oo vroar a 0 10 12 13 14 15 1s 17 1s 1g aL 23 25 26 DARRYL E. EAST MELODEE A. ANDERSON FAIR POLITICAL PRACTICES COMMISSION 428 J Street, Suite 800 Sacramento, CA 95814 Telephone: (916) 322-6441 Attorneys for Complainant BEFORE THE FAIR POLITICAL PRACTICES COMMISSION STATE OF CALIFORNIA In the Matter of FPPC No. 94/189 ) ) ) GATLIN DEVELOPMENT COMPANY and ) STIPULATION, FRANK GATLIN, ) DECISION AND ORDER ) ) ) } Respondents. The complainant, Acting Executive Director of the Fair Political Practices Commission, Robert Tribe, and Respondents Gatlin Development Company and Frank Gatlin hereby agree that this Stipulation will be submitted for consideration by the Fair Political Practices Commission at its next regularly scheduled meeting. The parties agree to enter into this Stipulation to resolve all factual and legal issues raised in this matter and t reach a final disposition without the necessity of holding aner 10 a 12 13 14 15 16 a7 18 19 20 8 25 26 27 administrative hearing to determine the liability of the Respondents. Respondents understand and hereby knowingly and voluntarily waive any and all procedural rights under Cal. Gov Code Sections 83115.5, 11503 and 2 Cal. Code of Regs. Section 18361, including but not limited to the issuance and receipt of an accusation, and the right to appear personally in any administrative hearing held in this matter, to confront and cross-examine all witnesses testifying at the hearing, to subpoena witnesses to testify at the hearing and to have an impartial administrative law judge present at the hearing to act as a hearing officer. Respondents further understand and hereby acknowledge that this Stipulation does not preclude the Commission from referring this matter to, cooperating with, or assisting any other agency with regard to this or any other related matters. It is further stipulated and agreed that Respondents have violated the Political Reform Act as described in Exhibit 1, attached hereto and incorporated herein by reference, which is a true and accurate summary of the facts in this matter. Respondents agree to the issuance of the Decision and i order and imposition by the Commission of a fine in the amount of, one Hundred and Ninety Two Thousand Dollars ($192,000.00), and a | cashier's check in said amount, payable to the "General Fund of the State of California," is submitted herewith to be held by che! Commission until it issues its Decision and Order.lo a 12 13 14 15 16s 17 1s 19 20 21 22 23 24 25 26 27 The parties agree that in the event the Commission refuses to accept this Stipulation, it shall become null and void, and within five (5) working days after the Commission meeting at which this Stipulation is rejected, all payments tendered shall be returned to the Respondents. Respondents further stipulate and agree that in the event the Commission rejects the Stipulation and a full evidentiary hearing before the Commission becomes necessary, no member of the Commission shall be disqualified because of prior consideration of this stipulation. aves, 215/96 Robert Tribe, Acting Executive Director Fair Political Practices Commission Complainant Dated: 5Lt4 [Ka 4nk Gatlin, individually and for Gatlin Development Company, Respondents Dated: Gfr0/[% kK Atle Jafles R. Sutton, Esq. Nielsen, Merksamer, Parrinello, Mueller & Naylor Attorneys for Respondents tena IT IS SO ORDERED, effective upon execution by the Chairman of the Fair Political Practices Commission at Sacramento, California. obs eile hcl Ravinder Mehta, Chairman Fair Political Practices Commission Dated:EXHIBIT 1 INTRODUCTION Gatlin Development Company is a real estate development firm located in San Diego which primarily builds shopping center complexes that contain Wal-Mart department stores along with other tenants. Frank Gatlin is the owner and principal officer of Gatlin Development Company. Between December 1992 and February 1994, respondents were the true source of one hundred and seven campaign contributions to candidates and members of the San Diego City Council, a candidate for the San Diego County Board of Supervisors, and a campaign committee located in Lake Elsinore. The contributions were made in the names of Gatlin Development Company employees and their spouses, as well as members, relatives and