Corporate Handouts, OC Style
By Dr. Kev Abazajian & Iyad Afalqa
The major corporate influence over both political parties is not a distant situation in the halls of government in Washington, D.C., as highlighted so well by incoming Rep. Alexandria Ocasio-Cortez. Moneyed corporate influence is holding great sway in the halls of power right here in Orange County. In the past two years, we have come to see the juggernaut of corporate influence over politics in OC, specifically over land-use in Irvine. That influence surrounds many aspects, but is highlighted in the future development of a 125.7 acre parcel, dubbed the ARDA site, whose land-use changes could increase its value from $4 million to nearly $1 billion. This influence includes well over one million dollars spent by a single corporation, FivePoint Holdings and related companies, on our local Irvine elections in order to hold sway over that parcel’s land-use, and to favorably affect other matters.
The webpage for FivePoint touts it to be “the largest owner and developer of mixed-use, master-planned communities in coastal California.” They are the company leading a rapid-paced development project at the Great Park Communities of Irvine, which is built on the former El Toro Marine Base. As part of the development, a portion was set aside to be the Orange County Veterans Memorial Park, which would be Orange County’s first Veterans Cemetery. Veterans have been pushing for the cemetery on the base since the El Toro Marine base closure in 1999. In 2014, the Irvine City Council was unanimously together on a plan to build at the ARDA site, and was backed by veterans groups.
Then, there came issues with the location. The Voice of OC reported in April 2016 that concerns by Chinese residents with locating a cemetery near their homes prompted the proposal for a land swap that would put the cemetery near the freeway in exchange of land with FivePoint. FivePoint CEO Emile Haddad called it a “win-win-win” for Chinese residents and veterans. But, many veterans were not convinced, and neither was a majority on City Council. In April 2016, that majority denied the swap proposal motion by Irvine Councilmember Christina Shea. Two future members of Irvine’s Mayor-Council spoke in favor of Councilmember Shea’s swap motion: then California State Assemblymember, and current mayor, Donald Wagner and current Irvine City Councilmember, Farrah Khan. Opposing the motion, Councilmembers at the time stated that it was a “ploy” by the developer to build more housing around the Great Park. As detailed below, that ARDA land’s value for housing places it near $1 billion dollars.
Land Values and Political Expenditures
Dr. Kev Abazajian is a Professor of Physics & Astronomy at UC Irvine. As a scientist, he makes decisions based on proven facts and not pure authority or reputation. He ran for Irvine City Council, and took a deep dive into the facts behind the land swap and the people involved. In the end, he found the moneyed influence of FivePoint over the candidates and the two major political parties held immense power over the future of the 125.7 acre ARDA parcel, whose future remains uncertain today.
It is worthwhile to calculate the value of the 125.7 acre ARDA site if it were to be changed to single-family zoning. Using this Irvine home’s publicly reported value, sitting on 3,761 sq. ft. of land (0.08634 acres), its land value is reported to be $562,284. That amounts to $6.9 million per acre. Doing the math, the 125.7 acre site is worth $870 million as single-family homes. Even setting aside a large fraction of the land to support space such as roads and neighborhood parks, the value is in the hundreds of millions of dollars. FivePoint and affiliated entity (Heritage Fields) have spent a combined sum of over $1.8 million for the elections in November 2016, and in the June and November 2018 elections in order to influence that land use decision (via the VALOR PAC, Friends of Great Park PAC and Friends of Great Park Education Committee). Overall, the zoning change would potentially alter the value of the ARDA site from $4 million to up to $870 million, and with control of the City Council, getting the variance to build homes next to the park instead of commercial property would be a small additional step. The value of the freeway land was estimated at $68 million, according to the contract for the swap. Therefore, the swap would still benefit FivePoint on the order of hundreds of millions of dollars. Investing a couple million on elections is good business for FivePoint’s interests. Of course, numerous smaller-level land-use and planning issues would also be viewed favorably by a FivePoint-oriented council when it has major developments continuing.
Land use decisions are the most powerful decisions a City Council can make. And, that’s why developers want favorable Councilmembers in place. But, this is why several Irvine citizens call the current state of affairs in our City Council’s elections “legalized bribery.” In the case of the ARDA site, the investment of about $70 million by FivePoint into the freeway land and elections could turn a park-side plot of land adjacent to their current developments from $4 million to $870 million. And, most importantly, that $870 million land would become their asset.
Legalized Bribery
For those in the financial and securities industry, it is well known that those who have an SEC license cannot make financial contributions to political campaigns due to conflicts of interest that could arise. For municipal governments, this could happen when a city issues bonds and needs a securities underwriter and sells the bonds. Even for this hypothetical situation, the law protects from this conflict of interest. However, there is nothing in place to stop the conflict of interest in the most powerful decisions City Councilmembers can make: land use zoning designations.
