A closer look at Arbitech

Barbara Diamond

“Who are they? And what are they doing trying to influence our local

election?” folks demanded when Arbitech LLC jumped into the City

Council race with an aggressive campaign against incumbent Wayne

Baglin.

Unable to put a face with the name, locals labeled the company as

“outsiders.”

“We’ve been here 4 1/2 years and we’ve been very active in the

community, but most of our customers aren’t in Laguna Beach and we

didn’t feel the need to advertise our presence or our [philanthropic]

activities,” said Torin Pavia, chief executive officer, board

president and a founder of the company, which sells computer hardware

on a global scale. “‘A Laguna Beach Company Reaching Around the

World’ is one of our slogans.”

The first time many locals ever heard of Arbitech were the

outraged cries when campaign donations were filed. Arbitech

executives had donated $35,000 to fund Citizens for Good, Honest

Government and Civility in Local Politics and Therefore Against Wayne

Baglin. More donations were reported in later filings, including

$15,000 from Ohana Holdings, an investor in Montage Resort and Spa,

to fund a poll.

The final accounting for all contributions and spending by

candidates and independent committees is due in January. All three

council candidates were the targets of “hit pieces” by independent

committees, over which the nontargeted candidates had no control.

“This past election was the worst on record in my 43 years in

town,” said Eleanor Henry.

WHO KNEW?

Despite their low profile, the election was not Arbitech’s first

foray into community affairs.

The company will be a Bronze-level sponsor for the Community Art

Project fundraiser in February.

This year, the company donated $1,000 to Laguna Outreach Community

Arts to support LOCA’s service programs to local children and another

$1,000 to the family of a nanny who was killed in a traffic accident.

The company also has sponsored, for three years, the Jimmy

Campanis/Tommy Lasorda Charity Golf Tournament, which raises funds

for underprivileged children in Southern California, notably the Gary

Center.

In 2002, Arbitech donated 15 state-of-the-art flat-screen monitors

to the Laguna Beach Police and Fire departments.

“We are Guardian Angels [department award] of the Police

Department,” Pavia said.

The company fields a softball team -- not nearly as successful as

the business -- and sponsors Little League teams here and elsewhere.

“One of our employees moved to Florida, so we have a team there,”

Pavia said.

The company was founded in 2000 by Pavia and Chief Operating

Officer William Poovey and is wholly owned by them with junior

partners Josh McCarter and Doug Kari.

Both founders lived in Laguna Beach when the company opened its

doors and both are surfers.

“We held literal and figurative board meetings in the water off

Thalia Street Beach,” Pavia said.

The company started with nine employees, with two children among

them.

“We now have 45 employees with 26 children,” Pavia said.

Pavia estimated that 25% of the employees and executives live in

Laguna Beach, including Poovey, Vice President Stuart Jeffries,

Facilities Manager Dave Williams and his assistant, Ryan Neptune.

Neptune is a fourth generation Lagunan, the grandson of the late

Terry Neptune.

“Ryan is our athletic director,” Pavia said of the former

volleyball coach at Laguna Beach High School. “Because of his

connection to the school, the first place we go with used, and

sometimes new, equipment is Laguna Beach High School,” Pavia said.

Donations to the school totaled about $10,000 last year.

“And we’ve already committed to a donation of $11,000 in products

for this year,” Poovey said.

The basis of the company was spelled out in Pavia’s thesis for his

master’s degree in business from USC. Two deans still act as

advisors.

MISSION STATED

“The definition of arbitrage is to buy low and sell high,” Pavia

said. “That’s what we do. We are a boutique of cutting-edge

technology, second-tier brokers that sell to corporate clients.”

The company occupies somewhere between 10,000 and 15,000 square

feet on the corner of Thalia and Glenneyre streets -- including the

old Reef Liquor store and suites upstairs from Sunset Drugs.

The large office space is divided into sales cubicles and the

“Pentagon,” an oddly shaped room where Jeffries heads up the buyers,

a conference room with a mural painted by Arts Commissioner Mike

Tauber.

The staff works on the latest equipment.

“We upgrade about every 18 months,” Pavia said.

Pavia may authorize the new equipment, and he knows what it can

do, but not necessarily why.

