San Diego City attorney Jan Goldsmith says he's careful not to cross the line with his investments.
“I haven't invested in California property and businesses over the years I've held public office in order to avoid potential conflicts,” writes Goldsmith, who's served as a state Assembly member, a judge and the mayor of Poway, in an emailed statement to CityBeat.
Except, that isn't true. According to his financial disclosures, Goldsmith owns between $10,001 and $100,000 in stock in Sunnyvale, Calif.-based Alliance Fiber Optics and between $100,001 and $1 million in stock in Chatsworth, Calif.-based MRV Communications.
After CityBeat pointed that out, Goldsmith sent an amended statement with “except for publicly traded stock” added into the sentence. In all, he holds between $150,000 and $1.5 million in corporate stock, but he also owns a stake in Thunderbird Airport Plaza LLC, a limited-liability company set up to own the Thunderbird Executive Plaza—a three-story office building with jet hangars—at the Falcon Field airport in Mesa, Ariz.
“It limits our investments, but it is safer when holding public office,” Goldsmith says of his personal financial policy. “I invested in the Arizona LLC because the building was in another state.”
The building may be out-of-state, but the company controlling it is based in San Diego and the venture has posed a potential conflict for his office.
As Goldsmith prepares to run unopposed for a second term, CityBeat is inspecting records from his first. We found that in the first months of his term, Goldsmith's staff provided legal counsel to the city during negotiations with Square One Development Corp., his partner in the Arizona project. Goldsmith's share in the project is currently worth between $10,001 and $100,000.
Square One was founded by lawyer Mark Mandell and Goldsmith's friend and longtime political ally, Poway mayor Mickey Cafagna. It was Cafagna who brought then judge Goldsmith into the project in 2000. Square One has always managed the Arizona property.
In 2006, a reluctant City Council committee chose Square One to develop a similar project on the southwest corner of Montgomery Field airport. At the time, The San Diego Union-Tribune reported that small-plane pilots who felt marginalized in the selection process alleged that cronyism was afoot, since Cafagna also chaired SANDAG, the region's transportation-planning agency. Nevertheless, Square One won exclusive negotiation rights by promising the city $130,000 annually in revenue, more than twice what was promised by two other bidders.
The negotiations were ongoing in December 2008 when Goldsmith took office. In February 2009, Square One submitted a new proposal that eliminated many of the concessions for small-plane pilots, such as outdoor areas for securing aircraft. The new proposal also extended the lease from 25 to 40 years. A real-estate consultant for the city responded enthusiastically, telling Square One he thought construction could start in summer 2010.
Then Cafagna began to lose his battle with kidney cancer. He died in April 2009.
The next month, a deputy city attorney wrote to Square One on official letterhead, with Goldsmith's name at the bottom. The memo said that Goldsmith's office had analyzed the new proposal and decided it differed too much from the original. In response, Mandell wrote a letter to the city saying he was “surprised, to say the least, by the tone and substance” of the city attorney's letter. Mandell then made several references to the Thunderbird Executive Plaza, though he did not mention his business partner, Goldsmith, by name.
“As you know, we had already completed a similar project by working with the City of Mesa, Arizona at Falcon Field, their main airport,” Mandell writes. “As one approaches that airport, our project stands out from quite a distance, and is a source of pride every time I visit that site. … Our experience at Falcon Field in Mesa, Arizona has convinced us that we can replicate this success at [Montgomery Field].”
The city formally terminated Square One's exclusive negotiation rights the same day Mandell sent the letter.
Goldsmith says he was unaware of the project and can't be expected to review every letter sent by his 147 lawyers. Since negotiations were dropped, Goldsmith says no harm was done.
Buzz Gibbs of Gibbs Flying Service, a fixture at Montgomery Field, tells CityBeat he had a “handshake agreement” with Cafagna to provide fuel service to the project. Cafagna was the driving force behind the project, Gibbs says, and between his absence and the eco nomic downturn, Gibbs isn't surprised the project fell apart.
So, what if Goldsmith's friend, Cafagna, had lived? Goldsmith denied interview requests but responded through his spokesperson.
“In a conversation with me today,” spokesperson Jonathan Heller writes via email, “he said that if the process had not been terminated and instead moved forward toward an actual contractor agreement, he likely would have learned of it and requested the City use outside counsel even if not required by ethics law to do so.”
State Bar rules for “adverse interests” state that a lawyer may not represent a client in matters when the lawyer has a personal or business relationship with a person or party in the same matter or with a person or party that would be “substantially affected” by the resolution of the issue, unless he's provided a written disclosure first. Goldsmith did not disclose the relationship.
Goldsmith's connection to Cafagna could be considered both business and personal. In a February 2009 memo, Square One explained: “Historically, our limited partners tend to be friends and family. We have never gone out to the market place to solicit or find investors.”
Though Goldsmith asserts he never stood to benefit from the Montgomery Field project, the letter sent by his office poses a problem, Santa Clara University School of Law professor and ethics specialist Gerald Uelmen tells CityBeat.
“If it's going out with his signature via his deputy, that would certainly be direct involvement and indicates he didn't recuse himself,” Uelmen says. “Yes, that sounds like a lapse. Whether that's a serious ethical lapse is another question. If these negotiations were going nowhere anyway, it may have been just carelessness not to withdraw from the process.”
Tracy Westen, CEO for the Los Angeles-based Center for governmental Studies, is skeptical of Goldsmith's claim of ignorance.
“It's possible, but you would've thought he would've had a review process,” Westen says. “If he did know, I think it would have been appropriate to disclose the relationship.”
Today, rather than receiving the $130,000 annually promised by Square One or the $57,000 proposed by its competitors, the city collects just over $30,000 in revenues from existing tenants. A helicopter port is now planned for the site.