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10/27/09

Shortly after Mayor Sanders pressured the SEDC board to fire its CEO, Carolyn Smith, on July 23, 2008, he faced a "town hall" meeting of South East San Diego residents on July 28, 2008, organized by the The Coalition of Neighborhood Councils (CNC) at the Tubman-Chavez Multicultural Center (TCMC). I videoed the event as "City Hall TV" (a name I was toying with at the time). In it Sanders makes his case for retaining SEDC and CCDC.
 

These video excerpts address the basic question still hanging over SEDC and CCDC: are city-owned corporations the best way to administer our redevelopment? Sanders expressed his support for the continued use of these corporations.

He told residents that SEDC and CCDC are "businesses" and that these corporations need "very specific expertise" and that he didn't see "how an election would help" because, he explained: "I expect my appointees to carry my point of view forward".

He referred to these two city-owned corporations as "agencies" and suggested that if they did not exist, blighted communities like South East San Diego would only retain 17% of their property taxes instead of 100%. His actual words were: "if all of a sudden you break the structure you stop getting 100 cents on the dollar". That is actually not true. A corporate structure is not necessary to retain redevelopment tax dollars.

The reason Sanders and his backers are anxious to retain a corporate structure is clear from what has happened in the past. San Diego redevelopment administration has been tightly controlled by developers like Fred Mass at CCDC and Artie Owen at SEDC. The following is an account of what happened at 5335 and 5412 Market Street.

In May 2000 a senior official of the San Diego Redevelopment Agency (RDA), Deputy Director Todd Hooks, signed off on a land deal that made a gift of $500,000 to businessman Artie Owen, who later became Chairman of the Board of SEDC. Is this the kind of "specific expertise" Sanders had in mind when he stood before the citizens of South East San Diego and defended a "business" structure for redevelopment?
 

Todd Hooks was born and raised in Monrovia, California and worked 5 years for the San Diego Redevelopment Agency.		He left in 2004 to "pursue real estate development opportunities" for the Agua Caliente Band of Cahuilla Indians. He now lives in this gated community off Gerald Ford Drive and is the immediate past president of the Palm Springs Chamber of Commerce.

On April 19, 2000 then Deputy RDA Director Mr. Hooks signed this "Double Escrow Disclosure" on behalf of the City, indemnifying and holding harmless Commonwealth Title in a transaction that clearly did not pass the smell test. The title company wanted protection against participating in a real estate transaction where City money was being used by Artie Owen to "purchase" 5335 and 5412 Market Street and simultaneously "sell" it to the city in what is known as a "double escrow".

The result was a gift of public funds to "businessman" Artie Owen.

Using citizens' rights under the Public Records Act I decided to check into how the city was able to convince the mainstream media that Mr. Owen was entitled to that $500,000 "profit". The Voice of San Diego for example has repeatedly thrashed my assertion that it was an illegal gift of public money. They went after Carolyn Smith instead.

I believe that Carolyn Smith was a sacrificial lamb to protect bigger fish that the media are afraid to touch. Here are the facts of the Market Street case, judge for yourself.

The earliest document I was able to find in the city's files was this letter from Artie Owen to Carolyn Smith dated September 3, 1999. He followed up on September 15, 1999 with a draft of the purchase contract he intended to use in the transaction. It clearly described him as the owner of the property. But he was not the owner and both Smith and Hooks knew it. Here is the Preliminary Title Report they received dated September 8, 1999 showing the real owner to be Federated Industries Inc, an Illinois Corporation.

On October 22, 1999 Smith docketed a request for action as instructed by Artie Owen in his letter dated September 3, 1999. Here is her Report to the City Council meeting as the Redevelopment Agency on October 26, 1999 at which they approved the Market Street purchase as it was presented to them. It falsely asserted that Artie Owen was the seller. That Report undertook to do due diligence and "ownership research" that would be "satisfactory to the Agency". The person who would sign off on that "research" as being "satisfactory" was the Deputy RDA Director, Todd Hooks.

A legislative Resolution was passed and approved by the City Attorney, Casey Gwinn. It was fraudulent on its face. It authorized the RDA to purchase a property from an "owner" that did not own the property. The really bad part is that everybody involved knew it, but said nothing. Such is the culture of dishonesty that pervades this City.

The only purchase contract that ever existed for this transaction was between the RDA and Artie Owen, showing him as the "Seller". The fact that the real owner was an Illinois Corporation, Federated Industries Inc, was never even mentioned (except of course in the title company's official title report). Nobody at the City or Owen even pretended that he was acting as an agent of Federated or that he had a prior option to purchase the property at a lower price. They simply misrepresented the property's ownership and did the deal.

