Contract up for review by bureau’s directors

Theresa Moreau

HUNTINGTON BEACH -- The city attorney’s office has released the Local

News sales contract between Mayor Dave Garofalo and businessman Ed Laird,

answering some of the questions about the mayor’s dealings, but some say

not all.

The mayor is being investigated by the Orange County Grand Jury, the

Orange County district attorney’s office and the state’s Fair Political

Practices Commission for alleged conflicts of interest on votes he cast

for advertisers in the Local News and the Huntington Beach Conference &

Visitors Bureau visitors guide. The mayor’s company, David P. Garofalo &

Associates, has held the publishing contract for both.

Earlier this month, City Atty. Gail Hutton ordered the city-funded

bureau to immediately terminate its contract with the mayor. The bureau’s

board of directors will consider Hutton’s advice at its next meeting,

Sept. 5.

Among the people who may be involved in that discussion are bureau

board member John Given -- whose company, Commercial Investment

Management Group, purchased an ad from Garofalo four months before the

mayor voted on the firm’s Downtown development -- and ex-officio member

Steve Bone, president of the Robert Mayer Corp., which owns the

Waterfront Hilton, another advertiser.

Bone, who plans to attend the Sept. 5 meeting, said he believes more

must be learned about Garofalo’s business relationships before a decision

can be made about terminating the contract.

“I think there are more facts that need to be determined with regard

to ownership of the rights to publish, which have not yet been fully

determined,” Bone said. “For instance, if there is not a relationship

with David Garofalo, it probably would not be correct to terminate it.

And, if there is a relationship with David Garofalo, further facts need

to be determined beyond that.’

Given could not be reached for comment.

Garofalo, who was first elected to council in 1994, maintains that

there has not been a conflict since early 1998, when the sale of his

publishing rights to Laird was finalized. But questions had been raised

time and time again about the actual sale, details of which had been

sketchy until recently, when a copy of the sales document was provided to

Hutton.

The purchase agreement and a subsequent amendment to the agreement are

each two pages long and appear to have been drafted and printed on a

personal computer. Neither bears a legal stamp from a notary public,

which could pose problems if a disagreement on the purchase arises

between Garofalo and Laird.

Business attorney Steve Chonoles said as long as there is a contract

that both parties have signed, that’s all that’s needed. If the matter is

dragged into a court of law, however, proof of authenticity may be

brought into question.

“Essentially, in the law of evidence, there’s a law called

authentication,” Chonoles said. “If you’re in a trial and you have to

introduce a document, you have to prove that it is what it purports to

be. If another party gets up and denies it’s the contract, then you have

a conflict of evidence. Then the jury has to figure out who’s telling the

truth.”

Garofalo declined to comment on the documents.

However, Laird, after viewing the documents, said the agreement

supplied to Hutton was written by Garofalo and was the last of several

rough drafts that he and Garofalo signed in late 1997.

“They are the right documents. They are the right dates,” Laird said.

“They’re OK. I signed them.”

The original contract of sale stipulated that Laird, president and

chief executive of Coatings Resource Corp., would buy the publishing

rights of Garofalo’s twice-monthly community paper the Local News, as

well as the rights to publish the city’s Conference & Visitors Bureau

visitors guide and the Chamber of Commerce Business Directory.

The purchase price for the publishing rights was $220,000, with

$20,000 down and the balance due within a 36-month period from the sales

date, Jan. 14, 1998, with interest on the balance accruing at the annual

rate of 7%.

Garofalo has said that as part of the sales agreement, he would

receive $100,000 for three years. And on his statements of economic

interest filed with the city, Garofalo claims he earned more than

$100,000 as a consultant and publisher.

Hutton, in her Aug. 1 memo on the bureau’s contract with the mayor,

listed Garofalo’s consulting fee as $10,000.

The original promissory note also stated that Garofalo would act as

publisher during the 36-month final payment period and would act as an

advisor on general printing aspects, and the term, “A Coatings Resource

Company,” would appear on all products.

However, the Feb. 25, 1998, amendment stated that an unexpected

medical problem arose for Laird when his wife, Sandi, who was suffering

from cancer, took a turn for the worse, which required a revision of the

original agreement.

The amendment stipulates that Garofalo would become an independent

contractor hired by Coatings Resource.

The answer to the question of who owns the publishing rights to the

Local News also answers the question of who owns the publishing rights to

the visitors guide.

In a memo to the City Council dated June 19, Garofalo said he sold the

Local News in December 1997, with the transaction concluding Jan. 14,

1998.

Also, public records filed Dec. 28, show that another company, Air

Quality Consultants, took over on Jan. 1, 1999. That ownership switch was

followed four months later by a fictitious business statement filed by

Garofalo that says the Local News is owned by David P. Garofalo &

Associates and has been since 1993.

Councilman Dave Sullivan, who viewed the sales documents, said he

wondered why Garofalo didn’t produce the contracts months ago when he,

fellow Councilman Tom Harman and members of the public clamored for proof

of the sale.

In her Aug. 1 memo, Hutton called for the bureau to immediately

terminate its publishing contract with David P. Garofalo & Associates

because the arrangement might violate a state law that prohibits

double-dealing by city officials. Hutton recommended the city cut off the

bureau’s funding if the bureau does not cancel the contract.

“The city should place its relationship with the bureau on an

unassailable foundation,” the memo states.

The bureau receives all of its funding from the city. This year, the

City Council gave the agency $270,000 for its operating budget.

Bureau Executive Director Diane Baker said board members will discuss

Hutton’s Aug. 1 memo and Garofalo’s contract, which is up for renewal

Dec. 31, at its Sept. 5 meeting. The final decision to renew Garofalo’s

contract will be up to the board of directors.

“I feel we’re in the middle of this,”’ Baker said. “There’s no win-win

in this situation.”

Bone, who said he will participate in the discussion, said there

should not be a rush to judgment. He said Hutton’s memo underscored the

difficulty of understanding the law in Garofalo’s case. But before action

can be taken, Bone said, there must be a legal opinion from which to

respond.

“There is a presumption in the memorandum that the facts have been

determined, when in fact it appears to me that there are several

investigations going on to find out what the facts are,” Bone said. “So

let’s find out what the facts are, so that in time we can take action

based on the facts.”

Garofalo won the bid to publish the visitors guide in 1993 and

continued as publisher until June 19, when he publicly divested himself

of all publishing duties.

As part of the licensing agreement with Garofalo, the Visitors Bureau

receives free copies of the publication, and he receives the advertising

sales. Garofalo has estimated his annual gross revenue at $65,000.

Garofalo has said that since the sale of his business, he has received

no advertising revenue.

However, the mayor accepted a $2,995 check for a half-page ad in the

visitors guide purchased by Given, in his role as vice president of CIM

Group. Four months later, Garofalo voted to move forward with the

developer’s Downtown project.

Baker, in June, confirmed that Garofalo sells the ads for the guide.