March 13, 2010

How Wal-Mart Rolls

Last month, Lisa Foster, Poway City Attorney, sent a memo to the council members with some advise regarding the Wal-Mart expansion. She advised councilmembers and council candidates not to meet with any local anti-Wal-Mart groups.

Question Presented
What steps can the City Council take to ensure that the applicant's due process rights are protected in a controversial land use matter such as the WalMart expansion, when Councilmembers are being asked to meet with interested parties and to commit to a decison prior to the public hearing?

Short Answer
In order to safequard the City Council's ultimate decision in a controversial land use matter from a due process challenge, it is recommended that City Councilmembers avoid meeting with interested parties prior to the public hearing, avoid committing to a decision prior to the public hearing, and provide all documents and other evidence that they receive to the City Clerk so that it can be made a part of the record for the public hearing. Additionally, it should be noted that in an election year, City Council candidates who take a strong public position regarding a particular land use mater are at risk for being disqualified from participating in that matter if elected to the City Council.

The legal justification for this advice is that land use decisions are "quasi-judicial". Quasi is a latin word that means "as if".  The city council is not really a judicial body. The council members are not judges or even a jury. Most land use decisions are "quasi-judicial" which means the councilmembers are supposed to be unbiased and fair and base their decision of the codes and Poway general plan and the evidence presented in the hearing, just "as if" it were a judicial hearing.  And it also means that if the applicant doesn't like what the council decides they can appeal the council's decision in a court of law after they have exhausted all other remedies. 

So, technically, the councilmembers should remain neutral and unbiased until the public hearing for every land use decision. But they don't.  For example, the city has courted In-N-Out Burgers to locate in Poway. In-N-Out Burgers has selected a spot in the Kohls/Staples center in the industrial park.  But the hamburger joint doesn't fit in the available space, so they are going to have to ask the council to give them a variance so that they can build into the setback.  The variance request is on the agenda for the March 16th city council meeting. It is a quasi-judicial proceeding. But it is already a done deal. The council members have already declared that they are bringing an In-N-Out Burger to Poway and the city even has promoted the restaurant in their February Economic Development newsletter:

So, why the special advice for the Wal-Mart decision and no shush-up warnings on In-N-Out Burger ?

Well, here is the difference.

In-N-Out Burger is loved.  Wal-Mart is not.
Or at least not as much as In-N-Out Burger.

But because both of these decisions are "quasi-judicial" there are consequences that apply to the next applicant, who may or may not be loved. The next fast food joint that wants to locate in the industrial park might also expect to get a variance, if circumstances were similar. And if Wal-Mart wins approval, the door is open for more superstores to locate in downtown Poway or in the commercial zones of Old Poway.

Disclaimer: I am not a fan of In-N-Out Burgers or Wal-Mart.  I would love to have a Lowes nearby. However, I certainly wouldn't want to see Lowe's locate on Poway Rd in abandoned car lots. That would just suck and I am amazed that the staff was even considering it.

One of the big problems is that our general plan doesn't address superstores and where they should or shouldn't be located in Poway. We, the citizenry, have never had a chance to weigh in on how superstores would positively or negatively affected our lives and whether or not we want them located near dense residential areas.  We are stuck with a quasi-judicial proceeding about Wal-Mart when we should have had a legislative hearing on superstores and our general plan. We would all have been allowed to say what we want to our council members in that scenario.

Another aspect of the city attorney's advice is that it hardly seems fair. Councilmembers are  advised not to meet with "interested parties" but that is pretty much the only way local groups can let their councilmembers know how they feel about supercenters in their downtown. Wal-Mart, on the other hand doesn't have to meet with councilmembers to get their message out. They advertise how great they are on TV, and on the internet.  They even paid for a couple to write a warm and fuzzy fake blog about their adventures in a motorhome "shopping across America". Would you believe that they only met wonderful Wal-Mart employees who loved working there on their trip across the US?  Of course, they were paid to say that.

Wal-Mart also has the money and the moxy to run a full page ad in an Arizona newspaper comparing a restrictive land use ordinance with Nazi book burning.

The full-page advertisement included a 1933 photo of people throwing books on a pyre at Berlin's Opernplatz. It was run as part of a campaign against a Flagstaff ballot proposal that would restrict Wal-Mart from expanding a local store to include a grocery.

Afterwards Wal-Mart apologized for it. Well, sort of apologized for it.

