Ethics Official Says Graham’s Actions Had ‘Appearance of Corruption’

Sitting a few feet from Nancy Graham, one of her former bosses testified Thursday of how hard the former Centre City Development Corp. president worked in San Diego. Came in early, CCDC chairman Fred Maas said. Stayed late.

When voiceofsandiego.org first raised questions in 2008 about Graham’s undisclosed financial ties to developers doing business downtown, Maas gave Graham the benefit of the doubt, he told the San Diego Ethics Commission at a daylong Thursday hearing. She was the agency’s president, he said, and he held a “kinship” with her.

Maas recalled asking Graham directly about the financial relationship: Did she know where her past business venture’s income came from?

“I was told absolutely not,” Maas said. So he stood up for her.

Then VOSD reported that Graham earned more than $3 million from a Florida development deal. Lennar Corp., which paid her from that deal, owned land in downtown San Diego, the site of a proposed hotel that Graham was negotiating about.

Graham never reported receiving those millions on her annual conflict disclosure forms here. If she did, she would’ve had to recuse herself from negotiations designed to clear the way for a hotel on the land adjacent to Petco Park. If the hotel had been built, Lennar and another developer would’ve made about $100 million.

Graham faces a maximum $170,000 fine, stemming from charges that she improperly influenced city decisions, knowing they could benefit her business partner, Lennar.

The Ethics Commission’s executive director, Stacey Fulhorst, called Graham’s case the most serious ethics violation in the commission’s nine-year history.

Three commissioners heard arguments; they’ll present a recommended decision to the full body within about 20 days. A final decision could come in July.

One key detail did emerge Thursday: Graham’s attorney, Paul Pfingst, said he’d been notified Wednesday that a Justice Department investigation into the circumstances surrounding her disclosures at CCDC had concluded without charges.

But most drama came from what its once-friendly witnesses were compelled to tell each other under decidedly more contentious circumstances.

Maas, once Graham’s advocate, was just the opposite Thursday. He testified that her lack of disclosure ended up costing CCDC hundreds of thousands of dollars. Tripled its legal bills, he said. Drew intense media attention and scrutiny.

Graham didn’t look at Maas when he was asked whether he thought she’d been truthful with him about her former business deals.

“No, I do not believe that she was truthful,” he said, quietly, his words trailing off.

The court reporter didn’t catch everything Maas said. He had to repeat it. Graham didn’t move.

“I do not believe she was truthful.”

If she hadn’t left on her own, Maas was asked, what would CCDC have done?

“Sought termination,” he said.

Graham and her attorney didn’t dispute that she received the money from Lennar. They argued that she hadn’t negotiated with Lennar or representatives from a joint company that included Lennar. They said she’d negotiated instead with Marriott, which she didn’t have financial ties to, and which wanted to build a major hotel on the land next to Petco Park.

But Maas contradicted Nancy Graham’s testimony on that point, as did Jeff Graham, CCDC’s vice president for redevelopment (no relation), pitting their sworn version of events directly against their former colleague’s. Nancy’s deal was not negotiated with Marriott, Maas and Jeff Graham said.

Nancy Graham fixed her eyes on Jeff Graham as he told commissioners that she’d given up some deal points in negotiations — like a requirement for office space — without getting anything in return from developers. He said that decision was surprising.

Under questioning from Pfingst, Jeff Graham acknowledged that “there was a lot of pressure on Nancy to get the hotel built,” because of its potential to generate hotel tax revenue for the city. Pfingst said his client had been told to give in on one deal point after getting instructions from Mayor Jerry Sanders’ office.

In a closing argument, though, the Ethics Commission’s Fulhorst said that pressure on Graham was irrelevant. What does matter, Fulhorst said, is that Graham was involved at all — and shouldn’t have been. The public should be able to trust government officials, she said, to be free from any economic interests in the decisions they make on the public’s behalf.

With a $1.5 billion development on 7 acres near Petco Park, Fulhorst said, “to suggest that alarm bells shouldn’t have gone off is really absurd.”

Graham widened her eyes at the remark.

“It is difficult to overstate the seriousness of the violation,” Fulhorst said. “Her actions created an appearance of corruption.”

Pfingst directed his rebuttal at Fulhorst and the Ethics Commission’s staff, saying that the charges were against a diligent city employee. Graham was being prosecuted over a nuanced business relationship that she shouldn’t have been expected to know about, he said. If she did make a mistake, he said, it was inadvertent.

He said Maas and others at the downtown agency “threw her under the bus. CCDC got hysterical when this whole thing was in the press and she was expendable because she was in Tennessee” caring for her sick mother.

Nancy Graham testified for more than two hours about the 2008 scandal, which led to her being charged criminally. She pleaded no contest last year to one count of failing to disclosure her economic interests.

She choked up as she described the scandal. She said she wished she’d never taken a recruiter’s call offering a job at CCDC.

“I had a spotless background,” she said. If she’d had a conflict, “I never ever would’ve participated in any way. It wasn’t in my history, it wasn’t in my ethics of my personal self, it wasn’t any personal gain.”

“It just isn’t me.”

Please contact Rob Davis directly at rob.davis@voiceofsandiego.org and follow him on Twitter: twitter.com/robwdavis.