David Diaz

"On January 15th when some lady is complaining about her investment, goes to Roger and says, “What about your investment, aren’t you concerned? Do you think it is still safe?” He says, “I am not worried about it. My investment is safe.”

At one point in his testimony before the county grand jury, Mike McDade made this observation: “You try and do the best job you can. But a political campaign is like no other activity that I can compare it to. If you try to compare normal legal or business principles — I am talking about the organizational structure — to a campaign, you will never complete analyzing it. It goes from total chaos to one splendid day when everything works. And then after that it falls apart.”

Mike McDade: "I have served as a campaign advisor to Assemblyman Larry Sterling, to Bill Lowery, primarily while he was on the city council. I ran Pete Wilson's re- election campaign in 1979. In 1981 I ran Susan Golding’s successful campaign for the city council."

Perhaps no other single passage in the sixteen volumes of transcripts from the grand jury’s recent investigation better illuminates the source of the turmoil now surrounding Mayor Roger Hedgecock. McDade, who is currently the mayor's chief of staff, made the statement while attempting to describe to members of the grand jury the tangled intricacies of modern political campaigning, and while at the same time trying to defend himself and the mayor against allegations of criminal conduct — a daunting task, but one McDade was uniquely qualified to undertake.

Roger Hedgecock - "When Roger and Cindy were moving ahead with their remodeling plans, Roger one day mentioned to me casually, “I think I am going to see if Nancy Hoover can help me with my remodeling.” At that point, I remember asking him, “Is this a smart thing to do?'"

He is one of Hedgecock's closest friends and advisors, he is a veteran of local politics, and he was the principal strategist for Hedgecock's 1983 mayoral campaign. Among the eighty-two witnesses who appeared for questioning, McDade revealed the keenest insight into contemporary San Diego politics; the transcription of his testimony is an engrossing document.

Deputy D.A. James Hamilton generally followed a chronological outline, beginning with questions about Hedgecock's nascent interest in running for mayor as early as June of 1980.

Because McDade's transcripts ran to more than 200 pages, editing was necessary due to the restrictions of space, though the integrity of his testimony has been preserved. All deletions have been marked by ellipses. Following McDade's testimony are major excerpts from Assistant District Attorney Richard Huffman's summation to the grand jury, as well as questions from the jurors. Deletions again have been marked by ellipses.

Richard Huffman: "This is a document purportedly seen by Mr. Hedgecock and Mr. Shepard on January 1st, 1982. The document could not have been signed on that date.... This document, ladies and gentlemen, is a fraud."

Deputy District Attorney James Hamilton questioned McDade, who had voluntarily appeared before the jury. Hamilton generally followed a chronological outline, beginning with questions about Hedgecock's nascent interest in running for mayor as early as June of 1980. The edited transcript below picks up at the point Hamilton’s questions began to concentrate on more recent developments, after Hedgecock has decided to campaign for mayor in the city's special election of 1983, which was prompted by Pete Wilson’s election to the U.S. Senate.

Nancy Hoover - "She was the only person I have known from the old days who was capable of making $100,000 bequests to the San Diego Opera."

Mr. Hamilton: You said at some point in time after George Mitrovich became hired by J. David and Company, you were invited down by him to the J. David firm to look over the place; is that correct?

Mr. McDade: Yes.

Q: Did you ever have a discussion during the latter half of 1981 with Mr. Mitrovich concerning the friction that had developed between Mr. Hedgecock and Ms. Hoover?

A: I don’t recall any specific discussion with George about it.

Tom Shepard - "This is part of the conspiracy. Nancy Hoover was helping out two friends, Roger Hedgecock and Tom Shepard. As long as Roger Hedgecock rose and became successful, Tom Shepard would become the premier political consultant in San Diego."

Q: Did you ever discuss that subject with anyone?

A: Yes. Numerous times, and perhaps I can explain that.

Q: Okay. I would like to know what period of time you discussed it, over what period of time, and the general nature of the discussions.

A: The discussions started when Nancy walked out on George [Hoover] in, I think, 1980, leaving him with the teenage kids, and went off with Jerry Dominelli, who nobody knew who he was, but was still encumbered by a wife at that time.

Nancy took an awful lot of criticism from people who knew her at that time.

As in most divorce situations, both parties all of a sudden came to be avoided by their prior friends. I believe, for example, in my case, I saw Nancy in 1980 and did not see her again until 1983, would be my recollection. She pulled back from virtually all of her activities. Her husband, George, pulled back from his activities, and there were a lot of people who were assessing fault in the relationship to Nancy. They were very unhappy with her for the action she had taken.

Q: Did you discuss this situation with Mr. Hedgecock at any time?

A: Oh, I am sure I did. He was just wondering what could possibly have gone wrong with Nancy to ruin such a nice family.

Q: Did you hear Mr. Hedgecock on one or more occasions make derogatory remarks about Ms. Hoover concerning this situation?

A: Not about her, but about her action. He felt it was a mistake on her part.

Q: During your conversations with Mr. Mitrovich in the year 1981, did he ever mention to you the desirability of effecting a more harmonious relationship between Mr. Hedgecock and Ms. Hoover in order to obtain her help during the future political campaigns?

A: George [Mitrovich] frequently talks in terms like that. You know, when he went to work for Nancy, he made a point of letting everyone in town know this was a woman who had lots of money and who could be helpful to any cause, be it charitable or anything else. He was spreading this around town.

On one occasion, and I can’t remember when it was, he would say, “Mike, we could go to Nancy and get her to get contributions for us. How can I possibly ask her as long as she and Roger are still at odds?”

That was on his mind.

Q: What did you say to that?

A: Huh?

Q: What did you say to that?

A: As I recall, it was a personal problem they would have to work out themselves.

Q: Well, was she — had she been a source of political funds in the past?

A: I don’t think so, because she had not — George Hoover, her husband, had — he is an excellent fund-raiser, and had acted as our finance chair, I believe, in ’75. But Nancy was not a fund-raiser for charitable purposes or anything else until she hooked up with Dominelli.

Q: Well, you know, it is common for politicians to try to be as friendly to people as they can whether or not they like them. Isn’t that almost a universal trait of a politician?

A: Roger seems to have violated that frequently in the past.

Yes. I would say the stereotype politician is that way.

Q: You, being a close advisor to Mr. Hedgecock, did you ever approach him with the idea of toning down his criticism of Ms. Hoover or trying to effect some kind of rapprochement with her in order to at least have her as an ally during a mayoral campaign?

A: No. I didn’t consider it a matter of great importance.

Q: Did you ever become aware of, through somebody telling you, that anyone else had done that?

