Behind the Late Lobbying Disclosure That Earned Midway Rising a Fine for Breaking City Ethics Laws

Just after the San Diego City Council chose a company to redevelop the Sports Arena, the winning developer filed a lobbying disclosure that was due months earlier.

The winning partnership – calling itself Midway Rising, led by Zephyr development – had for nearly a year neglected to submit a form that informed the public of its political investments.

That made it impossible for the public to consider that political spending ahead of the city’s selection. But even if the forms had been filed on time, they include almost no information that could have aided the public’s assessment.

Now, the city’s Ethics Commission is fining the partnership $5,000 and the settlement that led to the fine has revealed major spending the group made to a local political consultant. That consultant guided the group’s political strategy ahead of the city’s selection, before the start of a separate campaign to lift the height limit on new development in the Midway area handled by other strategists.

Not only did none of the other bidders for the Sports Arena project file the disclosure form at all – neither did any other company that had business before the city in 2021. Not one.

The San Diego Ethics Commission has now fined Midway Rising for the late disclosure. The commission’s written description of the settlement has provided some detail on the expenditure that wasn’t present on the late filing itself.

Midway Rising’s late disclosure, it turns out, did not relate to traditional lobbying, when companies meet with elected officials to persuade them toward a specific decision. Instead, it was a separate form called an “expenditure lobbyist” disclosure.

Expenditure lobbying is the city’s category for any effort to influence a public decision, other than direct communications with city officials, that costs more than $5,000. Those indirect efforts could include advertising, media communications, public outreach or creating reports and analyses that could build the case for a specific public decision.

Those activities are common, but companies choosing to file the required form that discloses them to the public city certainly is not.

Throughout all of 2022, Midway Rising was the only company that filed one. Its late filings included work going back to 2021. In 2021, only one other firm – Miller Public Affairs – disclosed any expenditure lobbying work. In 2018, 2019 and 2020 combined, a total of five companies disclosed expenditure lobbying work: Expedia Group, H.G. Fenton Company, Sempra Energy, HomeAway and the California Hotel and Lodging Association.

Sharon Spivak, executive director of the Ethics Commission, said the commission is always willing to improve the city’s ethics ordinance.

“We do everything we can to educate and outreach to ensure any lobbyist required to disclose their activity does so to comply with our laws,” she said. “At the end of the day, citizens need information to understand how parties are trying to influence city decisions.”

The “expenditure lobbyist” disclosure form itself does not provide much information to an interested citizen. It lists the amount of money spent on expenditure lobbying, and who paid it, but it does not mention who received the money, or what type of work they did for it.

“Our office will be reviewing the lobbying laws, and the disclosure forms, in the coming year, and welcoming input regarding any potential changes,” Spivak said.

Thanks to the settlement, though, there is some detail available on the spending that led to the late disclosure.

Midway Rising’s spending was for a “paid political consultant to advise respondents and to prepare external public communications regarding the development,” according to the settlement.

The political consultant is not named in the disclosure or in the Ethics Commission’s settlement write up. But Midway Rising’s political consultant was Dan Rottenstreich, a strategist for many Democratic candidates and campaigns in the county.

The overdue disclosures concerned $154,000 that Midway Rising paid Rottenstreich between October 2021 and July 2022. Subsequent filings have brought the company’s total expenditure on Rottenstreich to $203,000.

Rottenstreich said he was paid for helping craft the project’s image and the company’s messaging, political strategy and press relations, along with typical work like building the project’s website and placing social media ads.

None of the other companies that competed to redevelop the Sports Arena have submitted expenditure lobbying reports.

The Ethics Commission did not levy the largest fine that it could, which would have been $15,000 — $5,000 for each of the late filings. Instead, they settled at $5,000 because the firm’s lawyer, Gil Cabrera, a former chair of the Ethics Commission, self-reported the violations after he was hired to audit the company’s books to make sure it had complied with the city’s ethics laws, the write-up of the settlement [SL3] says. It also says the disclosures would have been filed a day before the City Council vote if not for a technical issue with the city’s filing portal.

Nonetheless, the Ethics Commission listed eight significant milestones in the city’s selection process that occurred after Midway Rising should have submitted its first expenditure lobbyist disclosure.

“At each milestone, the public, other bidders, and city officials were denied and could have benefitted from having information contained in the disclosure forms,” the stipulation reads.

Cabrera said it’s clear not enough people are following the law, and officials needs to do a better job telling people with business in front of the city that it applies to them, and enforcing the law when it isn’t followed.

“Even though not a single one of our competitors was complying with these reporting requirements, I’m proud that Midway Rising did the right thing by self-auditing their compliance, reporting the issue immediately upon learning of it and working with the Ethics Commission to fully resolve it,” he said.

In the days leading up to the City Council’s decision, Midway Rising and Mayor Todd Gloria’s office were fending off scrutiny over a different public disclosure: donations from Brad Termini, the CEO of Zephyr, to a political action committee that supported Gloria’s mayoral election. Termini and his wife donated $100,000 to a committee, sponsored by the labor union Laborers International Union of North America Local 89 in late 2019, ahead of the March 2020 mayoral primary. Former Mayor Kevin Faulconer launched the first attempt to redevelop the Sports Arena later that summer, and Midway Rising did not join that bidding process. When Gloria re-started the effort after state law required it, Midway Rising jumped in.