For the November 2016 election, FivePoint and other builders spent $466,908 to attack city founder, slow-growth candidate and ARDA-site veterans cemetery proponent Mary Ann Gaido. $274,065 alone was spent to support Donald Wagner for mayor, and Christina Shea for City Council, who won their election. Recall that Ms. Shea introduced the original land swap motion, and Mr. Wagner spoke in favor of the land swap in April of 2016. The scale of these campaign expenditures by builders must be put into perspective: Mr. Wagner raised only about $21,000, and 25 times as much was spent in support of his candidacy by the builders. For the 2016 election, the builder-funded California Homeowners Association PAC alone spent $172,140 supporting Don Wagner and council candidates Christina Shea and Anthony Kuo. Having hundreds of thousands of dollars backing one’s candidacy certainly leaves an elected official compromised via being indebted to those forces that were the strongest funders of one’s successful election. And, those forces would certainly also be involved in future elections.
Several former elected Irvine City Officials have reported to us that that they supported and endorsed Melissa Fox in 2016 with the understanding that she would reject FivePoint’s 2016 land swap proposal and that she would back the ARDA site for the veterans cemetery. Despite that promise, in the September 26, 2017 Irvine City Council meeting, Ms. Fox voted to approve the land swap deal moving the cemetery off the ARDA site. On October 10, 2017, Ms. Fox voted for the contract of the land swap, and on November 2, 2017, FivePoint’s partner builder Starpointe Ventures routed $10,000 to a campaign committee controlled by Irvine City Councilwoman Melissa Fox.
After the October 2017 City Council meeting approving the contract for the land swap, a group of activists, led by veteran Ed Pope, acted to stop the hundreds of millions of dollars in the land swap giveaway, as well as respect many veterans’ wishes for the cemetery to be near the center of the former base, via a petition to stop the zone change required by the land swap ordinance. The group submitted 19,140 signatures in less than a month. On the June 2018 ballot, Irvine voters agreed with the petitioners and disapproved Measure B’s land swap’s zoning change was disapproved by a whopping 25% point margin. In an effort to try to win passage of the the measure, FivePoint’s election investments ballooned to $800,000, in concert with $100,000 from their partner builder Starpointe Ventures. The funds went to a political action committee called VALOR PAC, which largely used the funds on incredulous mailers claiming the land swap would reduce traffic, and to win influence with Democratic Party of Orange County officials via consulting contracts.
To try to help secure the land swap, FivePointe’s partner Starpointe Ventures got the two major political parties involved, at the county level. In August of 2016, it made a $50,000 contribution to the Democratic Party of Orange County (DPOC)/California Democratic Party, and, in September 2016, a $40,000 contribution to the Republican Party of Orange County. In November 2017, both parties endorsed “Yes on B.” For the DPOC, the local party club, the Democrats of Greater Irvine, urged the county party to remain neutral due to the divisiveness of the measure and the taxpayer’s land giveaway it entailed. Despite that, the influence of Starpointe Ventures and Melissa Fox on the DPOC Central Committee had them endorse the land swap “Yes on B,” despite the clear massive land value corporate giveaway it entailed, and opposition by local Irvine residents and veterans.
FivePoint and its partner Starpointe Ventures also certainly wanted to influence the leading candidates for the 2018 election to Irvine City Council. In May of 2018, LuisAndres Perez was appointed Political Director of the DPOC, and in the month following his appointment, VALOR PAC payed Mr. Perez $6,000 as a political consultant. Recall VALOR PAC was funded by FivePoint and Starpointe.
As the greatest single entity spending on Irvine’s City Council and Mayor election, FivePoint spent, at last count, $600,000 into PACs that would funnel it into the election. FivePoint and Starpointe’s expenditures were more than six times as much as any candidate raised. The network of PACs funded by builders spent money on ads supporting Don Wagner, Anthony Kuo and Carrie O’Malley, while spending money against Ed Pope, Farrah Khan, and Kev Abazajian. Note that this network of PACs did not spend against Ms. Johnson-Norris, nor did this network spend against Melissa Fox in 2016.
Overall, via the immense spending by builders, directly into candidates’ funds, directly to the two major OC political parties, and independent expenditures of hundreds of thousands of dollars — about six times as much as any given candidate — the developers in Irvine have had an immense influence on land use decisions in our county. The veterans cemetery land swap is certainly not the only influence they have gotten sway over, but it certainly is the most flagrant.