A: No. I take it back. George Hoover had mentioned to me on one occasion, or had mentioned to Roger in my presence, “Don’t be so harsh on Nancy. She has got to do what she has got to do.” So he was telling him to not harshly judge his ex- wife.

Q: Do you recall when that was?

A: I sure couldn’t.

Q: Do you recall any time during 1981 when Mr. Hedgecock told you that he had met with Ms. Hoover?

A: Not specifically, no. Although I know that they did start meeting again. You say 1981, I don’t know when it is, but there was a point at which point they became social friends again.

Q: All right. Do you connect that happening with any particular series of events or event?

A: No.

Q: Mr. Hedgecock’s statements of economic interest for the year 1981 show that, I believe, in the months — starting in the month of September/October, he shows some gifts in the form of tickets to various charitable or social events on his statement of economic interest, which would indicate at least during the latter few months of 1981 Ms. Hoover was providing him with complimentary, as far as he was concerned, tickets to these events.

Do you recall that happening?

A: I recall seeing those in reviewing in connection with this investigation, reviewing Mr. Hedgecock’s statements of economic interest. But I don’t believe I had seen them before or was aware of them.

Q: Did you attend any of these particular events yourself?

A: I couldn’t tell you unless you told me the specific event. I don’t ever recall being the guest of Nancy Hoover to anything.

Q: Okay. I am really trying to find out, Mr. McDade, whether you have a recollection of this improvement of the relationship between Mr. Hedgecock and Ms. Hoover occurring during the year 1981.

A: You have very good evidence of that in saying that she was giving him tickets. I don’t think you would do that to someone you didn’t like.

Q: Okay. Well, wasn’t the — let me phrase the question this way: Was the antagonism, if I can use that word, and maybe it is a stronger word and is not justified, the feeling about, the adverse feeling, wasn’t this a feeling that Mr. Hedgecock had about Ms. Hoover because of her actions; wouldn’t that be correct?

A: I think it was more of a disappointment than anything else. He hated to see a good friend, a couple he had enjoyed socializing with, which had even been business partners or investment partners, break up.

Q: Was there anything that ever came to your attention that that was a reciprocal relationship; in other words, that Ms. Hoover resented Mr. Hedgecock for perhaps making remarks about her?

A: I have no knowledge of that ever happening. It is not much in Nancy’s nature, from what I have observed, to be much of a resentful person. But I don’t know the answer to your question.

Q: When do you have your first positive indication, when do you have a recollection of a positive indication that Mr. Hedgecock’s feelings toward Ms. Hoover had improved?

A: Probably when she gave a contribution to the 1983 campaign.

Q: Well, now, she gave a contribution — I can dig it out for you if you want — but there is a $250 contribution that she gave to the Roger Hedgecock Election Committee in June of 1981.

A: I wasn’t aware of that.

Q: I realize you said you were not aware of the contributions and the expenditures from that committee, but I will show that to you after lunch. But it is a fact, Mr. McDade. I hope you will accept my word for it.

A: Definitely.

Q: Yet we have evidence that the feeling about Mr. Hedgecock, the adverse feelings extended beyond that date. So I am not sure that the giving of a contribution would indicate a feeling on Mr. Hedgecock’s part.

A: I think you are probably correct in your analysis.

Q: So can I go back to one question:

Do you have a recollection of any event having occurred that positively indicated to you an improvement in Mr. Hedgecock’s attitude toward Ms. Hoover?

A: No. There is certainly no event. I don’t recall seeing a tearful scene where they embraced each other and said, “Let’s forgive all the past differences. ” Because I don’t think it was ever that type of a break. I think it was a break by virtue of absenting yourself one from the other.

This wasn’t something where there was an innuendo war going on, to my knowledge.

Q: Okay.

The Foreman: We will recess now until 1:30.

(Noon recess.)

Mr. Hamilton: Did you state this morning that you told Mr. Shepard that you didn’t think he would make a success with his consulting firm?

Mr. McDade: No. That was an offhand comment to Mr. Hedgecock, that I had doubts, because that is a dog-eat-dog type business. It is something where I have seen people come in and have a hard time making it.

Q: That comment was made to Mr. Hedgecock during the December conversation?

A: That is my recollection, yes.

Q: During this December, 1981 conversation you had with Mr. Hedgecock, did you discuss the role that was to be played by Tom Shepard and Associates after January 1st?

A: The role with respect to what?

Q: In respect to the preparations for a mayoral campaign on the part of Mr. Hedgecock?

A: No.

Q: There was no discussion of it?

A: No discussion of it.

Q: As of the start of 1982 when Mr. Shepard had in fact started his consulting firm, what was your understanding of the role that Mr. Shepard and his firm were to play in the preparation for the mayor’s campaign during the first six months of the year 1982?

A: It was my understanding that if there was a race for mayor, Tom Shepard was definitely going to be considered as one of the top candidates for running that campaign. I probably would have been the other one to be considered.

Q: Were you considering setting up a political consulting firm?

A: No. I have done that work in the past as an adjunct to my law practice. I have run a number of political campaigns.

Q: All right.

A: I would have dearly loved to have run this one from the start, but circumstances didn’t permit, and Tom had facilities and was ready to go, so he was the logical choice.

Q: Well, was it your understanding that he was going to be the consultant as of your understanding in the beginning of 1982?

A: No. No, it was merely something for discussion. Although there is no question that if he set up a firm that provided the services that a campaign would need, he would definitely be given consideration for it. But in my own mind I wasn’t sure that him going out for the first time, that he would be a person that could handle a race of that sophistication.

Frankly, I had more experience than he did in doing that type of thing, and probably given the same support, could have done the job.

Q: Take grand jury exhibit No. 5.1 am showing you grand jury exhibit No. 5.

Grand jury exhibit No. 5 contains a number of contracts for services between Tom Shepard and Associates and various individuals or organizations. Do you see that exhibit?

A: Yes, I do.

Q: I want to call your attention first to a contract, to two contracts in that exhibit, 5a and 5b, 5a being a contract between Tom Shepard and Associates and a Dan Kripke dated March 10, 1982; and 5b being a contract that is unsigned and undated between Tom Shepard and Associates and Roe for State Assembly. Do you see those two documents?

A: Yes, I do.

Q: I would like you to notice the letterhead at the top, and particularly on the right where they list the names of the partners of Tom Shepard and Associates. Do you notice the names of the four partners, Dennis, Franck, Meadow, and Shepard?

A: Yes.

Q: Now, I would like you to look at grand jury exhibit 5C, which is a contract that you signed between the Roger Hedgecock for Mayor Committee and Tom Shepard and Associates, which was signed on the third of August, 1982. Do you see that contract?

A: Yes, I do.

Q: Was that contract signed on the date indicated?

