Milk-Carton Millionaires

Photo by Jack GouldThe pursuit of felony charges against Huntington Beach City Councilman Dave Garofalo—outlined in a 500-plus-page search warrant and affidavit filed in Superior Court on July 18—is the most thorough assault on political corruption yet to come out of the office of Orange County District Attorney Tony Rackauckas. The report reveals that Garofalo systematically received money from advertisers in his publishing businesses and consistently voted for those advertisers when they brought issues before the City Council.

But the most unsettling revelation is that it apparently didn't cost much to compromise Garofalo's votes: most of the transactions amounted to just a few thousand dollars per year.

Perhaps that's because two prominent figures in the Garofalo scandal—megamillionaire developers George Argyros and Christopher Gibbs—didn't merit a mention in the DA report.

"Investigators have to pick their battles, you know?" a source close to the yearlong inquiry explained. "Lots of factors go into the decisions to follow one lead and let another go—whether they can collect sufficient evidence to get a conviction; whether, compared to the ease of getting other evidence, it's even worth the trouble."

But Gibbs and Argyros played huge roles in the OC Weekly's 20-month investigation of Garofalo. And they ought to have attracted the attention of investigators—precisely because of the complicated and sometimes contradictory lengths to which Garofalo went to disguise his relationship with them.

•In 1998, Gibbs grant-deeded Garofalo a house worth $565,000 in the brand-new Seacliff development while Garofalo was on a city subcommittee pushing for millions of dollars in rebates to the developer. In July of that year, just about the time Garofalo was voting to approve Gibbs' request for new project permits, escrow closed on the house. Garofalo sold it for $625,000 one day later to his friend, gas-station tycoon George Pearson.

When asked about the deal, Garofalo offered the Weekly conflicting explanations. "I took it for granted that any primary residence was exempt from any of those issues," Garofalo said in an early voice mail. But when we revealed we had proof that Garofalo never lived in the house, he offered a different explanation: that he had been a straw buyer, standing in for Pearson, and could account for "all but $5,000" of the transaction. Later still, Garofalo insisted he made only $1 on the sale to Pearson and that the increase in price—from $565,000 to $625,000—reflected the cost of improvements to the house.

Investigators might reasonably wonder how Garofalo moved to the front of a line of 300 other buyers bidding on Seacliff properties, why Garofalo remains reluctant to make public any evidence that he actually paid Gibbs' company for the house, and why Pearson participated with Garofalo in an unwieldy purchase strategy that required Garofalo to represent the purchase as his own for more than half a year.

Gibbs is only obliquely referenced in the DA report: his PLC development company was the subject of half of Garofalo's allegedly illegal votes identified so far.

•In 1999, Argyros invested $100,000 in fledgling Pacific Liberty Bank, for which Garofalo sits on the board of directors, while the bank was struggling to find the cash to open. Argyros' investment helped the bank to open in May 1999—one month after Garofalo voted to approve Argyros' controversial plan to build a Wal-Mart in the middle of a Huntington Beach neighborhood.

Investigators might ask Garofalo why he was allowed a seat on the Pacific Liberty board of directors despite the fact he could invest just half of the $100,000 required of other directors; why he failed to publicly disclose his business relationship with Argyros before voting several times to approve the developer's Wal-Mart project; why he failed to publicly disclose his business relationship with Argyros when he filed his state declaration of economic interests five days late on April 6, 1999—one day after he cast the deciding vote in the City Council's 4-3 approval of the Wal-Mart; why he failed to publicly disclose his relationship with Argyros when he amended the state form two months later, on May 31—referring to Pacific Liberty not by name but as "a start-up company"; why he waited until April 2000 to disclose his relationship to Argyros through Pacific Liberty Bank; how Garofalo, already in financial trouble, managed to qualify for a loan that allowed him to invest in Pacific Liberty; and whether Argyros' investment in the bank materially benefited Garofalo and other city officials invested in the bank.

When Garofalo rotated into the mayor's office late in 1999, Argyros topped the list of supporters who threw a victory party on Dec. 12 at the Waterfront Hilton that raised $10,000 for Garofalo's campaign war chest.

"It's just part of the political process," Garofalo told the Weekly then—back when he would still talk to the Weekly. "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."

It wasn't only Argyros who had "respect" for Garofalo then. The cream cheese of Orange County's Republican hierarchy—Congressman Dana Rohrabacher, Assemblyman Scott Baugh and Lincoln Club president Mike Capaldi—paid homage to him that day, intimating his potential as a future candidate for higher office.

Public defense from his highly placed friends has been nearly nonexistent in recent months. It's looking more and more as though Garofalo is going to take the fall alone, although it's hard to imagine how his longtime patron (and former HB planning commissioner) Ed Laird will be able to avoid his part in his allegedly fake purchase of Garofalo's publishing business. That is, unless Laird gets immunity to testify against Garofalo.

Suggestions that the money and power of Gibbs and especially Argyros may have daunted DA investigators' pursuit of them were shrugged off by two sources close to the investigation.

"There's no way to say for sure," said one. "If so, I doubt that it was orders from above. It would be more likely that it was the practicality of collecting effective evidence. In any case, the investigation is not going in their [Argyros and Gibbs'] direction."

Investigators are still collecting evidence, however. Documents included in the report filed last week were the basis for an April 12 raid on Garofalo's home, business and banks. "The investigation is three months ahead of that now," said another source. "No charges have been formulated. And no out-of-court settlement is being considered. It's too soon. They're still finding new things every day."


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