs' company. A participant in the negotiations said Garofalo pushed to give the developer "several million dollars more than what city staff thought was fair."
On April 17, the City Council finally approved a rebate settlement with PLC.
City records of the vote show Garofalo failed to disclose his ownership of the Seacliff house or that his recent acquisition was within a half-mile of the proposed development. His personal disclosure form listing his financial activity in 1998 also fails to mention the real-estate transaction. According to the state's conflict of interest code and the California Fair Political Practices Commission (FPPC), it's legal for elected officials to vote on permit requests by developers who sold them homes. But the code also states that proximity—as well as the likelihood that the proposed development would affect the value of his house by at least $10,000—gave Garofalo an indirect interest in the vote. At the very least, according to the code, Garofalo should have disclosed his recent purchase when he cast his vote approving the PLC permits.
In his voice-mail message to the Weekly, Garofalo said he would immediately send a letter to the FPPC—and a copy of that letter to the Weekly—requesting "whether or not my being in escrow on the property caused any reason for me to recluse [sic] myself."
The Weekly never received any such letter.
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