Photo by Jack GouldDave Garofalo hadn't incited such a display of power in almost a year, not since the cream of Orange County's political and economic crop assembled in a hotel banquet room in December 1999 to celebrate his coronation as mayor of Huntington Beach and to raise funds for his bright political future.
But it was a different kind of power that assembled in a government office in Santa Ana to discuss Garofalo early on the morning of Nov. 16, 2000. They came from the far reaches of law enforcement—agents from the FBI; investigators and prosecutors from the Orange County district attorney's office; and representatives from the U.S. attorney's office, the IRS and California's Franchise Tax Board. They convened to share information about their investigations into long-standing charges of corruption against Garofalo.
“It was a big meeting, and a lot was discussed,” says someone who was in the room that morning, speaking with the Weekly on the condition of anonymity. The source suggested the investigation could lead to prosecutions.
Garofalo's habit of cross-pollinating his private finances and political influence has been raising eyebrows —and conflict-of-interest allegations—almost from the moment he was elected to the Huntington Beach City Council in 1994. Former Huntington Beach Independent reporter Kathleen Haney began reporting on the charges in 1998. Eighteen months ago, the Weekly picked up the trail, and eventually the Independent, the Times Orange County and The Orange County Register also joined in the investigations, sounding a common theme: Garofalo consistently cast council votes in favor of developers and businesses that bought advertising in his three publications: the official Huntington Beach tourism guide; a chamber of commerce directory; and Garofalo's semimonthly newspaper, The Local News. Along the way, the Weekly discovered that in 1998, Garofalo was grant-deeded a luxurious new house by a developer with millions of dollars in business pending before the council. And that he voted to approve construction of a Wal-Mart proposed by developer George Argyros, a major investor in a struggling, upstart bank for which Garofalo was a director and had invested $35,000 of borrowed money. There are also tax issues relating to his supposed sale of The Local Newsin 1998.
With so many leads and so many investigating agencies—the state Fair Political Practices Commission and Orange County grand jury are also scrutinizing Garofalo—the theme of the Nov. 16 meeting of law-enforcement officials was collaboration. The main purpose was to determine which agency was best positioned to take responsibility for conducting the rest of the investigation and pursuing any subsequent prosecutions. After considerable debate, those duties were assigned to the Orange County district attorney's office.
“After examining what we had, it just seemed most appropriate that any violations be pursued as state charges, rather than federal, for the best chance of success,” says the source. “That's true of the tax situation, too.”
However, there are plenty of reasons to be skeptical of the Orange County district attorney's willingness to prosecute Garofalo. The first is that the DA declined to prosecute some of the same allegations against Garofalo in 1999 after a complaint filed by Huntington Beach resident Susan Newman and a probe headed by district attorney investigator Joe Lopez. The second is that District Attorney Tony Rackauckas campaigned for office in 1998, promising to scale back investigations into political corruption in Orange County; indeed, he gutted that area of the felony-projects unit shortly after taking office. Then there is the matter of Rackauckas' very conspicuous attendance at Garofalo's outlandish swearing-in ceremony—the one with the marching band and dancing girls—in Huntington Beach council chambers in December 1999. Both men enjoy the patronage of megadeveloper Argyros, who contributed to Rackauckas' campaign and helped throw a glitzy Sunday brunch/political fund-raiser for Garofalo at the Waterfront Hilton a week after he became mayor.
Representatives of outside investigative agencies have been concerned about all of this, too. Little more than a month before turning over the case to the Orange County DA, one of them acknowledged how bad it might look to do so.
“The DA has an inherent problem in that he has already turned down this investigation and has come right out and said he was not going to pursue as much political corruption,” the source said. “This fact has received major attention in the press and has prompted accusations from the public that the office is tainted by politics.”
But the same source has become convinced that the DA's office can be trusted. He praised DA investigators, who “have done an unbelievable amount of good, hard, thorough work” on the Garofalo case. He went on to speculate that the fickle nature of political considerations could keep Rackauckus from interfering, no matter what he might prefer—that is, that newspaper investigations into Garofalo's activities and the subsequent high public awareness of them may have tied Rackauckus' hands.
“While their [DA investigators'] boss may have an incentive not to look into this,” said the source, “as soon as there's a potential political black eye, the incentive swings the other way. That's what's happening here.”
Meanwhile, the other enforcement agencies are leaving their cases open—in effect, looking over the district attorney's shoulder. “If they thought that the DA's office was being persuaded or the DA himself was trying to steer the investigations elsewhere,” said the source, “they'd be back in.”
The DA's chief investigators, Tim Craig and Craig Kelsey, have little to say about the investigation besides indicating that it is thorough. “We like to think so, anyway,” Tim Craig said.
According to several people who have been interviewed by the DA's office, the central thread of the investigation is still epitomized by the infamous two-sided business cards that Garofalo used to distribute—the ones with the Huntington Beach city seal on one side and The Local News logo on the other, suggesting a connection between his votes on the City Council and his advertising revenues as a publisher.
Among those questioned by DA investigators are former employees of Garofalo's publishing business; developers and merchants who purchased advertising; city officials; and even Garofalo's most significant benefactor, wealthy, Huntington Beach paint manufacturer Ed Laird.
Garofalo's relationship with Laird is of primary importance to investigators, not only because of conflict-of-interest issues but also because of tax implications.
Laird's company, AQC Corp., claims to have purchased The Local News for $200,000 in 1998, thus shielding Garofalo from conflict-of-interest questions involving his City Council votes. Laird—for a time Garofalo's appointee to the planning commission—subsequently said his college-student son, Jeff, was head of AQC.
But the facts surrounding this supposed sale remain fuzzy. The paperwork was not filed until December 1999, along with a note that the sale was retroactive to January 1999. But no proof has been provided that money ever changed hands. Beyond that, records filed with the secretary of state's office indicate that AQC Corp. was dissolved on March 25, 1994—several years before the alleged sale.
Investigators are asking people who bought ads in Garofalo's publications to produce canceled checks, attempting to follow the councilman's often complicated financial trail. Investigators are also closely examining videotapes of Huntington Beach City Council meetings, minutes of various committee meetings, and correspondence between Garofalo and other city officials.
DA investigator Tim Craig declined to speculate when the probe will conclude. However, another source close to the DA investigation indicated that it could be wrapped up soon—between one and three months. “We're getting down to the short hairs now,” said the source.
“You don't want to be Dave Garofalo right now,” said the source who attended the Nov. 16 meeting. “No, you don't want to be him.”