It is interesting to note that in answering my public records requests, Casey Gwinn's former Executive Assistant, Leslie Devaney, who narrowly missed defeating Mike Aguirre for City Attorney in 2004, was being copied with my email correspondence. Does she have some "special knowledge" in this area, that requires the current City Attorney Jan Goldsmith to hire her as a watchdog on watchdogs?

In the overall city budget somebody stealing $500,000 is not going to break the bank. But the fact that our city staff, including our current City Auditor, so readily accept somebody receiving a $500,000 gift of public funds, for no apparent reason other than that he was politically well connected, is very disturbing. The fact remains that on May 1, 2000 a Deputy RDA Director, Todd Hooks, signed a $400,000 Note and Deed of Trust in favor of Artie Owen as part of the purchase price of a property he did not own. The beneficial interest in that $400,000 Note was then moved offshore to the British Virgin Islands.

The fact remains that the City Comptroller sent a check for $433,841.10 to the British Virgin Islands tax haven on May 22, 2001. The payoff included the interest accrued from the note's creation on May 1, 2000 until the City's sale of part of the secured property, 5335 Market Street, to TayRad Construction required the payoff on May 22, 2001.

Is this the kind of "special expertise" Sanders sees as necessary for redevelopment in San Diego? Does he think that this is the price we must pay to get "high caliber" private developers, like Artie Owen, to "invest" in our communities?
 

The wife of real estate fraudster Jim McConville filed for personal bankruptcy yesterday. Here is the court document. It is a petition to wipe out between $1 million and $10 million in "mainly business debt" to between 100 and 199 creditors. 18 pages of the document are devoted to listing her many creditors a meeting of whom is scheduled for January 6, 2010. Maybe the creditors should sell the rights to some reality TV show or maybe Jim has already done so. It should be quite a spectacle.

The private creditors will be angry because they know that McConville put all the scam real estate in his daughter's name or a company owned by her and put all the fast cars and art collection in his own name.

The banks, developers, mortgage brokers and attorneys don't care. McConville put millions of dollars in their pockets. He was a one-man real estate bubble. Their hats are off to him. It was private investors like Andy Narraway who got burned. The bankers made a killing.
 

 10/27/09

By law a labor impasse must be resolved by the City Council. So they dutifully listened to long presentations from the Mayor's negotiating team and from representatives of the MEA and Local 127. (The safety unions, police and fire, are exempt from Managed Competition.)

Mike Zuchett made the case for the MEA.
 

Mike addressed broader policy issues relating to Managed Competition, like who is asking for real competition and who is asking for a rigged system? Is the City trying to achieve savings by eliminating health care? He strongly rejected the Mayor's assertion that the MEA has stonewalled the process. He said that while the MEA is willing to test and defend its slogan that "Nobody does it better", he believes the process is a complete waste of time and money.

Joan Raymond represented Local 127, the blue collar workers.
 

Joan blamed the Mayor for having wasted millions of taxpayer dollars defending his "illegal position" and that it took a judge and a failed legal challenge to bring him to the negotiating table. She further claimed that he has now done an about-turn on health care in the middle of an epidemic. Health care seems to have become the pivotal issue on Managed Competition.

Councilmember Gloria then read the well-orchestrated motion - these things are worked out by the chiefs of staff well in advance.
 

Todd made the motion: "the Council has determined not to impose the Mayor's last, best and final offer at this time, that the City's negotiating team return to the table and that the Council convene in closed session to give direction to the City's negotiating team, with such direction to be stayed until completion of the Mayoral veto process".

Councilmember Emerald then seconded the motion.
 

The final vote broke along party lines, no Democrat daring to challenge union power. With that kind of organized opposition the Mayor knows very well that he will never be able to implement Managed Competition "by agreement" with the unions.

City Attorney Jan Goldstone, has already provided the answer - if Sanders has the courage to take it. According to this legal opinion dated October 8, 2009, under the current strong mayor form of government Sanders does not have to negotiate with the unions in order to implement managed competition. Goldsmith explains: "Section 117(c) does not mandate that the Mayor solicit proposals from City departments before outsourcing."

He goes on to explain that outsourcing is in compliance with state collective bargaining laws provided certain safeguards are followed e.g. "the City must provide notice to the affected employee organization and [be given an] opportunity to negotiate prior to the decision to contract out the work".

That's clear enough - from the elected City Attorney. If this Mayor is serious about implementing managed competition and/or business process re-engineering, he should get on with it. Blaming the unions and City Council is wearing a little thin.