Unrelenting controversy over a potential conflict of interest involving developer George Argyros and the proposed construction of a Wal-Mart store has prompted a high-ranking Huntington Beach city official to sell his stock in upstart Pacific Liberty Bank.
"It would simplify my life if I didn't own the shares anymore," said David Biggs, director of economic development for Huntington Beach.
Biggs told the Weekly he recently contacted a broker to find out exactly how to transfer his 200 shares of Pacific Liberty stock (originally valued at $2,000) to a friend. Biggs insisted the decision to sell was his alone. However, in a November 1999 interview, Biggs acknowledged that Huntington Beach city administrator Ray Silver had mentioned to him that the investment in Pacific Liberty might be a conflict of interest.
Biggs was among several members of Huntington Beach city government who were founding investors in Pacific Liberty, which opened for business in May 1999. A potential conflict of interest arises because these city officials are investment partners in the bank alongside big developers whose projects frequently come before these same officials for approval. Those developers include Newport Beach's George Argyros, who is trying to build a Wal-Mart on the site of Crest View Elementary School, and Christopher Gibbs, whose PLC company is constructing the massive Holly-Seacliff housing development on previously open space. Argyros and Gibbs have each bought $100,000 in Pacific Liberty stock.
Since the Weekly revealed this cozy relationship in November, city officials have insisted there is nothing improper. The Orange County grand jury, district attorney and Huntington Beach city attorney have also ruled that the investments aren't conflicts of interest. The Fair Political Practices Commission is still investigating.
"I still don't believe there's any conflict of interest in owning the stock," said Biggs, who explained that he first invested as a gesture of support for the community-based bank. "I've always viewed it as something that in 10, 15 or 20 years might have paid off."
Although Biggs' $2,000 investment seems comparatively paltry, he has been one of the bank's most symbolically important investors. As economic director, Biggs is responsible for moving big development projects such as Wal-Mart through City Hall. Having someone with Biggs' responsibility and stature listed on the founding shareholders plaque in the Pacific Liberty foyer was a real coup for bank officials.
Biggs' decision to dump the stock comes on the eve of the March 7 election, when the Huntington Beach ballot will include an initiative—Measure I—that would effectively stop the construction of Argyros' proposed Wal-Mart by rescinding the rezoning of the school site that made the project possible. The issue has become entwined because of two undisputed facts. First, when Argyros needed city backing for the Wal-Mart, he got it from Biggs and four City Council members, three of whom (including Mayor Dave Garofalo, who sits on the bank's board of directors) own Pacific Liberty stock. Second, when bank officials such as Garofalo needed start-up capital, they got it from Argyros in the form of 100 grand.
Getting Biggs and other officials to invest figured prominently in Pacific Liberty's search for start-up capital. In the bank's original July 23, 1998, pitch letter, bank officials claimed that "a large group of business, civic and community leaders who want to see the return of personal service and local decision making contributed the organizational funds to start Pacific Liberty Bank."
Only Biggs and Councilwoman Pam Julien listed their investment in Pacific Liberty on their state-mandated financial disclosure forms. No city official, however, mentioned it during the long debate over the Wal-Mart deal.
Among those who received the bank's original pitch letter was Dr. Gerald Chapman, a Huntington Beach dentist and member of the city planning commission. Chapman attended a meeting for potential investors and was even invited to join the bank's board of directors, but he later declined to have anything to do with the fledgling bank when he discovered that bank directors have complete financial responsibility for the money of their depositors.
"I didn't invest or join the board because I have a patient who's president of a bank in Victorville," said Chapman. "I asked him about it, and he said he made good money but it wasn't worth what it did to his health."
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Another who declined repeated invitations to join Pacific Liberty was Huntington Beach City Councilman Ralph Bauer—the only pro-Wal-Mart voice on the council not affiliated with the bank. His reasons mirrored Chapman's. "I was approached a number of times to invest and join the board of directors," said Bauer. "Basically, these banks are not good investments. You can't make any money."
City attorney Gail Hutton—who's already decided the stock investments by Biggs and the other city officials did not constitute a conflict of interest—has told the Weekly that she declined repeated invitations to invest in the bank because of her concern that such an investment might appear to compromise herindependence.
"I was approached by Pacific Liberty Bank, and I declined [to invest]," Hutton said. The reason, she said, had to do with her experience more than a decade ago in the now-defunct Huntington National Bank. "Among other things, I had previously invested in a bank that was promoted in Huntington Beach. I felt this created a lot of difficulties for me to function as city attorney. Once in a while, they have a matter coming before the council, and if I have any investment over $1,000, it is necessary for me to abstain and recuse myself. That costs the city money."
Perhaps the most colorful reason for not investing in Pacific Liberty came from Mike Ramsey, 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," he said. "I don't have that much confidence in small banks like that. You don't know how these 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."