Other ads included a picture of a child praying and a person with duct tape over her mouth. "We wanted people to think about the freedoms we enjoy in America. The intent was wholly honorable and good," said Chuck Coughlin, president of Highground Inc., a Phoenix consulting company that created the advertisement. "We will not back away from substance of the ads . . . We will apologize for the use of imagery." 

Wal-mart also has paid flacks who orchestrate getting quoted in local news articles. Just a couple of weeks ago John Mendez, Wal-mart Stores Inc Southern California public affairs and government relations manager was quoted in a UT article saying:

Traffic does not mean traffic,” he said. “Traffic means commerce. When you ask small-business owners in Poway, all of them are saying that the more traffic the better, because that brings in more people, and that means more commerce, and that means additional sales.

Mendez is paid to say that stuff.

Wal-Mart, sly devils that they are, also employ fake grass root community support groups. A PR firm, paid by Wal-Mart, sets up these groups. Members of the fake groups write letters to newspapers, do push polling, post on blogs, etc. If a councilmember meets with a group face-to-face, s/he can easily distingush a bonafide local group from a fake one. When the city attorney advises that councilmembers do not meet with real community groups, the advantage goes to Wal-Mart. They can make lots of  noise with their paid-for-by-Wal-Mart fake groups and make it seem as if there is a large pro-Wal-Mart group in the community.

Surely the city attorney should have advised councilmembers to  turn off their TVs, cell phones and computers and ignore their newspapers, lest they be tainted by Wal-Mart's persistent PR blitz.  Shouldn't the council and candidates be sequestered?

And how do we know our councilmembers aren't being influenced by more than yellow smiley faces, fake blogs and paid hacks? It isn't as if our councilmembers are required to keep a public record of who they meet and what they talk about.

Think Wal-Mart doesn't go there?

Think again.

In 1996, the FPPC (The California Fair Political Practices Commission) fined Wal-Mart developer Frank Gatlin and his  law firm a record $420,000 for laundering illegal campaign contributions.

In September 1996, a San Diego shopping-center developer and a San Bernardino law firm agreed to pay a $420,000 fine for laundering more than $56,000 through 210 separate contributions to five San Diego city councilmembers, including Ron Roberts, Juan Vargas, Barbara Warden, George Stevens, and Judy McCarty, as well as losing council candidate Andrea Skorepa. Wal-Mart developer Frank Gatlin and his attorney Mark Ostoich admitted using friends, clients, employees, and business associates to make the contributions, which were later reimbursed. Roberts, who topped the list with $24,750 in illegal contributions, was quoted by the Union-Tribune as saying he had told Gatlin not to launder money to him and was unaware that the money his campaign had collected had been tainted. "On behalf of Gatlin Development Co., I accept full responsibility for my actions and want to extend my deepest of apologies," Gatlin said in a statement.

Gatlin wasn't (and still isn't) a Wal-Mart employee. He is a developer who builds the shopping centers that Wal-Mart leases. According to the Gatlin Development website, Gatlin

 has developed over twenty Wal-Mart anchored shopping centers consisting of approximately seven million square feet of retail development valued at over $1 billion. 
To date, Frank has developed in excess of 10% of the Wal-Mart anchored shopping centers in California- a record currently unmatched by any other developer. Frank and the GDC team handle every aspect of development from site selection and acquisition, to entitlements, build-out and lease-up.
Despite advers economic conditions, Frank has developed an impressive portfolio of anchored shopping centers with an overall occupancy rate of 98%, and a value in excess of $200 million. With offices in California and Tennessee, Frank and his team of experts are strategically set to contimue developing shopping centers and acquiring real estate assets from coast to coast.

It is very disappointing to realize that the guy who got caught for laundering illegal campaign contributions, the guy who (along with his law firm) got fined one of the biggest fines in FPPC, ended up being the numero uno Wal-Mart developer. I guess crime pays. It takes more than a huge fine to change corporate culture. It takes some jail time. In fact, FPPC investigators did everything possible to get San Diego County District Attorney Paul Pfingst to follow up with a criminal prosecution in the Gatlin case, but Pfingst blew them off.

I obtained a copy of the summary of Frank Gatlin's  interviews with the FPPC.  It is a nice little exposé of how to get the politicians on your side, way before you have that "quasi-judicial" hearing where everyone is all unbiased and making their decision based only on the evidence at the hearing and all that other malarky.