business associates of a law firm which was retained by Gatlin Development Company to provide legal services for its development projects. Most of the contributions made to San Diego City Council candidates and members were in the amount of $250. At the time the contributions were made, there was a $250 per person campaign contribution limit in effect pursuant to a San Diego city ordinance. This ordinance also prohibited any contributions from corporations. As such, Gatlin was prohibited from making any campaign contributions in San Diego city elections. The foregoing chain of activity is commonly referred to as "laundering". It undermines the campaign disclosure provisions of the Political Reform Act (Act)1/ by depriving the electorate of essential information regarding who is actually supporting or opposing a particular candidate or measure. For purposes of this Stipulation, the violations of the Act are as follows: : On or about December 14, 1992, respondents made nine (9) contributions in the amount of $250, totaling $2,250, to San Diego City Council candidate Ron Roberts in names other than their own name, in violation of Sections 84301 and 84300(c). 1/ the Political Reform Act is contained in Government Code Sections 81000 to 91015. All statutory references are to the Government Code unless otherwise indicated.FPPC No. 94/189, Gatlin Development Company, et al. Exhibit 1 Page 2 6-107: On or about January 28, 1993, respondents made four (4) contributions in the amount of $250, totaling $1,000, to San Diego City Council candidate Andrea Skorepa, in names other than their own name, in violation of Sections 84301 and 84300(c) . On or about March 15, 1993, respondents made eight (8) contributions in the amount of $250, totaling $2,000, to San Diego City Council candidate Juan Vargas in names other than their own name, in violation of Sections 84301 and 84300(c). On or about March 17, 1993, respondents made six (6) contributions in the amount of $99, totaling $594, to the "Citizens for Lake Elsinore" committee in names other than its own name in violation of Section 84301. On or about July 14, 1993, respondents made ten (10) contributions in the amount of $99, totaling $990, to San Diego City Council candidate Andrea Skorepa, in names other than their own name in violation of Section 84301. on or about July 30, 1993, respondents were the true source of thirty four (34) contributions in the amount of $250, totaling $8,500, to San Diego City Council candidate Ron Roberts in names other than their own name in violation of Sections 84301 and 84300(c). on or about December 2, 1993, respondents were the true source of twenty (20) contributions in the amount of $250, totaling $5,000, to San Diego City Council candidate Barbara Warden in names other than their own name in violation of Sections 84301 and 64300(c). on or about January 20, 1994, respondents made four (4) contributions in the amounts of $250 and §500, totaling $1,500, to San Diego County Board of Supervisors candidate Ron Roberts in names other than their own name in violation of Sections 84301 and 84300(c). on or about February 23, 1994, respondents made twelve (12) contributions in the amount of $250, totaling $3,000, to San Diego City Council candidate Juan Vargas in names other than their own name in violation of Sections 64301 and 84300(c). Gatlin Development Company and Frank GatlinFPPC No. 94/189, Gatlin Development Company, et al. Exhibit 1 Page 3 SUMMARY OF THE LAW ‘COUNTS = 107 Government Code §81002(a) of the Act provides that election campaigns shall fully and truthfully disclose information regarding receipts and expenditures in election campaigns in order to fully inform the public and inhibit improper practices. Accordingly, timely and truthful disclosure of the source of contributions is one of the overriding purposes of the Act. In order to accomplish this purpose, Section 84301 provides that no contribution shall be made, directly or indirectly, by any person in a name other than the name by which that person is identified for legal purposes. The act of making contributions in the name of another person is commonly known as "laundering" . Section 84300(c) prohibits contributions of $100 or more unless they are made by way of a written instrument containing