Rule Violation and Corruption at the DPOC
Three candidates were vying for the DPOC endorsement for Irvine City Council: Dr. Kev Abazajian, Lauren Johnson-Norris, and Farrah Khan. Ms. Khan served as a Vice-Chair for the DPOC, ran in 2016 for Irvine City Council, and came in fourth. The DPOC endorsement committee, which was to make a recommendation to the Central Committee as to the endorsement, was chaired by LuisAndres Perez, a paid consultant to VALOR PAC, which, recall was a FivePoint funded PAC that was leading the effort for the land swap. Not surprisingly, the endorsement committee recommended Ms. Johnson-Norris and Ms. Khan for the endorsement.
Meanwhile, at the local party club, the Democrats of Greater Irvine, a straw poll on August 19, 2019, had Ms. Khan and Dr. Abazajian strongly lead the poll, by a near 20% point margin. This was largely because of the progressive positions of the leading two as well as their opposition to the land swap giveaway in their statements at the August 2018 straw poll.
At the August 20, 2018 Central Committee endorsements meeting, Kev Abazajian sought the endorsement of the DPOC, and, from his whip count of the DPOC Central Committee, he had the votes in a two-way vote with Lauren Johnson-Norris. A week prior to the meeting, he asked DPOC Chair Fran Sdao for the procedures to be used given three candidates for two endorsement slots, as two seats were up for Irvine City Council election in 2018.
The procedure for the endorsement was not revealed until the August 20 Central Committee meeting. Per the bylaws of the DPOC, a candidate must receive a 60% vote in order to earn the endorsement, and the endorsement vote must contain the option of “no endorsement.” To facilitate this, the procedure was to have up to five votes take place:
- A three way vote between the candidates: If one received 60%, they were endorsed, and move to step 4. If none received 60%, then move to step 2.
- The top two candidates in step 1 have a vote between them, and if one receives 60%, they were endorsed, and the 2nd place candidate moves to step 4.
- The top vote getter from step 2 is voted on between them and a recommendation of “no endorsement.” If they achieve 60%, they are endorsed. If not, they are not endorsed.
- The committee vote on the 2nd and 3rd place candidates from step 1. If one receives 60%, they were endorsed. If neither received 60%, then they move to step 5.
- The top candidate in step 4 is considered against a recommendation of “no endorsement.” If they achieve 60%, they are endorsed. If not, the committee recommends “no endorsement.”
This procedure was presented in a very confusing manner. Political consultants paid by various Council campaigns sat on the Central Committee and did not recuse themselves. Dr. Abazajian was the second choice of practically all of Ms. Khan’s Central Committee votes (28). Therefore, if one combined Ms. Khan’s votes with Dr. Abazajian’s (8), in step 4 above, Dr. Abazajian would have achieved the required 36 votes for 60%, and therefore received the endorsement. Or, it is also possible that no candidate would have had 36 votes, and no endorsement would have been made.
But, after the first step above, a motion was made by Central Committee member Florice Hoffman to suspend the rules and endorse Ms. Khan and Ms. Johnson-Norris, with no option of “no endorsement.” Note the bylaws of a body cannot be suspended with regard to voting rights. Therefore, the motion violated the bylaws in a crucial election endorsement. Since the state California Democratic Party (CDP) is in charge of ensuring county parties follow their bylaws, Dr. Abazajian challenged the endorsement, as stipulated in the CDP bylaws, with the CDP Chair at the time: Eric Bauman. On October 6, 2018, the CDP Compliance Review Commission (CRC) ruled that the CDP CRC does not have jurisdiction as it “has not approved the DPOC’s Bylaws.” No decision as to whether the DPOC violated the bylaws was made. But, it remains clear to us that the lack of a no-endorsement option violated the bylaws. In addition, the gross conflict of interest in the endorsement process was clear, between the consultation fees paid to the DPOC Political Director LuisAndres Perez by developer-backed VALOR PAC, and by consultation fees paid some members of the Central Committee. Note that Dr. Abazajian only worked within the Democratic Party to address the bylaws violation, without any outside litigation.
Epilogue
The handover of about $800 million in land value to FivePoint via the veterans cemetery move process was nearly achieved by the sheer political influence of the money and tactics employed by the developer and their allied political entities. While none of the activities are likely illegal, they are clearly unseemly, and many Irvine residents see the actions as “legal bribery.”
The future of the ARDA site remains unclear. The veterans cemetery may be moved more interior to the Great Park, away from those that may be sensitive to its presence, or it could be located in Anaheim. The influence of FivePoint and Starpointe remain, since they helped elect Irvine City Councilmembers Kuo and Shea, as well as Mayor Wagner. All this influence could still lead to windfalls in decisions related to the ARDA site and future sites. One does not have to look to Washington, DC, to find corporate influence buying its way to public giveaways, over the interests of the residents. Corporate purchasing of our elected representation is alive and well in the heart of Orange County right here in Irvine.