A: On that date or very close to it.

Q: All right. Now, I will call your attention to the letterhead on top of that. On the right they list the partners as of that time as Franck, Meadow, and Shepard. Do you see that?

A: Yes.

Q: And, also, besides the — that being the difference between 5a and 5b and 5c, the one that you signed, there is also a difference in the address of the firm at the bottom, 5a and 5b listing their address at 1205 Prospect Street, No. 465. And grand jury exhibit 5c, which you signed in August, listing the address of Tom Shepard and Associates as 1205 Prospect Street, 338. Do you see that?

A: Yes.

Q: Now, I would like to go back to the contract that bears Mr. Hedgecock’s signature [dated January 1, 1982], and would you notice that the letterhead upon which this contract is made contains the names of only the three partners, Franck, Meadow, and Shepard, at the top, and contains the address at the bottom, 1205 Prospect Street, No. 338. Do you see that?

A: Yes.

Q: This is the same letterhead that was on the contract that you signed in August, is that not correct?

A: That is correct.

Q: We have testimony in front of this grand jury that Mr. Dennis left the firm in about June, and therefore there was a change in the partners, and also at some point in time they moved from the fourth to the third floor.

A: uh-huh.

Q: Now, it seems clear from this document, being on the stationery that it is, that it could not have been signed on January 1st, 1982; does that appear obvious to you?

A: I couldn’t make the conclusion, Mr. Hamilton.

Q: Do you know whether or not there was a document or the original of this document was prepared at some time after the date appearing on it?

A: No. I have no knowledge of that.

Q: Now, at the time that you — the arrangement with Mr. Shepard became fairly definite in March, 1982, were you aware at that time of the manner in which he was being funded?

A: I knew that Tom had Nancy Hoover as an investor in his firm. I did not know the extent of his own personal assets or any other principal in this firm, but I did know that Nancy Hoover was a partner to some extent.

Q: Was the extent of your knowledge then that she was a partner?

A: She was a limited partner, yes.

Q: And as far as you know, she could have been one of hundreds; is that the extent of your knowledge?

A: I never had the impression there was a larger group. She was a person with access to great financial resources at that time, and I assumed she was the sweetheart in this deal.

Q: Were you told that she was the one providing all of the capital?

A: No.

Q: Did you assume that?

A: No.

Q: Did you assume there were others?

A: I assumed that Tom put some of his own resources in, and I assumed that you don’t give partnerships to people like Franck and Meadow and Dennis and the others without asking them to give something in return. So I guess if you are looking to my assumptions, I figured everyone was putting something in.

Q: Okay. You didn’t inquire, I take it; is that correct?

A: No. I had not reason to.

Q: Was it your assumption that monies of J. David and Company were going into the Shepard firm?

A: The first time I ever heard any intimation that J. David monies were coming in was during this year when the newspapers started indicating that from the proceedings you have been engaged in.

Q: So you were of the impression at that time that Ms. Hoover had large independent resources available to her?

A: She was living a lifestyle that left very little to doubt in that respect, that she had disposable income of almost any amount that she wanted, yes.

Q: Well, but your assumption was this was other than J. David funds; is that correct?

A: I had never been told anything different. I had been told at any mention of funding of the firm, it had always been Nancy Hoover funding the firm. There had never been a mention of J. David.

Q: Was this mentioned quite often?

A: No.

Q: How many times during the first part of 1982, first half of 1982, did you hear that fact mentioned that she was funding J. David — or Tom Shepard and Associates?

A: Oh, maybe three or four times.

Q: Okay. Now, during that time was there any discussion as to the amount of her funding?

A: No.

Q: Now, do you recall the date of November 2nd, 1982?

A: No.

Q: That is Election Day, 1982?

A: Okay.

Q: Do you recall this date?

A: Yes, I do now.

Q: Where were you on election night on that date?

A: At election central.

Q: Did you attend a party that night?

A: Yes. At Soledad Franco’s.

Q: Who gave that party?

A: That was put on by the Hedgecock Election Committee.

Q: What was the purpose of that party?

A: It was intended to stir up tremendous support for Roger’s candidacy and get him off and running just as fast as he possibly could.

Q: Was it announced at that party that he was definitely going to be a candidate?

A: I don’t think so. I think the announcement came later. But if it wasn’t announced, it was one of those thinly veiled political things where everybody in the place knew it. It was a very exciting evening because all of us were very elated that Pete [Wilson] had won and maybe all the work we had been doing as volunteers over the past year would have some meaning.

Q: Was there some type of a campaign parade through the streets?

A: Right. They had a few bugles and drums, and things like that, and the parade went from Soledad Franco’s down to the election headquarters at the Embarcadero.

Q: The purpose of this was to advertise Mr. Hedgecock’s candidacy, is that correct?

A: Yes.

Q: We have received evidence, there has been evidence introduced here before the grand jury, that on or about November 8th, which would have been within six or less days of this November 2nd date, Mr. Hedgecock and Ms. Hoover entered into an agreement whereby Mr. Hedgecock agreed to sell Ms. Hoover a promissory note and a deed of trust in return for $16,000. Were you aware of that having happened at the time?

A: No.

Q: When did you first find out about that arrangement?

A: I believe it was in June of 1984 when the attorneys for Roger Hedgecock revised his and amended his economic interest statements and included that transaction more clearly characterized on his statements of economic interest. And at that point I believe Ralph Frammolino, from the Times, picked it up, and I learned about it from the newspaper.

Q: You learned about it in the course of the investigation that is currently going on?

A: That is correct.

Q: There was a resolution of the San Diego City Council on November 15th, 1982, calling a special election for the office of mayor with the primary — setting the primary on March 15th, 1983, and the general election on May 3, 1983. Do you recall that happening?

A: Yes, I do.

Q: Again the evidence in front of this grand jury shows that on November 17, 1982, Mr. Hedgecock notified Jack Kaufman, Ms. Hoover’s attorney, not to record the promissory note and deed of trust that we have previously discussed until June 23rd, and not to notify the obligors on the note. Were you aware of that conversation at the time it occurred?

A: No.

Q: Did you find out that there was that consideration or a similar consideration between Mr. Hedgecock and Mr. Kaufman?

A: Yes.

Q: When did you find that out?

A: When I reviewed the documents that Mr. Hedgecock has presented to your grand jury.

Q: Do you know John Woodard?

A: Yes, Ido.

Q: How long have you known Mr. Woodard?

A: I believe I met him in Roger Hedgecock’s office when he was an intern there. Probably in the ’80 to ’81 period of time. I can’t be precise on that.

Q: Did Mr. Woodard work in the 1982- 1983 Hedgecock campaign for mayor?