the names of both the donor and the payee. The City of San Diego has a campaign ordinance which limits contributions to $250 per person per candidate for an election. The ordinance also prohibits corporations from making any campaign contributions to candidates for city elected offices. COUNTS 1 - 107 Frank Gatlin (hereafter referred to as "Mr. Gatlin") is the owner and principal officer of the Gatlin Development Company (hereafter referred to as "Gatlin"). Beginning in 1989, respondents developed shopping centers, which all included a Wal- Mart store along with other tenants, in San Bernardino and Riverside Counties, including the cities of Colton, Redlands, Fontana, Corona, Yucca Valley and Lake Elsinore. In connection with these development projects, Mr. Gatlin retained the San Bernardino law firm of Gresham, Varner, Savage, Nolan & Tilden (hereafter referred as "Gresham, Varner"). Mark Ostoich, a partner with Gresham, Varner, was the principal attorney working with Gatlin on these projects. In 1992, Mr. Gatlin began building similar shopping center projects in the San Diego area. These shopping centers included those located at Aero Drive-Highway 15 and on Palm Avenue in the City of San Diego. Gresham, Varner and Mark Ostoich continued to provide legal representation to Gatlin in consummating land acquisitions. As a new developer in the San Diego area, Mr. Gatlin was interested in acquiring a good working relationship with local elected officials and gaining their support for his projects. He was initially contacted by a San Diego City Councilmember whoFPPC No. 94/189, Gatlin Development Company, et al. Exhibit 1 Page 4 requested contributions.?/ Mr. Gatlin agreed to help and asked architects, engineers and subcontractors who worked with Gatlin to make contributions. He did not reimburse these individuals or companies for their contributions. Mr. Gatlin continued to receive calls from other San Diego City Councilmembers requesting his assistance in fund-raising. Mr. Gatlin believed that "if he did for one, he’d have to do for another". Because he felt his business contacts had been exhausted, he began asking his employees to make contributions to specific Candidates for which they were reimbursed with a Gatlin company check. Mr. Gatlin either personally delivered the contributions to the candidate or a member of the campaign Committee came to his office to pick up the contribution checks. Shortly after he began reimbursing his employees, Gatlin’s controller questioned whether the reimbursements were legal. Mr. Gatlin asked his in-house counsel who told him he was not familiar with that area of the law and that he should contact Mark Ostoich. In a sworn statement to Commission staff, Mr. Gatlin stated that he contacted Mark Ostoich and asked whether the reimbursements were proper. Mr. Ostoich stated that "they may not be ethical, but they are not illegal." This statement, coupled with the fact that both attorneys were accepting the reimbursements and the law firm was making reimbursements on their own, led Mr. Gatlin to believe that reimbursing his employees was not against the law.? Between December 14, 1992 and February 23, 1994, Gatlin employees and their spouses, as well as members, relatives and business associates of the Gresham, Varner law firm made campaign contributions to various members of the San Diego City Council, a candidate for the San Diego County Board of Supervisors, and a campaign committee in Lake Elsinore. The Gatlin employees and other intermediaries made the campaign contributions by issuing personal checks to the various candidates and committees. They were reimbursed directly or indirectly with a check issued on a Gatlin bank account. Respondents reimbursed the intermediaries and were the true source of the following campaign contributions: 27 tn his interview with Commission staff, Mr. Gatlin stated that he did not recall which councilmember initially contacted him. 3/ aithough uncertain about an exact date, Mr. Gatlin stated under oath that this conversation took place sometime shortly after he began reimbursing his employees. In his sworn statement to Cousission staff, Mr. Ostoich stated that he received a phone call from Mr. Gatlin asking whether the reimbursements were illegal shortly