A federal investigation is continuing almost 17 months after a scandal broke over secret bonuses and extra compensation paid to staff at the Southeastern Economic Development Corp.
At least two former SEDC staff members have recently received subpoenas from federal investigators, evidence that the FBI and U.S. Attorney’s Office are still looking into the agency’s problems.
That scandal cost several SEDC staffers their jobs, including former agency President Carolyn Y. Smith, who was fired by the SEDC board under pressure from Mayor Jerry Sanders and the City Council. It also led to a federal grand jury investigation; investigators have previously questioned SEDC board members and seized computers from the agency’s office, though no charges have been filed.
In the last year-and-a-half, the scandal has had other fallout. SEDC’s former financial director, Dante Dayacap, has been called before the San Diego Ethics Commission over an allegation that he misused his position at the agency. And Smith has threatened to sue the agency to try to reclaim more than $100,000 in severance pay that the SEDC board recently denied her.
Brian Trotier, SEDC’s interim leader, said he has recently been contacted by two former agency staffers who said they had been subpoenaed by federal investigators, and who asked Trotier’s advice on how to proceed. He said he advised the former employees not to talk to anyone except the investigators about the subpoenas.
“I said to them, ‘Why are you calling me?’” Trotier said.
A spokeswoman from the San Diego U.S. Attorney’s Office declined to comment and a spokesman for the local FBI office did not respond to calls and e-mails for comment.
Trotier said the SEDC office has not received any new subpoenas since October 2008, when investigators asked the agency to produce the SEDC computer system server and some staff members’ computers. The U.S. attorney named on those subpoenas no longer works for the federal government. His successor declined to comment.
voiceofsandiego.org revealed last year that Smith paid herself and her staff more than $1 million in secret bonuses and extra compensation. The payments were not outlined in the agency’s budget and were not discussed or approved by SEDC’s board or by the City Council.
Other VOSD stories last year uncovered a development project managed by SEDC and the relationship between then-SEDC board chairman Artie M. “Chip” Owen and Pacific Development Partners, a Los Angeles developer SEDC had used.
Cruz Gonzalez, the SEDC board chairman, has said FBI agents had questioned him about Owen’s business dealings. Trotier said he has no indication that investigators are looking at anything other than the bonus issue.
The feds aren’t the only ones looking into SEDC.
On Oct. 8, the Ethics Commission scheduled a hearing for Dante Dayacap, SEDC’s former finance director, who was a central figure in the bonus scandal. A damning city audit of the agency found that Dayacap was responsible for deciding how much in bonuses and extra compensation to pay himself and all SEDC employees — including Smith, then his boss.
Stacey Fulhorst, the commission’s executive director, said in an e-mail that Dayacap waived his rights to a probable cause hearing, an initial stage in the investigation of a possible ethics violation. Fulhorst said the commission is investigating whether Dayacap misused his position at SEDC under the city’s Ethics Ordinance. She said a hearing will be set for Dayacap next spring.
For her part, former SEDC president Smith has defended her claim to a $100,350 severance payment she was promised by the SEDC board when she was fired last summer.
That payment was challenged by a local activist and his attorney, who late last year convinced a judge to issue a preliminary injunction barring SEDC from writing Smith a check for the severance.
The SEDC board echoed that ruling by nullifying Smith’s severance payment in a meeting earlier this year.
Trotier said Smith has recently threatened to sue the agency over the severance payment. It’s not known what form that threat took. Trotier would not discuss details of the threatened litigation, however, and Smith’s attorney, Daniel Gardenschwartz, also declined to comment.
Will Carless, a former VOSD reporter, is an Indonesia-based freelance writer. Please contact him directly at email@example.com. And set the tone of the debate with a letter to the editor.