A: He was a volunteer during 1983, acting as a driver for Roger Hedgecock to various events.

Q: When do you recall him becoming Mr. Hedgecock’s driver?

A: It wasn’t necessary until after the first of the year, so it would have been early in 1983.

Q: Okay. Did you know that during the campaign he was on the payroll of Tom Shepard and Associates?

A: I didn’t learn that until later. I —

Q: Wait a minute. At any time prior to May 3rd, 1983, did you know that Mr. Woodard was on the payroll of Tom Shepard and Associates?

A: I think I did know that he was doing some work for him. It was my —

Q: All right.

A: — recollection, if I may finish, that he was doing the same type of thing Corine Couwenberg was, doing polling on an hourly basis, and doing that kind of work.

Q: I am interested in the date. When did you first find out that Mr. Woodard was on the payroll of Tom Shepard and Associates?

A: I couldn’t tell you. This particular issue has been bandied about in the press so often that I don’t know when my first recollection was, because the newspapers keep throwing around all sorts of comments about who should have known what at what time. I would say it was not a momentous [revelation]. Probably sometime, I would think, prior to the end of the primary election in March.

Q: So you would place the date of your finding out as prior to March 15th?

A: I would think so, yes.

Q: Do you recall from whom you found out?

A: I think John mentioned he was doing a little work for Tom Shepard, and I was delighted because he is a nice kid and had been unemployed.

Q: Did Mr. Woodard tell you that he was getting paid by Tom Shepard to drive Mr. Hedgecock?

A: No.

Q: Did you ask him whether that is what he was getting paid for?

A: Never even occurred to me. John had been a volunteer in previous activities.

Q: Well —

A: He was a volunteer pure and simple, as far as I knew, in the campaign.

Q: Mr. McDade, Mr. Hedgecock is reputed to be a very, very active campaigner. And I would assume that during the course of a rather short special-election campaign for mayor, he is being opposed by two rather formidable candidates, that he is on the move most of the day, was he not?

A: He had his duties as a county supervisor that took up most of the day, most of every day.

Q: Are you saying he spent very little time on the campaign trail? !

A: He spent excessive amounts of time on the campaign trail in the afternoons and evenings.

Q: Who was driving him during that period of time?

A: Some of the time John Woodard.

Q: Wasn’t it most of the time?

A: I would say most of the time after a certain point in time, but I couldn’t tell you when that was.

Q: When you were told that Mr. Woodard was being paid by Mr. Shepard, it did not enter into your mind that he might be getting paid to drive Mr. Hedgecock?

A: No. In every campaign I have worked in of any scope, there have been volunteer drivers for the candidate. Those people have worked for a wide variety of different people, and I saw John as no different than the other 2000 volunteers in the campaign.

Q: So let me ask the question this way: If in fact Mr. Woodard was employed by Tom Shepard and Associates for the primary purpose of driving Mr. Hedgecock during that campaign, would this have been something you were unaware of?

A: Yes. If I had known about it, I would have considered it a campaign violation.

Q: Have you ever inquired of anybody as to that possibility?

A: What time period are you referring to?

Q: During the entire period of the campaign.

A: During the campaign, I had no occasion to make any inquiries about that at all.

Q: That would be through May 3rd, 1983?

A: That is correct.

Q: Do you know Carl Ludlow?

A: Yes, I do.

Q: How long have you known Mr. Ludlow?

A: Since the 1978 Hedgecock campaign.

Q: Now, is he the one that you were instrumental in getting fired as an executive assistant to Mr. Hedgecock; is that correct?

A: Unfortunately I have had that responsibility twice in Carl’s life.

Q: I believe you have testified at some point he was committed with the committee work to organize a campaign for Mr. Hedgecock in 1982; is that correct?

A: Yes. In 1982 he was quite active in the campaign up until I asked him to leave the campaign.

Q: Do you recall what point that was?

A: Yes. That was over the Christmas holidays, 1982.

Q: Now, did Mr. Ludlow ever approach you during the latter part of 1982 and inform you that he had discovered that certain of the Hedgecock campaign workers or volunteers were being paid by Tom Shepard and Associates?

A: Absolutely not.

Q: What was the cause of your firing Mr. Ludlow?

A: He had made substantial misrepresentations throughout the City of San Diego concerning both his role with the Hedgecock campaign and his ability to produce certain results for community activities. He was making our campaign a laughingstock. He was creating friction throughout the campaign. He and Tom Shepard were frequently close to blows because of Carl’s attitude toward Tom and Tom’s thin skin.

He was uniformly disliked by virtually all of the volunteers in the campaign. He was a pain in the neck, and basically I gave Roger the option that either Carl Ludlow left the campaign or I left it, and I was supported in that by the campaign committee.

Q: Did you know that in December, 1982 a mobile telephone was placed in Mr. Hedgecock’s personal automobile?

A: Yes, I did know that.

Q: Do you know the circumstances under which that was done?

A: I know —

Q: Did you know at the time?

A: No. What I knew at the time is that he had been complaining that he was on the road so much, he never had a chance to make phone calls; that he wanted to inquire into the possibility of getting a mobile telephone.

He asked if he did do this, if we would authorize that as a campaign expense, as far as the payment for it, and we did authorize that.

Q: All right. Now, do you know to whom he went to get it installed?

A: No, I don’t.

Q: Do you know whether or not the campaign paid Pacific Telephone for that telephone?

A: I don’t know. I would assume we paid all bills we received, but I remember seeing phone operation bills. I do not recall at this time seeing an installation bill.

Q: Well, we have evidence that the actual bills for that phone, at least for a period of several months after its installation, were sent to Roger Hedgecock in care of Tom Shepard and Associates. Did you know that arrangement had been made?

A: No, I didn’t.

Q: Do you know whether or not those bills were ever passed on either to the Roger Hedgecock for Mayor Committee or to Roger Hedgecock personally?

A: I was told they were passed on to the committee.

Q: Who told you that?

A: Roger Hedgecock indicated the committee was going to pay for his phone.

Q: Mr. McDade, when you made this verbal amendment [in December, 1982] to the contract with Mr. Shepard, either you or Mr. Hedgecock made it, were you aware at that time that what you were offering him, Mr. Shepard, in the way of compensation would not cover the operation of his office?

A: No. If I understand the question correctly, and I see it is from one of the grand jurors.

Q: That is my question.

A: You are just fiddling here. I had no personal knowledge of operational costs of Mr. Shepard’s business. Further, in view of the fact that Mr. Shepard was running a business with multiple clients, I had no feeling that anything we paid him should cover the cost of running his operation.