after an April 1994 newspaper article alleged that Gatlin and Gresham, Varner had laundered contributions. Mr. Ostoich Stated, at that time and not before, he told Mr. Gatlin that he did not believe they were illegal.FPPC No. 94/189, Gatlin Development Company, et al. Exhibit 1 Page 5 COUNTS 1-9: On December 14, 1992, respondents reimbursed nine (9) individuals for contributions totaling $2,250 made to San Diego City Council candidate Ron Roberts as follows: Date Employee/Intermediary Amount Recipient 12/14/92 Kerry Bentin $250 Ron Roberts Regina Bentin 250 Glen Daigle 250 Barbara Jo Danner 250 Thomas Govan 250 Dennis Paquet 250 Tammie Paquet 250 Janette Thomas 250 James Thomas 250 Total: 7250 COUNTS 10-13: On January 28, 1993, respondents reimbursed four (4) individuals for contributions totaling $1,000 made to San Diego City Council candidate Andrea Skorepa as follows: Date Employee/Intermediary Amount Recipient 01/28/93 Barbara Jo Danner $250 Andrea Skorepa Thomas Govan 250 Linda Spharler 250 Janette Thomas 250 Total: $1,000 COUNTS 14-21: On March 15, 1993, respondents reimbursed eight (8) individuals for contributions totaling $2,000 made to San Diego City Council candidate Juan Vargas as follows: Date Amount Recipient 03/15/93 Kerry Bentin $250 duan Vargas Regina Bentin 250 Barbara Jo Danner 250 Thomas Govan 250 Thomas Sherbondy 250 Janette Thomas 250 Eric Welsch 250 Steven Young 250 Total $2,000FPPC No. 94/189, Gatlin Development Company, et al. Exhibit 1 Page 6 COUNTS 22-27: On March 17, 1993, respondents reimbursed six (6) individuals for contributions totaling $594 made to the "Citizens for Lake Elsinore" committee. The committee was established to oppose the recall of Lake Elsinore City Councilman Gary Washburn at an election held on March 30, 1993. On March 11, 1993, Frank Gatlin and his attorney, Mark Ostoich, made an appearance at the Lake Elsinore City Council meeting where the City Center Development project was approved by a 4-1 council vote. Councilman Washburn voted in favor of the project. The reimbursed contributions are as follows: Date Employee/Intermediary Amount 03/17/93 Barbara Jo Danner $99 “Citizens for Lake Thomas Govan 99 Elsinore" Anne Hoover 99 Thomas Sherbondy 99 Linda Spharler 99 Loren Van Der Slik 99 Total: $594 COUNTS 28-37: On July 14, 1993, respondents reimbursed ten (10) individuals for contributions totaling $990 made to San Diego City Council candidate Andrea Skorepa as follows: Date Employee/Intermediary Amount Recipient 07/14/93 Glen Daigle $99 Andrea Skorepa Barbara Jo Danner 99 Thomas Govan 99 Anne Hoover 99 Catherine Johnson 99 Holli Anne Langdeau 99 Thomas Sherbondy 99 Janette Thomas 99 Loren Van Der Slik 99 Bric Welsch 99 Total: $ 990 COUNTS 38-71: On July 30, 1993, respondents were the true source of thirty four (34) contributions, totaling $8,500, made to San Diego City Council candidate Ron Roberts. The first group of 8 contributions were made by Gatlin employees and their spouses who were directly reimbursed by respondents. The second group of 26 contributions were made by employees, associates, partners, and spouses of Gresham, Varner who were indirectly reimbursed by respondents. OnFPPC No. 94/189, Gatlin Development Company, et al. Exhibit 1 Page 7 duly 29, 1993, Gatlin issued a check in the amount of $6,500 to Mark Ostoich, who endorsed it over to Gresham, Varner‘s general office account. Gresham, Varner issued reimbursement checks to the 26 individuals listed in the second group below: Date Employee/Intermediary Amount Recipient 07/30/93 Kerry Bentin $250 Ron Roberts Regina Bentin 250 Glen Daigle 250 Barbara Jo Danner 250 Dennis Paquet 250 Tammie Paquet 250 Eric Welsch 250 Steven Young 250 07/30/93 Bart Brizzee 250 Ron Roberts Patty Brizzee 250 Diane Brummel 250 Peggy Burnett 250 Patrice Dalman 250 Brett Dalman 250 Joann Flores 250 Everett Flores 250 Cheryl Gray 250 Jackie Kuntz 250 Richard Marca 250 John Nolan 250 LaVon Nolan 250 Mark Ostoich 250 Michael Ramsey 250 Mrs. Michael Ramsey 250 Donna Reed 250 Eddie Reed 250 Ernest Riffenburgh 250 Robert Ritter 250 Linda Ritter 250 Karin Sharpe 250 Pat Wagner 250 Mr. Wagner 250 Tara Wirtz 250 John Wirtz 250 Total: $8,500 COUNTS 72-9: On December 2, 1993, respondents were the true source of twenty (20) contributions, totaling $5,000, made to San Diego City Council candidate Barbara Warden. The first group of 4 contributions were made by Gatlin employees and their spouses who were directly reimbursed by respondents. The second group of 16 contributions were made by employees, associates, partners, spouses and friends of Gresham, Varner or Mark Ostoich who wereFPPC No. 94/189, Gatlin Development Company, et al. Exhibit 1 Page 8 indirectly reimbursed by respondents. On December 1, 1993, Gatlin issued two checks to Mark Ostoich in the amounts of $3,500 and $500. Mr. Ostoich deposited these checks in his personal account and issued reimbursement checks from that account to the individuals listed in the second group below: Date Employee/Intermediary Amount Recipient 12/02/93 Dennis Paquet $250 Barbara Warden Tammie Paquet 250 Eric Welsch 250 Steven Young 250 12/01/93 Lee Ann Adams $250 Barbara Warden Peggy Burnett 250 Jori Caldwell 250 Craig Dobler 5004/ Cheryl Gray 250 Saul Jaffe 500 Mark Ostoich 500 Michael Ramsey 250 Lorraine Saari 250 Joan Sommers 500 Kathryn (Vaughan) Webb 500 Total ~~ $5,000 COUNTS 92-95; On January 20, 1994, respondents reimbursed four (4) individuals for contributions totaling $1,500 made to San Diego County Board of Supervisors candidate Ron Roberts as follows: Date Employee/Intermediary Amount Recipient 01/20/94 Kerry Bentin $500 Ron Roberts Barbara Jo Danner 250 Glen Daigle 250 Dennis Paquet 500 Total: $1,500 COUNTS 96-107: On February 23, 1994, respondents reimbursed twelve (12) individuals for contributions totaling $3,000 made to San Diego City Council candidate Juan Vargas as follows: Tea 4/7 he $500 contributions were reported as two separate $250 contributions from Dobler, Jaffe, Ostoich, Sommers and Webb on the campaign statement filed by Barbara Warden.FPPC No. 94/189, Gatlin Development Company, et al. Exhibit 1 Page 9 Date Employee/Intermediary Amount Recipient 02/23/94 Kerry Bentin $250 Juan Vargas Regina Bentin 250 Glen Daigle 250 Barbara Jo Danner 250 Mark Linman 250 Teresa Linman 250 Andras Marton 250 Trudy Marton 250 Dennis Paquet 250 Tammie Paquet 250 Eric Welsch 250 Holly Welsch 250 Total: $3,000 FACTORS IN AGGRAVATION _ 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. There were a large number of laundered campaign contributions. The repeated nature of the violations over the course of 1 1/2 years indicates a pattern of laundering activity rather than an isolated incident. The violations were deliberate and part of an organized scheme. Nearly all of the contributions (97) were laundered in City of San Diego elections where campaign contribution limits were in effect and limited to $250 per person. In addition, in San Diego contributions from corporations are expressly prohibited by local ordinance. Mr. Gatlin admitted that he was aware of the $250 contribution limit in San Diego city elections and that information regarding contributors making $99 contributions was not reported on campaign statements. In addition, respondents had development projects pending in San Diego and had been involved in a development project in Lake Elsinore at or about the time the contributions were laundered. FACTORS IN MITIGATION Respondents cooperated with the Commission’s investigation by voluntarily identifying the contributions which it had reimbursed. Respondents also voluntarily provided corporate documents which confirmed the reimbursements. These actions saved the Commission time and resources in subpoenaing this information.FPPC No. 94/189, Gatlin Development Company, et al. Exhibit 1 Page 10 Mr. Gatlin has stated that he did not believe his actions were illegal or improper, because his in-house counsel was accepting the reimbursements as was his real estate attorney, Mark Ostoich. When Mr. Gatlin learned in April 1994 that reimbursing his employees was illegal, he immediately ceased this activity. The respondents have no prior enforcement history with the Commission. CONCLUSION This matter consists of 107 counts which carry a maximum possible penalty of Two Hundred and Fourteen Thousand dollars ($214,000.00) . The facts of this case, including the mitigating and aggravating factors discussed above, justify imposition of the agreed upon penalty of One Hundred and Ninety Two Thousand dollars ($192,000.00)