“I look so ‘dot-com,’ but I’m not. I’ve never played a video

game,” said Pavia, a trim, baby-faced, 32-year-old, comfortable in

casual duds.

He studied Roman history and business as an undergraduate at UCLA.

Poovey, also 32, is an attorney, but equally laid back in style.

The downstairs facility, which opens onto the alley between

Glennerye and Catalina streets is what first brought Baglin to

Arbitech’s attention -- and vice versa.

“We realize that deliveries are disruptive,” Pavia said. “That’s

why we are moving some of the functions to Carson, which we tried to

tell Wayne, but he wouldn’t listen to us.”

BACK STORY

“I think the situation with Arbitech was aggravated by

communication from the city manager that I was solely responsible for

the enforcement of the zoning code,” Baglin said. “I had not issued a

formal complaint. That was done by residents and businesses.”

City Manager Ken Frank declined to comment on Baglin’s statement.

Pavia said the spitting contest that led to Arbitech’s involvement

in the election began before the zoning issue was raised. He traces

it back to two years ago when the company complained to the police

department about Baglin’s customers allegedly parking in the

company’s loading zone, which they admit was overworked.

Baglin’s one-person real estate office is across Thalia Street

from Arbitech.

“We took pictures which we submitted to parking enforcement,”

Pavia said. “In my opinion that was the beginning. Baglin refused to

meet with us but said he would recuse himself from any Arbitech

issues.

“The next thing we knew, the senior code enforcement officer

showed up here. He ruled in our favor. No problems. Zero compliance

issues.”

Pavia absolutely believes that Baglin was the source for the

complaints about the zoning code violations that brought the code

enforcement officer to the business.

Baglin said not true.

“Inaccurate information was leaked to Arbitech by a council member

or a staff member at a closed session and leaked in a fashion that

led Arbitech to think I was out to get them,” Baglin said. “I have

documentation of the erroneous belief.”

After getting a favorable review from code enforcement, Pavia said

police officers took photographs of the delivery area. Arbitech

officials contacted council members and the city manager, complaining

of harassment.

“A few weeks later, we saw Wayne taking pictures of FedEx delivery

trucks,” Pavia said.

Speaking with the self assurance of youth and heady success, Pavia

said Baglin’s activities did not shake up company officials.

“We don’t lose often,” Pavia said.

That doesn’t mean they flout the law, Pavia said.

“A [Fire Department official] specified the best places for us to

park for deliveries and we absolutely have enforced that,” Pavia

said. “We are one of the few buildings on a double-wide alley so we

don’t block traffic if we park against the building.”

Neighbors have been asked to notify the company of any violations.

They have been given a direct line to call with complaints, Pavia

said.

“Wayne said that maybe Arbitech was against him because of zoning

problems with the city and [us] trying to intimidate other council

members,” Pavia said. “Those were all resolved.”

As of last week, Pavia and Baglin had never met.

THE CAMPAIGN

In an e-mail to employees dated Oct. 22, Pavia said that Baglin

continued to bully the company, but that was not reason enough to

launch a negative campaign.

Far better reasons, Pavia said, were the stories he heard from

business people who told him they feared retaliation if they spoke

out against Baglin. He also learned that the Police Employees Assn.

would not endorse Baglin for a consecutive term. Accusations of

rudeness toward the public, the city staff, and City Atty. Philip

Kohn rankled Pavia and the public.

Pavia had seen for himself the effect on one of his employees who

claimed Baglin had ridiculed him in public.

One employee had a negative experience with a home renovation

project.

“Wayne Baglin refused to meet with Jimmy [Whalen, the employee] to

talk about the issues,” Pavia said.

When the project was appealed, Pavia said, Baglin referred to the

employee as a 25-year-old kid and voted against it.

“The project was approved on a 3 to 2 vote, but Jimmy was so

appalled, he didn’t want to live there and sold the property at a

fire sale price and moved to Skyline Drive,” Pavia said.

Whalen, who was named Arbitech’s 2004 Salesman of the Year,

chaired the committee to oppose Wayne Baglin.

“I feel responsible for every person here,” Pavia said.