I should further indicate that the compensation we were offering him, which I believe over the course of the campaign amounted to some $30,000 above all expenses, amounted to more than I have been paid for running Pete Wilson’s campaign and Susan Golding’s campaign. So it certainly doesn’t shock my conscience.

Q: How many salaries were you paying for?

A: There were salaries involved, one or two, but it wasn’t as large an operation.

Q: How many salaries were you paying out of your 30,000?

A: I didn’t get 30,000. That is what I am saying.

Q: How much did you get?

A: I believe less than $10,000 for that campaign.

Q: How many salaries were you paying out of that 10,000?

A: My own, and I believe some clerical support.

Q: Were you paying for a computer?

A: No.

Q: The evidence in here is that at the time of this — at or about the time of this amendment, Mr. Shepard added four employees to his staff and increased, doubled the compensation of one of the partners, leased a computer, and apparently may have paid for a mobile phone. Were you aware that all those things were happening at the time?

A: No. I had no active knowledge of the internal workings of Tom Shepard’s office.

Q: Were you aware that in order to pay for the increased expenditures that Mr. Shepard was incurring because of the Hedgecock campaign, that he had to go to Ms. Hoover in either November or December and request increased capital contributions to cover the additional expenditures?

A: I am not aware of that to this date.

Q: All right.

A: I hope that that is an accurate reflection of the evidence rather than something that does not take into consideration the fact that he had other clients during this period of time. I mean, generalizations are easy.

Q: What other clients did he have at this period of time?

A: You received a statement from him.

Q: Which lists no clients during the period of time in question. What clients are you referring to? I am referring to the period between December, 1983 and May 3rd, 19 — excuse me. December, 1982 and May 3rd, 1983. He had two, what I call — I call one-shot clients which is listed, and that is the Public Defenders, which commissioned a jury survey which took a couple weeks and a limited amount of man-hours, and another client who came on board just before the election. And other than that, he had no clients that I know of. Do you know of any other?

A: I have seen just briefly the statement which he presented to the grand jury.

Q: I have seen the same statement.

A: And I can’t quote what the clients were at that time. I know he was doing work for a North County chamber of commerce group during that period of time. I don’t know who else.

Q: Do you have any personal knowledge of the amount of monies that were being presented by Mr. Shepard with regard to these other clients?

A: No.

Q: Do you have any personal knowledge as to the amount of compensation he was receiving from these other clients?

A: No, I do not.

Q: All right. Has he told you or Mr. Shepard told you that he has a number of other clients who were causing him a great amount of work in the period of the Hedgecock campaign?

A: He has told me he had other clients that were taking his time. Our campaign was definitely the largest client that he had.

Q: Did he quantify that in terms of percentage?

A: No.

Q: Did you believe at the time you entered into this amendment of the contract with Mr. Shepard that the compensation that you were offering him, which was fifteen percent of the media agency fee, which would apparently either be electronic media and possibly print media, did you believe that that compensation would cover his entire expenses in regard to handling your campaign as well as make a profit for him?

A: Yes, I did.

Q: All right.

A: Because I should point out, the expenses of the campaign were paid by us. All he was interested in was his internal operation, be it profit and overhead, and I thought that would adequately compensate him.

Q: What was that based on? What did you know about his internal operation at that time?

A: Very little. So he told me it would be satisfactory. I don’t believe Tom Shepard is any fool. I thought it was a fair price from the standpoint of the campaign, which was my client, effectively.

Q: Well, nobody is suggesting that Tom Shepard is a fool. The suggestion, of course, obviously, is that the funding was coming from another source, which is not only the suggestion; the evidence has been that there was funding coming from another source.

My understanding of your testimony is you were unaware that that was happening; is that correct?

A: That is correct.

Q: Do you recall a time when [Nancy] MacHutchin came to you and said that she had recently learned that certain of the people working in the Hedgecock campaign, whom she had thought to be volunteers, were in fact paid?

A: No. I have no recollection of that kind of discussion.

Q: Do you ever recall her coming to you and saying anything to you to that effect?

A: No, I sure don’t.

Q: Do you ever recall Ms.

MacHutchin coming to you at any time and discussing specifically the fact that she had found out that Ms. Evonne Schulze was being paid?

A: No.

Q: Do you recall at any time that Peter Aylward came to you and told you that he had found out that people were being paid by Tom Shepard?

A: No.

Q: Now, you found out about this at some point in time with regard to Mr. Woodard; is that correct?

A: Yes, I did.

Q: And insofar as — that was during the campaign?

A: That was during the campaign.

Q: Did you discuss that matter with Mr. Hedgecock?

A: No, I sure didn’t.

Q: Did you ever discuss that matter with Mr. Hedgecock?

A: No. Subsequent to these allegations coming out in the investigation, I have discussed it with him, yes.

Q: In 1983 did you ever discuss the fact that Mr. Woodard had been paid by Tom Shepard and Associates with Mr. Hedgecock?

A: No.

Q: Did you ever discuss with Mr. Hedgecock your discovery that at some point in time that [Evonne] Schulze had received some compensation from Tom Shepard and Associates?

A: I believe I testified I did not know of any compensation she received until this investigation began.

Q: Oh, I am sorry.

Q: Now, there is evidence in front of this grand jury, Mr. McDade, that during the month of June, 1983, Mr. and Mrs. Hedgecock engaged in at least two conversations with Jerry Dominelli and/or Nancy Hoover regarding schemes to effect a renovation of his State Street house. Were you aware at the time that those discussions had taken place?

A: No.

Q: When did you first become aware of the fact that those discussions had taken place?

A: When the investigation commenced. Well, let’s say prior to the investigation. I believe I first learned of it at a meeting on February 12th, 1984. . . .

There is one qualification I put on that. Back at the end of the campaign, when Roger and Cindy were moving ahead with their remodeling plans, Roger one day mentioned to me casually, “I think I am going to see if Nancy Hoover can help me with my remodeling.” At that point, I remember asking him, “Is this a smart thing to do? Is this something that” — I mean, it obviously was an appropriate transaction between the parties, but I asked him if he should go to a private source for this kind of money. He said he would think about it.

Thereafter, we never had any discussion about the remodel. It went forward, and it was not until February 12th that I learned that Nancy Hoover had been involved in the remodeling. And I came unglued at that point and was quite angry that he had not documented the transaction properly.

Q: You say you visited the house several times?

A: Right.

Q: Saw the renovation in progress?

Was there some reason why you didn’t ask Mr. Hedgecock whether or not he had succeeded in making these arrangements with Ms. Hoover?

A: No reason at all. It just never occurred to me. I was in the process of putting together city staff, firing people, getting off to a fast start, helping on the convention center campaign, and I didn’t meddle in his business.

Q: Well, Mr. McDade, in all due respect, I have dealt with you since 1976 on various issues regarding the Hedgecock campaign, have I not?