So, from the FPPC interview here's how Gatlin got started:

He wanted to be known in San Diego, because he wanted to do projects in the area. He viewed himself as becoming a permanent resident in California, so he wanted to get involved.
He had two projects slated in the city of San Diego. The first thing he did, as he always does, was meet with the "politicians" and show them the proposed project. He wanted their support from the beginning to the end. He believed that some of the "politicians" were running for office or had campaign debts. He was asked by one of them, he could not remember which one, to assist in raising some campaign funds or assist in retiring campaign debt. He advised he would be glad to assist.  

Why would a politician even meet with a developer? Land use decisions in San Diego are quasi-judicial decisions too. Shouldn't they have said, "Oh, sorry, Frank, we might have to vote on that. You better just go talk to the planning department and find out what you need to do. We can't meet with you because we might get biased." No, what they said was, "Hey Frank, I'd love to talk about your project. Can you raise some money for me?" And it wasn't just one sleazy politician, Gatlin started getting requests for money from lots of them.
He (Gatlin) made some phone calls to architects, engineers and other subcontractors of Gatlin Development and asked if they would be willing to contribute. He was able to raise approximately $4,000 to $5,000. This was probably for Mr. Roberts or Mr. Vargas.
Shortly after he raised campaign funds for the first candidate, he received phone calls from other candidates making the same request. He felt obligated, since he had done it for one. So, once again he found himself making phone calls requesting individuals to make campaign contributions. He didn't want to ask the same people to contribute again. So, he asked his employees if they would be will (sic) to contribute.
It was his understanding that there was a $250 campaign contribution limit per person and $500 per couple in San Diego. He also knew that a corporation could not make contributions. He did not realize that it was illegal to reimburse someone for their contributions. 

Um, right, Mom says you may not have any of the cookies she just baked. So, you get your little brother to sneak a cookie for you, give it to you and you eat it. Technically, you didn't take any of Mom's cookies. And if you have no moral qualms, you could grow up to be a rich developer.

Finally, Gatlin's controller asked him if what he was doing was legal.

He (Gatlin) asked his in house counsel, Mr. Young and Mr. Young did not know. He recommended that Mr. Gatlin call Mr. Ostoich.  So he called Mr. Ostoich and asked if it was legal.

He didn't put Mr. Ostoich on the spot and asked for a legal opinion in writing. He asked..."Mark I need to raise some money and I've asked my employees to make some contributions. And...I told them I would be willing to reimburse them for it, for making the contributions. Is this against the law? And Marks exact words, were Frank its not against the law, might not be quite ethical, but its not against the law. There's no case law on this." Mr. Gatlin asked him if it was legal to reimburse his staff and Mr. Ostoich advised him it was legal.

Mr. Ostoich was Gatlin's real estate lawyer. His firm got fined by the FPPC too. But not for the bad legal advice.  Members of the law firm were also giving illegal campaign donations that were being reimbursed by Mr. Ostoich and later by Mr. Gatlin.

Gatlin Development was working on six development projects within the county of San Diego. Two of the projects were within the city of San Diego. They were at Aero Dr./Hwy 15 and 805/ Palm Ave. The others were in Lakeside, Chula Vista, and two in Oceanside. 

The Poway Wal-Mart was not a Gatlin development. That parcel is owned by a Wal-Mart controlled company. So Gatlin didn't get cozy with Poway politicians. At least, not that I know of. But that's not to say that developers and corporations haven't given "batched contributions" to Poway candidates. They have. And they still do.  In fact, James Mashburn (the owner of the company that won the exclusive right to haul our Poway garbage)  got fined $249,500 by the FPPC for laundering contributions to candidates between 1992 and 1995. And many of them were Poway candidates. I don't even recall any of them returning those illegal contributions either.

Some candidates try to hide batched donations by entering the information on different pages of their reporting statements. I guess they never heard of an excel sort. Why don't the developers just have their employees send in the checks on different days? Sometimes they do, but in general, a developer or somebody who wants a contract or something will want to deliver the batched contributions in person. They want to let the politician know that they expect to have his/her ear in return for the donations.

Here is Gatlins's description of giving batched contributions to Juan Vargas:
In March of 1993, he had Gatlin development staff contribute to Mr. Vargas. Mr Gatlin met with Mr. Vargas after he was elected to the city council as he was the district councilmember  in which Gatlin Development had a project in. He could not recall if some else (sic) asked him to make the contributions. He also could not recall how the contributions got to Mr. Vargas' campaign committee. He then recalled that he had a meeting with Mr. Vargas and handed the contribution checks to him. Once again the checks were given to him in a large envelope and included contributor card information. Mr Vargas never opened the package during the meeting. He did tell Mr. Vargas that he did not have time to put on a fund-raiser, however, he was able to get some people to contribute to Mr. Vargas' campaign, in the total amount of approximately $5,000.

