Wednesday, December 8, 2010 | The disclosure this week that Santa Ana Mayor Miguel Pulido would receive a $500,000 "finder's fee" if a controversial sale of state properties were to go through raises significant ethical alarms and gives opponents of the sale new ammunition.
However, state officials say it remains unclear whether Pulido violated any state real estate or other laws by helping an influential consortium put together a winning bid for the properties.
"We'd have to investigate all of the nuances," said Tom Pool, spokesman for the California Department of Real Estate. He said he only learned of the situation Tuesday when Voice of OC asked questions; but, he added, "we routinely look into those types of things."
In very general terms, Pool said, anyone who acts on behalf of someone else for money in a real estate transaction or expects compensation for negotiating or soliciting buyers or sellers, needs a real estate license. Pulido isn't licensed to sell real estate in California, but it is unknown at this time how much he did for the consortium.
Pool said case law indicates that a finder's fee is legal for a person without a license if that person did nothing more than introduce two people and then walk away without participating in any discussions or doing anything more to advance the sale.
The legal issues "all would be driven by the facts," Pool said. "There's nothing wrong if it was a true finder's-fee situation."
Eric Lamoureux, spokesman for the state Department of General Services, which is selling the properties at the urging of Gov. Arnold Schwarzenegger to help offset a major budget deficit, said the state never pays finder's fees for real estate sales.
"Absolutely not," he said. "We don't do that with our transactions."
The Los Angeles Times reported Monday that Pulido would get the finder's fee if the pending sale of 11 state properties goes through. The story came to light through a Dec. 3 deposition given by current state Treasurer Bill Lockyer as part of the San Francisco court case challenging the sale.
The $2.3 billion sale is supposed to close Dec. 15. It is intended to help offset the state's huge budget shortfall. Critics contend that the resulting leases will cost the state more in the long run and that valuable property, including the home of the California Supreme Court in San Francisco and the Ronald Reagan building in downtown Los Angeles, will be lost.
Good government experts say that although the possibility of Pulido getting such a fee doesn't point immediately to public corruption, it definitely raises ethical issues.
The key question, said Rick Drooyan, a former high-ranking prosecutor in the U.S. Attorney's Office in Los Angeles, is this: "Did he use inside information that came to him as a public official" for personal financial gain?
"That's big money," added Bob Stern, president of the Center for Governmental Studies. "You shouldn't be earning any money based on what you learn as a public official."
And beyond Pulido's $500,000, Stern said, "my biggest question is, Are they [the state] getting fair market value for selling all of these buildings? I see that as an even bigger problem. Is the state giving something away?"
Orange County Democratic Party Chairman Frank Barbaro called Lockyer several weeks ago on behalf of Pulido and asked about the likelihood of the sale succeeding, according to Lockyer's testimony.
Lockyer described Barbaro as a "very good friend" and "the brother I never had" in the deposition.
Barbaro "said Miguel was concerned [about the state of the sale] because he was going to receive a $500,000 finder's fee if the transaction was consummated," according to Lockyer's depostion.
Lockyer said, "I asked, 'What did he do?'" And Barbaro replied: "'Well, he put the -- helped put the deal together.'"
Lockyer, through a spokesman, declined to comment further about the issue. Barbaro said Pulido is a legal client, so he couldn't speak without Pulido's permission.
When first contacted by the Times, Pulido acknowledged that he was in line for the $500,000 (which he called a "success fee") and said that he was justified in taking it. But then he called the Times reporter back and said the deal had fallen apart.
Yesterday, Pulido told the Orange County Register that the issue has been "blown out of proportion." He has not responded to Voice of OC's requests for an interview.
'There Was Never a Deal'
A spokesman for California First -- the consortium that is trying to buy the properties -- said the group never agreed to a finder's fee with Pulido or anyone else.
California First spoke to a number of community leaders and others as part of its "due diligence" in determining if buying the properties was a good idea, said Michael Bustamante, who was a spokesman for former Gov. Gray Davis.
"Does that warrant a cup of coffee?" Bustamante said. "Sure. A half a million? Not a chance. There was never a deal."
Regardless of whether a deal was ever in place, the fact that there might have been one is sure to impact the pending court case.
An attorney for those fighting the sale of the buildings said the issue would "absolutely" be added to the case.
"We think this is just the tip of the iceberg," said Anne Marie Murphy, a San Francisco Bay Area attorney whose firm, Cotchett, Pitre and McCarthy, is fighting the sale on behalf of two former building authority commissioners whom Schwarzenegger removed when they questioned the sale. A judge could rule as early as Friday on whether the sale should be delayed.
California First is a politically well-connected investment arm of two other firms, Hines and Antarctica Capital Real Estate. Antarctica's managing partner is Richard Mayo, who also is a partner in another investment firm, Spyglass Realty Partners.
Mayo's biography on the Spyglass website says the following: "As an appointee of former Governor Pete Wilson, Rich was responsible for overseeing the privatization of the State of California's 35-million-square-foot real estate portfolio. He directed all surplus land dispositions, leasing, acquisition, planning, construction and asset management activities."
Another Antarctica executive is Grover McKean, who was chief deputy state treasurer when Jess Unruh, one of the most powerful figures in California political history, was state treasurer in the 1980s.
OC Weekly reported Tuesday that Belgravia Capital, one of the 10 firms listed as investors in California First, is owned by Orange County's R.J. Brandes, a donor to Pulido's political campaigns. The Weekly also reported that Pulido had earned between $10,000 and $100,000 working for other Brandes companies.
It's not clear what, if any, impact the deal may have on Pulido's political future. Rumors have been circulating in Orange County political circles for weeks that he was likely to get a state appointment from the incoming governor, Jerry Brown.
Brown spokesman Evan Westrup said Tuesday that the new administration is not publicly commenting on any potential appointments. "We're really not discussing who the candidates are and who's being discussed for positions," he said. "Any speculation on appointments is just that, speculation."
Correction: A previous version of this story misspelled the name of the law firm Cotchett, Pitre and McCarthy and the name of the firm's lawyer Anne Marie Murphy. We regret the errors.