Santa Ana Mayor Miguel Pulido could very well have committed felony conflict-of-interest crimes when he voted in favor of city contracts for an auto parts dealer after he had profited from a property swap with the firm's owner, according to a city investigative report obtained by Voice of OC.
The report, based on an investigation by former Riverside County District Attorney Grover Trask, found Pulido tried to cover up his real estate transactions with NAPA Orange County Auto Parts owner Rupen James Akoubian, which ultimately netted the mayor a $197,000 profit.
At the very least, the report concludes, Pulido broke the state’s 1974 Political Reform Act on multiple occasions because he did not report the transactions on his financial disclosure statements, known as Form 700s, and voted on a contract for the auto parts store. The penalties for violations of that law could include fines and misdemeanor charges.
But more importantly, the report argues, Pulido's deal with Akoubian very likely constitutes a willful violation of state government code, section 1090, which prohibits public officials from having financial interests in their agency’s contracts.
If that turns out to be the case, Pulido could face possible prison time and be barred from holding public office.
(Click here to read the report.)
Pulido hung up on a reporter when reached by phone early Tuesday morning.
The city hired Trask, who works for the San Diego-based law firm Best, Best, & Krieger (which also employs Santa Ana City Attorney Sonia Carvalho), to look into the property swap after Voice of OC published an investigation last November revealing the specifics of the deal.
The report was completed over six months ago and the city turned it over to the Orange County District Attorney's office and the state Fair Political Practices Commission (FPPC). In September, members of the Santa Ana City Council, upset with the pace of the DA's investigation, voted to release the report by Sept. 30 if the DA or the FPPC did not file charges by that date.
The DA's office responded by saying releasing the report would compromise an ongoing criminal investigation into the mayor's dealings by "multiple law enforcement agencies," likely referring to a federal political corruption task force that includes the FBI and IRS.
An FPPC spokesman has so far declined to comment on that agency’s investigation.
The city ended up relenting to the DA's request and did not release the report following the Sept. 30 deadline.
Crucial to the case is that the statute of limitations on the criminal violations of the Political Reform Act violations runs out on Jan. 4, 2015, four years after Pulido cast a potentially illegal vote, according to the report.
The Origins of the Property Swap
The property swap deal dates back to 2010 when Pulido family members traded a parking lot they owned behind the auto parts store on First Street in Santa Ana for a house in Westminster belonging to Akoubian. At the time, the Pulido family and Akoubian claimed on sales deeds that the house and lot were both worth $200,000.
However, the county assessor later appraised the fair market value of both properties, finding that while the parking lot was indeed worth $200,000, the house was actually worth $430,000.
The Pulido family never challenged the assessor’s appraisal, and, in 2012, transferred the house solely into the mayor’s name. That same day, Pulido sold it for $397,000, netting a $197,000 profit.
Over the course of these transactions, Pulido cast votes awarding NAPA Orange County Auto Parts with two contracts to supply auto parts for the city's vehicle fleet.
The first, approved in a routine City Council vote on January 4, 2011, renewed a $50,000 agreement for the store to provide auto parts to the city.
The next contract was awarded without a bidding process and made Akoubian’s store the city’s exclusive auto parts provider. Pulido joined a unanimous council vote on Dec. 19, 2011 -- also in a routine action 15 months after the property swap – to approve the $1.35 million agreement.
A third NAPA Orange County Auto Parts contract for $50,000 Pulido voted to approve in 2010 might also be illegal if Pulido “contemplated” the property swap before he voted on that contract, the report states.
The Case for Felony Charges
Section 1090 was written to cover both direct conflicts of interests, such as when a government official is a shareholder in a firm receiving government contracts; and indirect conflicts, which come when an official benefits financially from a contract even if he or she does not have a direct financial interest in the firm receiving the contract.
Pulido's alleged conflict is no doubt indirect, because there is no evidence of him having an ownership stake in NAPA Orange County Auto Parts nor has the firm employed him. But, the report asserts, the property swap probably gives the mayor an indirect interest in the firm's contracts with the city.
"Though it appears on its face that Mayor Pulido's financial interest flows from a land deal with the Auto Parts Co. rather than the city contract with the Auto Parts Co., the fact that he voted on contracts within 3 months and 15 months after engaging in the property swap with the Auto Parts Co.'s president appears to constitute the kind of indirect financial interest that Section 1090 prohibits," the report states.
The parking lot helped Akoubian enhance his business operations, which in effect tied the property swap to the city contract, the report asserts. For example, the store employees regularly park the pickup trucks – some of which almost certainly delivered parts to the city -- in the lot formerly owned by Pulido.
“There is a clear nexus between the financial interests of Mr. Akoubian’s business and obtaining the Mayor’s parking lot to enhance the business purposes of Auto Parts Co.,” the report states.
“The property swap was an ongoing scheme and it was directly linked to enhancing the Auto Parts Co. business which in turn was directly linked [to] providing the necessary auto parts service and supplies to the City’s fleet of vehicles,” the report states.
The report goes on to pose the following questions:
- "How can Mayor Pulido not be pulled in one direction by his personal financial interests with Mr. Akoubian and in another direction by his official duties?"
- "Would [Pulido's] council colleagues have voted for the contract(s) in question knowing Mr. Akoubian was a significant source of potential income based on the secretive Property Swap?"
Finally, the report makes it clear that in the author's view Pulido's 1090 violations appear willful.
“Mayor Pulido’s machinations in covering up the Property Swap continued beyond the 2010-11 timeframe, until he transferred the property into his sole name and sold it at a huge profit,” the report states.
Nonetheless, the report makes it clear that the matter requires further investigation by an outside agency.
Trouble for the Contractor?
The report does not address the possibility that the property swap amounted to bribery nor the issue of an illegal gift, either of which is possible based on the facts, say good government experts.
From the beginning, Akoubian has maintained there was nothing nefarious about the property swap. He said despite the lot's market value, it was every bit as valuable to him as the house was to Pulido.
The store’s front parking lot is relatively small and provides only limited space for the trucks. Before the property swap, Akoubian needed an easily accessible location to store his parts delivery trucks, he confirmed to Voice of OC last year.
Akoubian’s solution to his parking problem was Pulido’s lot, which is located directly behind his store.
“I have 12 trucks that I've [got to] park somewhere, and I've got big deliveries that come in. … I would have paid $500,000 for that lot,” Akoubian had said.
The exclusive contract certainly increased his delivery burden. According to an online business profile, NAPA Orange County Auto Parts takes in between $2.5 million and $5 million in annual revenue. That means the contract could have increased the annual revenue by up to 18 percent, if not more.
But even if there is no bribery case, Akoubian could be significantly affected by 1090 violations, according to the report.
Depending on the charges, the city – or a third party lawsuit -- could force Akoubian to pay back the amounts of three contracts, which total $550,000.
Unlike the Political Reform Act, the four-year statute of limitations for 1090 violations begins when the crime is exposed, which in this case means the date of the first Voice of OC article on the matter, Nov. 14, 2013, according to the report.
“Given the concealment, it is unlikely a plaintiff should have discovered the violations sooner,” the report states.