S&L; Chief Aided Loan for Chula Vista Mayor

Chula Vista Mayor Greg Cox sought and received help from Kim Fletcher, chairman of Home Federal Savings & Loan Assn., to obtain a $2.2-million real estate loan after the lender initially rejected his application.

Cox’s appeal, during a meeting in Fletcher’s downtown San Diego office in April, 1985, took place at the same time that one of Home Federal’s multimillion-dollar real estate projects was being considered by the Chula Vista City Council.

Fletcher arranged for the loan committee to reevaluate the request, and Home Federal then approved the loan to refinance a troubled 123-unit apartment complex in Austin, Tex., in August, 1985. Four months later, Cox voted to support Home Federal’s proposal to increase housing density at its Bonita Long Canyon development.

At the same time that his loan was being reconsidered, Cox played a key role in negotiating a compromise that would bring an industrial business park and increased housing density to El Rancho del Rey, a 4,028-unit residential project that Home Federal purchased in January, 1986, for $27 million.

Requirements of Law

Cox’s meeting with Fletcher raises new questions about whether the mayor received special treatment from Home Federal. Political-reform laws prohibit a public official from making decisions that benefit sources of income, in some cases including loans. The law exempts commercial loans as a source of income if similar loans are generally made available in the regular course of business.

Cox, who did not disclose the loan until earlier this month after learning that The Times had inquired about his finances, denied that his 20-minute meeting with the head of a company that is building houses in Chula Vista amounted to a conflict of interest.

But on Tuesday night, the mayor abstained from voting on a utility easement issue concerning Bonita Long Canyon, saying he will await an opinion from the state Fair Political Practices Commission before participating in any more votes affecting Home Federal development projects in Chula Vista. Before Tuesday night, Cox had participated in numerous votes affecting the two Home Federal projects.

During his meeting with Fletcher, Cox said, the two men discussed, among other topics, the possible opening of a second entrance to San Diego Bay between Coronado and Imperial Beach. They did not not talk about Home Federal’s development activities in Chula Vista, Cox said.

‘No Special Consideration’

“Clearly, there was no special consideration asked for, nor was any received,” Cox said. “The loan on the property was a business decision made not by Kim Fletcher, but by the loan committee. And I couldn’t begin to tell you who was on the loan committee.”

Fletcher sits on Home Federal’s loan committee “on an ex-officio basis” and is a board member of Home Capital Development Corp., a Home Federal subsidiary. Citing confidentiality restrictions, the Home Federal chairman declined to discuss specifics of his conversation with Cox.

Fletcher said he could not recall whether he was present when Home Federal’s loan committee approved Cox’s application. Nor was he aware, Fletcher said, that his development company had invested $9.7 million in Bonita Long Canyon, an 862-unit Chula Vista housing project, nine months before he met with Cox.

After meeting with Cox, Fletcher said, he referred the loan application to Home Federal’s loan committee, which reevaluated the financing and reappraised the property. Cox’s partner, Patrick Judd, had earlier applied for the $2.2-million loan but was rejected because of insufficient net worth, Cox said. The loan was approved after Cox met with Fletcher and offered to co-sign the loan.

Foreclosure Auction

Though Home Federal officials said they used “conservative underwriting standards” in making the loan, Cox and other investors have been in default since late last year. Home Federal has scheduled a May 5 foreclosure auction for the 123-unit apartment complex in Austin. Home Federal is owed more than $100,000 in back interest on the loan.

The $2.2-million loan from Home Federal has embroiled Cox, 38, a popular second-term mayor who has been mentioned as a possible candidate for state office, in political controversy. Cox violated state laws by not disclosing the loan, according to Jeanette Turvill, a spokeswoman for the Fair Political Practices Commission.

Under state Political Reform Act laws, Cox was obligated to report the loan on his 1985 and 1986 financial disclosure forms, Turvill said. State laws require public officials to report loans exceeding $10,000 from banks that conduct business in their local jurisdictions.

On April 2, Cox amended his economic statements to include the loan after learning that The Times had inquired about the transaction.

Legal Opinion Sought

Cox said he has asked the FPPC for a legal opinion on whether the loan prevents him from voting on future projects involving Home Federal. He said he expects to get an answer within three weeks.

“I raised the question with City Atty. Tom Harron, and it was his opinion there was no conflict,” Cox said, explaining his decision not to participate in Tuesday’s City Council vote involving Bonita Long Canyon. “Notwithstanding that opinion, I thought at this point I wanted to abstain until I got something in writing from the FPPC.”

In evaluating a possible conflict of interest, the FPPC might look at whether Cox received any special treatment from the savings and loan.

Fletcher said it is not unusual for him to be contacted by acquaintances, including businessmen and news reporters, who apply for Home Federal loans.

“I don’t make loans,” Fletcher said. “I have friends who request a loan, and I will turn it over to a loan committee. I referred (Cox) to a loan officer.”

Cox said he and Fletcher have a “casual friendship” and had met when both were active in the United Way campaign.

Cox, who was elected mayor in 1981, has said he is in “serious financial straits” as a result of failed real estate investments. He said he stands to lose $117,000 on the Austin project and in February lost his investment of between $150,000 and $200,000 in a 70-unit apartment complex in San Antonio.

Cox said he and Judd approached three local lenders--Home Federal, Great American First Savings Bank and Coast Savings & Loan--in mid-1985 to refinance the Austin complex, called the Gazebos. At the time, both Home Federal and Great American were actively developing large residential projects in Chula Vista.

Cox said Home Federal was the only banking institution that would lend them the $2.2 million on reasonable terms.