A federal investigation into questionable stock transactions made by San Diego City Councilwoman Valerie Stallings has moved to a higher level, with witnesses testifying before a federal grand jury, according to witnesses who have been called to testify.
The federal probe is looking into Stallings’ purchase and sale of stock in a Texas company owned by San Diego Padres owner John Moores, and her subsequent votes on the $1 billion-plus ballpark redevelopment project in the East Village section of Downtown.
Although federal investigators refuse to confirm an investigation is even taking place, witnesses have been testifying before the grand jury since last month. According to some of those who have been called before it, the grand jury may be close to handing down indictments.
“They’re spending enormous amounts of time and energy on this and they’re trying to get an indictment,” said a witness who requested anonymity. “I’d be very surprised if they spend this much time and energy and not indict them.”
The investigation led by Assistant U.S. Attorney Thomas McNamara was initiated two months ago following revelations that Stallings purchased stock during an initial public offering for Neon Systems, a Sugar Land, Texas, software company chaired by Moores. Within a month of the IPO, Stallings sold the stock at its peak price and pocketed a before-tax profit of about $14,000.
The sale occurred March 31, the same day the council voted unanimously to continue working with the Padres on the planned ballpark project. The combined ballpark and surrounding redevelopment of the 26-block area was approved by voters in November 1998.
Stallings, a longtime friend of Moores, has denied any wrongdoing but has abstained from voting on any ballpark matters since the story broke in April. She has declined to grant press interviews on the subject.
Because of the investigation and pending litigation over the ballpark, the city has been unable to issue up to $299 million in tax free bonds for ballpark construction.
As an alternative, the city and Padres agreed to fund an interim $30 million package this summer to keep the $450 million project on track. The Padres say the ballpark will open July 4, 2002.
Assistant City Attorney Les Girard declined to say much about the investigation, except that it was continuing, and there is no deadline on when it would be completed.
“(Federal investigators) have done a number of interviews, but whether they’re done or not, I have no idea,” he said.
Last week in closed session, the council approved spending $3,100 for the services of an outside attorney to advise a current Stallings staffer during her testimony before the grand jury, according to the city attorney’s office.
That is added to the council’s earlier approval of spending up to $30,000 for outside legal services for Stallings. Her attorney is John Wertz, of Sullivan Wertz McDade & Wallace.
Besides current and former Stallings staffers, all City Council members and other city officials have been interviewed by investigators.
“The interview lasted two hours and the questions were very wide-ranging,” said Councilwoman Chris Kehoe. She said she was queried by an assistant U.S. attorney, but representatives from the district attorney’s office and the FBI were present.
Judging from the subpoena issued by the U.S. District Court, the amount of records reviewed by investigators is enormous.
According to the subpoena, recipients were ordered to turn over “all records and items, including but not limited to, correspondence, memorandum, notes, tape recording, referencing Valerie Stallings and relating to: the San Diego Padres; the San Diego ballpark and/or redevelopment project; John Moores; JMI Services Inc, JMI Equity Fund, and other JMI business entities and their employees; Neon Systems Inc.; Donaldson Lufkin and Jenrette; and BT Alex Brown.”
From the city, the subpoena sought all records involving the above subjects from all open and closed meetings of the council and the city’s redevelopment agency, including “minutes, agendas, dockets, audio, and videotape recordings.”
Lengthy Time Frame
The records requested cover Sept. 1, 1997, to the present. The document also noted if any original records no longer existed, copies of such records should be produced.
Girard, the assistant city attorney, said he could not provide the number of pages or the number of inches of paper the documents measured, but said it was a “significant amount.”
City staffers surrendered boxes of documents, according to one source.
“They demanded every piece of paper with the ballpark on it,” the source said. “And they came back day after day looking for more.”
Beyond preventing the city from issuing bonds for the ballpark, the investigation is creating problems among those on the council who think Stallings should resign, and those who back her.
Yet those who know Stallings best say she is not about leave and will refuse to leave her post unless she is legally forced to.
“She will resign when hell freezes over. There is zero chance she will resign unless she’s actually indicted and the pressure triples on her,” the source said.