Gatlin forgot a lot of details. His goose was cooked and he knew the FPPC had him and he would get stuck for a fine, but he never implicated the politicians in the pay-to-play scheme. They all skated. Said they were unaware that the contributions were laundered. Imagine that. A big fat envelope of donations from Gatlin's employees at a lunch meeting and the politician had "no idea".  Right.

One of Gatlin's favorite politicians was Ron Roberts. Roberts asked Gatlin for money pretty often. And Gatlin seemed to like him. Here is the description of Gatlin handing over a fat envelope of illegal contributions to Ron Roberts:

Mr. Gatlin gave the contribution checks to Mr. Roberts at a luncheon/meeting. Included with the checks were copies of the envelopes that listed each employees occupation/employer information. Mr. Gatlin called Mr. Roberts on the telephone prior to the luncheon to make the arrangements. He could not recall if he told Mr. Roberts on the phone if he was bringing contributions with him to the meeting. When the contributions were given to Mr. Roberts they were packaged together in one large envelope. Mr. Roberts thanked him for the contributions and nothing more was said regarding them. Mr. Roberts never opened the envelope and looked at the contributions. 

So, just how serious is laundering campaign donations? From the FPPC stipulation and decision:

The laundering of campaign contributions is one of the more serious violations of the Act. It undermines one of the basic purposes of disclosing important information to the voting public regarding the true source of campaign support and contributions.

The Gatlin episode happened 17 yrs go. None of the politicians that Gatlin  gave laundered donations to, suffered any consequence. In fact, Ron Roberts is still around and running for re-election as a county supervisor again. Gatlin suffered only a momentary slap on the wrist, but rebounded to become the best Wal-Mart shopping center developer in California. I have no doubt that politicians are still asking for "a little fundraising" help from any developer that wants to do a project in their area. Why wouldn't they? There is very little risk of any real consequences.

I understand the legal justification for the Poway City Attorney's advise to councilmembers and candidates to not meet with any interested party in the Wal-Mart case.  But it just seems ludicrous that a company like Wal-Mart has the balls to threaten a lawsuit if councilmembers listen to the people in their own community. Wal-Mart may sue if they don't get a fair shake. But, hey, when did Wal-Mart ever play fair?


PowayVoter said...

And your thought the third world had corrupt political practices?

If Poway had a formal code of ethics, it would only be a start. Everything is for sale in Poway! Not much different than Houston, TX except there they call an ace an ace ... here its done by "nice people" for "nice reasons".

Mary Lou St. Lucas said...

A giant 24-hour crime-magnet just doesn't belong directly next to so many houses and apartments.
People complain about sports fields being lit up near their homes. With this, we're talking 24 HOURS.
When I vote, I have the right to be able to know the candidates' views on something that affects my quality of life.

Chris Cruse said...

Mary Lou, the issue of "what goes next to what" is really the core of the debate about Wal-Mart, and about all of downtown Poway. Poway has a land-use matrix that defines what zones can go next to what other zones. Pretty much, they can't put anything but rural residential next to rural residential. That leaves those folks with no shopping opportunities in their own neighborhoods. They have to drive out and shop elsewhere. Wal-Mart and other big box stores are great for these folks, although they are usually located near a freeway and not in an urban downtown.

But Poway's Wal-Mart is in an urban downtown, that is becoming increasingly residential. People who live in urban areas often walk to a market and pick up a few things. Urban areas often have short blocks to accommodate a strong pedestrian element. Poway's downtown was not designed for the people who live there. Heck, all the sidewalks around Wal-Mart end abruptly at the entrances. Wal-Mart only puts out the welcome mat for people who are driving in from some place else, not the people who live across the street.

As Poway builds more residential apartments in the urban downtown area, the problem of having a car- magnet, suburban mall Wal-Mart in the center of town, is going to cause increasing land use compatibility problems. You have to go pedestrian friendly urban or totally suburban mall (like Mira Mesa)- you just can't mix it up together.

Anonymous said...

last few days our group held a similar talk about this topic and you illustrate something we haven't covered yet, thanks.

- Laura

Anonymous said...

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