A: Yes, you have.

Q: We have talked on numerous occasions.

A: Many occasions.

Q: You have impressed me during that period of time as being very meticulous with regard to asking questions about the campaign laws, and so forth. Am I incorrect in stating that as being the things you have done?

A: I certainly have tried to over the years, yes.

Q: Now, you have described yourself as a very, very close advisor and friend to Mr. Hedgecock, isn’t that correct?

A: Right.

Q: Mr. Hedgecock, as I understand your testimony, approaches you after the election and says something to the effect that he wants to get his house renovated, and he is going to contact Nancy with regard to this — Nancy Hoover with regard to this. And you say, “Is that a smart thing to do?” And then he goes his way, and the next thing you find out, that the renovation is being done. Did it not occur to you to ask him why he had in fact gone through with this thing with Nancy Hoover?

A: Not on the financing aspects. I just never had an occasion to ask.

Q: Were you not worried about the possible consequences?

A: I had given him my opinion as I did on“many issues. I felt he was able to handle his affairs without my meddling on a day-to-day basis. I gave him my advice when he asked for it.

Q: I take it, then, it did surprise you when you found out that this was an undocumented transaction, is that correct?

A: It not only surprised me, but it frightened me, and that is why I was very delighted to find the documents in your possession that came from Nancy Hoover’s attorney, which clearly indicated that there had been a loan transaction intended from the start, because I have to say, for a while when the newspaper was raising the [question] about this being a gift, I was wondering if I had misevaluated the man. And then when I saw the document that came from attorney Greco’s office where there was clearly an indication from the parties as to what the nature of the transaction was, I once again had my faith restored in my friend.

Q: Well, if you read those documents, you must have read the letter from Mr. Greco to Ms. Hoover advising her very strongly to document the loan in a standard manner, did you not?

A: Yes, I sure did.

Q: You didn’t find any documents that indicated a standard documentation of a loan, did you?

A: No. They were never executed, to my knowledge.

Q: All you found in there were handwritten notes from Ms. Hoover, all undated, which reflected her memorialization of considerations with Mr. Hedgecock; isn’t that correct?

A: Those were the things I relied on in those comments, yes.

Q: Now, as an attorney, if Mr. Hedgecock had asked you, this is not the type of documentation you would have advised him to prepare, is it?

A: You can bet on that.

Q: Also, among those documents did you not notice the first two arrangements with regard to, first, the potential sale and a loan of the home were to be done behind the blind trust?

A: Yes. I did notice that.

Q: Didn’t that raise concern in your mind?

A: I didn’t see that until after — in fact, I guess I didn’t see those documents until probably May or June of this year.

Q: Okay.

A: So they certainly didn’t arise any questions at a time when I could do nothing about it.

Q: Now, how did you find out about this arrangement on February 12th, 1984?

A: I was called at home on a Sunday, as were other members of the political advisory committee to Roger, and asked if we could come to a meeting at his house.

Q: Who called you?

A: I don’t remember.

Q: Was it Tom Shepard?

A: It could have been.

Q: What time did this call come to you?

A: As I recall, in midafternoon. I remember being irritated about having to go into town from El Cajon on a Sunday afternoon.

Q: Did you go to his [Hedgecock’s] house?

A: Yes, I did.

Q: Who was there when you arrived?

A: Either when I arrived or at some time during the evening Roger was there, Tom Shepard, Nancy MacHutchin, Larry Cushman, and Pete Aylward. I think that is all. Cindy Hedgecock may have been there. If so, she was in and out and wasn’t participating in the meeting.

Q: When you were called and asked to go to this meeting, were you informed during the telephone call as to the nature of the meeting?

A: Just told there was a problem, and we needed to discuss it right away.

Q: When you got there, did somebody acquaint you with what the problem was?

A: Yes.

Q: Who was it that acquainted you with it?

A: Roger.

Q: What did he describe to you as being the problem?

A: He basically indicated that the rumors we had been picking up for the past couple of weeks about the collapse of J. David had been driven home to him in a very personal manner when this contractor, I believe it was either Mr. Columna or Mr. Harris, who I did meet on one occasion on the job site, had advised him that $35,000 in unpaid subcontractors’ bills were outstanding; that they were stopping work; that they were no longer receiving money from Nancy Hoover; and that the job was basically going to come to a standstill.

He at that time advised us that he had also borrowed $130,000 from Nancy to date to handle the remodel, and that he was now going to have to come out-of- pocket for the 35,000 plus whatever additional costs were necessary to complete the house.

Q: Now, did Mr. Hedgecock tell you the manner in which this $130,000 had been borrowed?

A: He indicated that he had taken out a loan from Nancy Hoover. At that time, he didn’t go into the specifics. I know them subsequently, because I have traced through them with him.

Q: I realize you know them since then.

I am trying to find out what he told you as of that meeting. Did he in fact tell you that the loan had originally started with a $50,000 check from Nancy Hoover which was deposited into a construction fund account?

A: No. I found that out later.

Q: Did he tell you that thereafter the bills for the renovation, after that $50,000 was consumed, that the bills for the renovation thereafter were submitted by the subcontractors directly to Parin Columna who paid them? Did he tell you that?

A: He had indicated something about the arrangement, that Nancy was paying the contractor directly. So we knew that she was out-of-pocket money at that time.

Q: But, how did he explain — did he indicate to you that at the inception, there had been a firm agreement for $130,000 loan?

A: I don’t think it was that cleanrcut at that meeting.

Q: All right.

A: I think he was, if you will remember his mental state when he appeared in public in those days, he was still trying to piece it all together.

Q: All right.

A: He was approximating, and I seem to remember 130,000 as the approximate amount.

Q: Now, that meeting has been described as one that lasted two or three hours; would that be correct?

A: Yes, it did.

Q: The total that you can remember about his explanation of the problem is that he had borrowed $130,000 from Nancy Hoover, but without going into the specifics?

A: I don’t think he went into the specifics as to the timing as when he received the money. I also might not have been totally receptive to what he was saying at that time because I was frankly very angry that he had gone forward with something that could jeopardize his political future by appearances without documenting it.

Q: Did he indicate to you any suggestion as to — or what his suggestion was as to handling this problem?

A: Yes.

Q: What was —

A: We talked about it from a number of perspectives, and I think those of us who were called were a group of political advisors. We were obviously very concerned about any political fallout that might occur as a result of this.

After we finished cursing the fact that there were no documents that would clearly illustrate what was going on, we decided to have him lay it out as clearly as he could for us. And Peter Aylward at that time took notes and subsequently drafted an agreement that would reflect what the transaction had been.

Q: All right.