“I see our role as business is to take out the big bully who is

kicking sand in someone’s face. Bullying a bully is justice.”

Baglin admirer Tom Gervin said if putting pressure on staff is

being a bully, someone should look up the definition of bullish.

“It means optimistic,” Gervin said.

Pavia didn’t quite see it that way.

“I believe in a lot of Wayne’s environmental policies, but

everyone has a right to be heard and treated civilly,” said Pavia,

who moved out of town because of a distasteful experience with a

residential project.

Pavia said he felt Arbitech was ideally positioned and obligated

to reach out to the voters of Laguna.

The reach was brutal; perhaps not quite as nasty as the 1992

campaign against Ann Christoph, but it ranked right up there.

The mailers, no doubt carefully vetted by attorneys that Arbitech

could well afford, contained no lies, but not the whole truth,

either, and some sketchy accusations.

True: as each of the mailers stated, Baglin was indicted by the

Orange County Grand Jury on six counts of violating the state law

that says an elected official cannot benefit from deals with the

city.

But, the mailers did not include the fact that a jury found Baglin

not guilty of taking a commission on a property sale to the city in

which he represented the seller.

True: Laguna’s beaches are not pollution free. Baglin and admirer

Roger von Butow are the first to point out problems.

But, Baglin has been in the forefront of the effort to clean the

shoreline and the waters that feed into it.

The Arbitech mailers inflamed Baglin supporters and even some of

his critics, who decided to vote for him in protest.

Pavia makes no apologies.

“We knew we would have to do something to get people’s attention,”

Pavia said. “If Doug or I or a few Arbitech people have to answer a

few uncomfortable political questions -- so be it.

“What we gave Laguna was information. It was up to the voters what

they did with it.”

Baglin said, during a show of support for him at the Nov. 16

council meeting, that officials shouldn’t be elected on the basis of

negative campaigns.

“Say good things about your candidate,” he advised. “Don’t twist

and don’t malign.”

In fact, Pavia said, he would have had no problem if Baglin had

won the election, as long as the voters were aware of his conduct and

style and kept a closer watch.

Pavia does regret taking a $15,000 donation from Montage Resort

and Spa investor Ohana Holdings to fund a poll that he didn’t even

want.

“It was a mistake,” Pavia said.

COSTLY DECISION

Pavia made the decision to go after Baglin the day after he

watched “The Lion King” with his 2-year-old daughter.

“It’s the circle of life -- you can’t take more than you give,”

Pavia said.

The decision may or may not have cost Baglin the election --

absentee ballots cast before Arbitech entered the fray reflected the

final tally, according to the part-time political consultant Norm

Grossman -- but it did cost the company in terms of local public

esteem.

Arbitech’s integrity was called into question when the company

called Baglin’s integrity into question.

Councilwoman Toni Iseman named Arbitech as one of the senders of

mailers composed by “hostile, negative, bottom-feeding consultants.”

She said it would take Arbitech years to recover its good name.

Contrary to some remarks, Pavia said the company does not deal in

off brands but only in first-tier products: Hewlett-Packard, Compac,

Cisco, Sun and IBM.

“We had earmarked $30,000 this year for the computer wing at the

center,” Pavia said. “My grandmother is moving here and I wanted to

be able to take her to the center for bridge buddies.

“But a lot of that went into defending ourselves from Baglin’s

attacks. We fight fire with fire.”

Council members Toni Iseman and Elizabeth Pearson said negative

campaigns could cost the city some good candidates.

“Who’d want to put themselves through all that?” Pearson said.

HOW’S BUSINESS?

In March, the Orange County Business Journal presented Arbitech

with one of its five Excellence in Entrepreneurship Awards. Three

months later, “Entrepreneur” magazine and Dun and Bradstreet named

the young company No. 1 on the list of America’s 100 fastest growing

new businesses for 2003. It was a step up from the previous year, but

the company didn’t have far to go. It ranked No. 2 in 2002 and 2001,

when it debuted on the list.

“The reason for our success is integrity,” Pavia said. “I thought

we would be successful, but not this successful.”

Sales grew to $86 million in 2003 and are expected to increase

again this year.

“We couldn’t stop growing right now if we tried,” Pavia said.