Schools Chief Also Got VIP Home Purchase

The superintendent of the Huntington Beach City School District was placed on a VIP list to buy a home in the exclusive Holly Seacliff community after negotiating with the developer for more than a year to build a new elementary school in the area.

Supt. Duane Dishno negotiated with PLC Land Co. from early 1996, when the company bought the future school site, to December 1997, when the two sides agreed that the developer would pay a higher amount for the state-of-the-art Huntington Seacliff Elementary School than originally discussed.

In March 1998, Dishno and his wife bought a three-bedroom, two-bath house for $339,500 after being told by the developer that he was going to be placed on a preferred-buyer VIP list that precluded his waiting in line with about 300 other people. He said he didn’t think he had a conflict of interest because the negotiations had already concluded.

“This was after [negotiations], and I thought it was a nice thing to do, and thought it was because [PLC] liked me,” Dishno said in his office this week at district headquarters. “It was sort of flattering.”

Some who were on the waiting list said Dishno received the same VIP treatment when buying a home in St. Augustine as Mayor Dave Garofalo. They said the house Garofalo bought for $565,000, and sold a day later to a friend for $625,000, was the most coveted in the development. Garofalo said he made only $1 on the deal after upgrades were figured into the sale price.

State law forbids public officials from deliberating upon or influencing matters from which they would benefit financially and requires them to abstain from votes for a year if they have received $250 or more from a giver.

Garofalo has said he called PLC in early 1998 to buy a home, insisting that he was on a waiting list and bought only “when it was my turn.” He said he attended the first drawing, though four residents who were there said they didn’t see him and didn’t hear his name called.

Garofalo has not returned repeated telephone calls placed by The Times. The district attorney’s office is investigating whether he violated state conflict-of-intrest laws by voting on behalf of companies with whom had had financial relationships.

In Dishno’s case, his contact with the developer occurred after the school district voted and the question of school fees was resolved. Garofalo continued to vote on the council for project approvals needed by the developer while he was in escrow on the house, and for a year later.

However, Shirley Grindle, co-author of Orange County’s campaign-contribution and gift-ban laws, said Dishno nonetheless used his position to gain special treatment not available to the general public.

“It’s really like a gift, it’s something that’s not available to the general public, and that’s what conflict of interest is all about,” Grindle said. “Ordinary people lose sight of the subtle romancing by those who need something from those in government. All these guys need a good lesson in ethics and integrity.”

One school board member said the actions of the two officials are different because Dishno didn’t cast any votes involving PLC.

“I’ve never had any sense that there was any preferred treatment, and I was close to those transactions all the way through,” Huntington Beach City School District board member Shirley Carey said. “All of the decisions were board decisions.”

Dishno said that weeks after the settlement was approved, he contacted William Holman, a PLC executive who was part of those negotiations, and asked about the availability of a home that he could afford in the gated St. Augustine tract of Holly Seacliff. Dishno makes $100,771 a year.

Dishno showed up at the sales office and filled out an application, placing him on the waiting list with other potential homebuyers. He had already received paperwork in the mail detailing the procedure that homebuyers would have to follow, including appearing at numerous meetings to keep their place in line.

As the first meeting approached on a Saturday, Dishno said he called PLC sales manager Larry Elliott and asked if he had to attend. Dishno said he understood that he would get the home he wanted without having to attend meetings. Elliott declined comment last week.

Several residents in St. Augustine said they heard from a PLC official that “important people” would be among their neighbors, naming Garofalo and Dishno.

Four residents at the first drawing for homes said the lots chosen by Garofalo and Dishno already were marked as sold. A list later provided residents showed Garofalo’s and Dishno’s names as the first purchasers. A third lot was sold to a PLC employee before the homes in the development were offered to the public.

Garofalo’s 7,132-square-foot lot drew attention because it was the largest, most expensive lot in the neighborhood, with an unobstructed view of the Pacific, said Dave Hicks, an engineer and president of the St. Augustine Homeowners Assn. Dishno’s 1,783-square-foot home was on a 5,962-square-foot lot.

“The other lots were more standard houses,” Hicks said. “They really didn’t raise as much attention.”

Dishno’s involvement with PLC began in 1996, when the company bought 448 acres in Holly Seacliff. The city in 1992 had set a per-unit school fee for homes eventually built there, mandated by state law. The plan was for an elementary school to be built to serve the new neighborhoods, an obligation assumed by PLC when it bought the property.

But Orange County’s economy sagged in the mid-1990s, particularly in the real estate market. PLC decided to build far fewer homes, pulling permits for 2,400 units instead of the 4,200 units envisioned. Because of the drop, the fees on the new number of homes wouldn’t be enough to build the kind of school the district wanted.

That’s when Dishno stepped in to reopen negotiations with PLC. The new fees would have paid for little more than portable classrooms and a gravel parking lot, according to district records.

About a year of negotiations followed, with a higher per-unit fee agreed to by both sides in September 1997. The new school would benefit the district, as well as provide a much more attractive selling point for families wishing to move into the new neighborhoods. In December, the agreement was approved by the school board.

Like Dishno, Garofalo held an important negotiating role over public services provided in the Holly Seacliff development before buying his home. Garofalo served on a three-member council committee hashing out how much the city would reimburse PLC for improvements including a water reservoir and fire station that would serve a wider area than just the development.

The council committee disbanded in early 1998 after reaching an impasse between a city consultant’s recommendation to reimburse about $2 million and the developer’s demand for at least $32 million. PLC sued over its reimbursement, which was settled this past April when the City Council unanimously agreed to pay $6.4 million.