A: Admittedly after the fact is not as good as before the fact.

Q: Now, do you recall whether any documentation was presented by Mr. Hedgecock or anyone else at that meeting which documented the actual expenditures on the house renovation?

A: I don’t recall seeing actual documents. I recall indications that these would be provided to Pete Aylward so he could prepare the documents, but I don’t think —

Q: That is my next question. Was there a discussion about a necessity for someone to go out to Mr. Columna or someone else and get a breakdown of the costs?

A: Yes.

Q: All right. So was it your impression as of the February 12th meeting that such a document had not been obtained?

A: I don’t think so. Yeah, we wanted to make sure that when the numbers appeared in the agreement, they jibed with what Columna was actually charging on the job.

Q: Let me rephrase that. I think maybe I got a double negative. Did you understand at that meeting that there was no document in existence at that time that showed the actual breakdown of costs on that job?

A: No. I was of the impression that there was documentation of that clearly existing, but that it wasn’t present at the meeting, and that this was documentation primarily in the hands of Mr. Columna.

Q: Was it your belief at that time that that documentation was not in the hands of any of the members of the committee who were present there at Mr. Hedgecock’s home?

A: That is right.

Q: So was one of the individuals there delegated to go get that documentation, do you recall?

A: I think Roger was going to take care of that himself. The other possibility is that he asked Tom Shepard to inquire of Nancy Hoover, who was his friend, how much money had been expended up to that point. But I think both of those two were going to take the responsibility for accumulating-the documents.

Q: Was it your understanding of what Mr. Hedgecock had said that he had received some type of verbal indication, at least from someone, that the total costs owed at that time was $130,000?

A: Yes.

Q: All right. So what was missing was the written documentation of that, isn’t that correct?

A: Exactly, and the supporting bills.

Q: Okay. So whoever was going out to do it, was going to get what would have been some written documentation to support the verbal figure he had been given; is that correct?

A: Right.

Q: At some point in time after the campaign, did you talk to Ms. Evonne Schulze about her association with Tom Shepard?

A: Yes.

Q: When did that occur?

A: That occurred in 1984, shortly before her testimony before your grand jury.

Q: All right. So that was after this investigation had started; is that correct?

A: That is correct.

Q: Can you relate what that conversation was with Ms. Schulze before she testified here?

A: Yes. Actually I had two conversations with her. When you filed your civil suit shortly prior to the election, there were certain aspects of that civil suit that were not clear as to what was being alleged. Subsequently you filed an amended civil suit which seemed to focus on two employees of Tom Shepard. Knowing that Evonne Schulze was the person who had been talked about in the press as having worked for him, and since she was close at hand, I called her into my office on our lunch hour and I asked her if she could tell me what was her arrangement with Tom Shepard at any time when they were consulting or talking about going into the consulting business together.

She gave me a breakdown at that time of just exactly what her arrangement had been, which relieved me no end because I found out that she was not an employee of Tom Shepard at any time; that she was an independent consultant; that she received $900 from him; and more than that, from other sources, that she received no employee benefits, had no withholding taken from her check, none of the things that would characterize her as an employee.

Q: You were satisfied, I take it, with that response?

A: I was very satisfied. In fact, extremely relieved.

You had asked about other conversations. Then I also had a subsequent conversation with her when she inquired if I would give some idea about what the grand jury process was all about, because she was frightened, and that has all been reported in the paper. But I would be very happy to go over what I counseled heron.

Q: I don’t really think that is too relevant. Thank you.

A: I hope not.

Q: I believe at some point in time you said that Nancy Hoover was living in a style that demonstrated that she had access to almost unlimited funds. Was this something that you personally observed?

A: No. It was something that was reported in the paper repeatedly. She was the only person I have known from the old days who was capable of making $100,000 bequests to the San Diego Opera, and things of that nature. It was quite obvious from her appearances in San Diego magazine and the social columns, and everything else, that she was doing quite well for herself.

Q: Did her financial circumstances appear to improve after she left Mr. Hoover and went to live with Mr. Dominelli?

A: Not unless you like Porsches better than Volkswagens.

Q: All right. So in your view she had always been an affluent person?

A: She had always had a certain degree of affluence. They were not poor people at all, but it was a quantum leap when she left George and when J. David appeared to be reaping in marvelous profits. She was giving gifts to her daughter’s friends, and sending her kids to the best schools, and supporting athletic teams, and it was a definite marked difference.

Q: I know we are jumping around. I am taking these questions in the order in which they are here in my hand rather than in chronological order.

A: That is fine.

Q: Can you briefly review the process that was used during the 1983 campaign in an attempt to keep committee expenditures in line with contributions?

A: I am not sure I follow the question exactly.

Q: We have had testimony in here, Mr. McDade, that there was within this executive committee, or perhaps even a smaller subcommittee of that, there was a continual battle to keep expenditures within the limitation of contributions.

A: Right.

Q: Now, what was the — and that, quite frankly, there has been testimony that that was not successful in some cases, witness the $44,000 debt at the end of the May ’83 campaign. Can you explain to us what the process was that was used to keep those expenditures in line?

A: Yes. I understand what you are saying now. At each executive committee meeting, which was generally on Saturday morning at the campaign headquarters, all of the various decentralized aspects of the campaign would come together for the only time in the week. You have to understand how this operation worked. There were many aspects of the campaign operating out of the headquarters. There were others operating out of diverse neighborhoods, things in Rancho Bernardo, San Ysidro, all over the place; some going on out of my office in El Cajon; some of my own personal activity I was involved in. There was a lot of delegation in the campaign, people working on specific functions.

They would come together on Saturday morning to hear reports from the precinct operation, the volunteer operation, the fund-raising operation, the accounting aspects of the campaign.

With respect to the specific question, each week we would have a projection prepared by Peter Aylward ordinarily of where we stood and a cash flow revenue standpoint. If I use the wrong terms, it is because I am not an accountant in any respect. But he would give us a picture of how we stood at any particular time. Projections would be made as to what expenditures were anticipated for the next week. Projections would also be made by Nancy MacHutchin or someone from her group as to what we could expect by way of contributions. Then we would try and work on the program for the next week, be it advertising, or anything else, to try and trim it down within the limit of what we could anticipate reasonably.

Q: Was there a person charged with the responsibility of authorizing expenditures?

A: Not a single person.

Q: Who had the authority to authorize expenditures in this campaign?

A: Up to a certain level, and I think it was either $150 or $250,1 believe that the campaign secretary could authorize expenditures or could write the checks, anyway. Usually almost always in consultation with someone in the campaign.

Q: Let’s go above the $250 level. Who there had the authority to authorize expenditures?

A: I did, Pete Davis did, Roger did. Although Roger usually had to go through the barrier of arm wrestling with Pete and I as to why it was a legitimate expenditure. But we were the ones that could co-sign the larger checks. For example, most of these larger checks were checks drawn to Tom Shepard and Associates.

Q: Did Mr. Shepard have the authority to okay expenditures?

A: No.

Q: So that when Mr. Shepard wanted to make a media buy, he would have to come to one of you three gentlemen to get authority for that, is that correct?

A: More importantly than that, he would have to come to the entire committee, present what the media buy should be, and then see it criticized and reshaped, so it would be approved in theory.

Q: I understand the theoretical approval, but I am talking about the actual approval of the expenditure.

A: No. At that time, once it had been approved by the committee, he can go out and incur indebtedness on behalf of the committee, which is typical as far as consultants.

Q: Insofar as this theoretical approval that you gave him for the consent of any given media buy, did that place certain restrictions on the maximum amount of money he could have spent?

A: You bet.

Q: So each time he came with a plan, was there a maximum figure established by the committee?

A: Yes. A maximum figure which would vary slightly depending on availabilities, because what he would do is go through and figure out what would be, for example, a good buy on Channel 10.

To give you a good example, at one point we realized that the showing of MASH, the final showing of MASH, would be a tremendous audience-drawer. We would probably get a better bang for our dollar there than we would in any other show of the year because of the watchership.

The original authorization was given to spend $3000 or $4000 for a thirty-second ad on M*ASH specifically. [But] during the week they pump their rate up to commercial rates, they took away the availability of political rates, and it would have cost us $8000 or $9000. So Shepard had to make a decision to alter that buy after consultation with me and the candidate.

Q: So he could not alter the authorization without either your approval or Mr. Hedgecock’s?

A: Except for fine-tuning, he could throw out a thirty-five-dollar spot here, add on one fifty-dollar on there. But there would be no substantial variation. . . .

Q: With regard to the one thing you mentioned there that you occasionally gave legal advice, were you ever asked by anyone, either Mr. Hedgecock, Mr. Shepard, or anyone else, to give any legal advice as to the effect of the capital contributions toward Tom Shepard and Associates, the possible effect of those capital contributions toward Tom Shepard and Associates in the Roger Hedgecock campaign?

A: I was never asked, nor did that question ever occur —

Q: Okay.

A: — in discussions, to my mind.

Q: I believe you previously testified you were never aware of the fact that some of the money that was going to Tom Shepard and Associates actually had come from bank accounts of J. David and Company, is that correct?

A: No. I first learned that in 1984 when it came out in the papers.

Q: Now, you stated at some point in time, I believe, you didn’t believe that Mr. Shepard had what it took to be a successful consultant. In light of that, did you ever recommend to Mr. Hedgecock that he not be employed as a consultant on this campaign?

A: No. He proved otherwise to me as soon as things got rolling by his performance. I guess I didn’t know him that well before.

Q: I am talking about at the very inception before things got rolling, did you advise Mr. Hedgecock of your reservations about Mr. Shepard’s ability to do this job?

A: I asked him if he thought Tom could handle it, and he said, “Yes.” And he said, “What is my alternative?” He said, “Your wife won’t let you do it, so what are we talking about?”

Q: Well, there are other political consultants in town other than yourself and Mr. Shepard, aren’t there?

A: Not very many good ones.

Q: You did not consider Mr. Shepard to be a very good one, if I understand you, at that point.

A: I didn’t know him well enough to know that he could do the job.

Q: There are others you have used in the past, have you not?

A: Yes, I have.

Q: The question is, did you, in view of your reservations, suggest to Mr. Hedgecock that he might consider using some other consultant?

A: No, I didn’t.

Q: Did you ever, yourself, scrutinize Mr. Shepard’s bills to the extent where you compared them with the actual invoices?

A: No, I didn’t. I really didn’t have the time nor did I consider that my role.

Q: Was there any discussion at that meeting on February 12th concerning the possibility that some of the money that might have gone into the house renovation was actually money of J. David and Company rather than Nancy Hoover?

A: No.

Q: Was that even discussed as a possibility?

A: Not that I recall.

Q: Was it discussed as a possible concern?

A: The possible concern that we had was that Nancy Hoover was an integral part of J. David, and that if J. David was going down as fast as everyone seemed to believe at this time, that Roger had best do anything he could do to avoid being pulled down into that whirlpool.

Q: Was there a discussion about the fact that publicizing the fact that Nancy Hoover had, in effect, financed this renovation might be construed by the public as being a J. David operation rather than a Nancy Hoover operation?

A: I don’t think we were that sophisticated in our analysis at that point, but it became clear that that was what the papers were going to make of it in a very short period of time.

Q: That thought did not occur to you at that meeting?

A: I didn’t think of that thought specifically. I was concerned about the fact that J. David was sinking, that Nancy Hoover in effect was a part of J. David, and I did not want my mayor associated with that firm.

Q: I assume, then, the name J. David was mentioned during that meeting?

A: Oh, you bet.

Q: In what context was it mentioned with regard to the house renovation?

A: It was mentioned in the context of the interbank account which Roger had given to Nancy Hoover as security for the loan she had extended to him.

I had been aware that he had invested with J. David as early as, oh, probably the previous summer. He had indicated he had invested something, and I was looking at him enviously and wished I could invest something, but didn’t have the funds to do so.

At that point I became aware of it, and when the rumors started coming around about J. David, I remembered having a conversation with Roger after I was at a cocktail party where a woman said she had tried to get her money back for several days and failed. And I called him and I said, “Hey, do you feel that investment of yours is safe?” And he said, “I have no reason to doubt that it won’t be.

Q: When was that?

A: January of 1984.

Q: Now, I believe we have the documents which show that Mr. Hedgecock’s initial investment into the interbank account occurred in December of 1982 and was a $10,000 amount, and that $10,000 was part of the $16,000 that he had received from Ms. Hoover.

A: You are right.

Q: You did not know about the $16,000 that he received from Ms. Hoover at that time, did you?

A: No. And I didn’t know about his early small investment. He made a more substantial investment in the summer of 1983, and that is the one that he told me about.

Q: When did he tell you about that?

A: I believe at the time thai he was making the investment, which was July or August of that year.

Q: Did he tell you that the investment was a security for anything?

A: No, he did not discuss that with me.

Q: Would the extent of the conversation be that he had made an investment in J. David and Company?

A: He had made an investment; that they had made it possible for him to invest in something that appeared to be getting a very attractive return. I was extremely envious.

Q: Did he tell you the amount of the investment?

A: No, he didn’t.

Q: You had this conversation with him in mid-January, 1984, and he said he was not worried about his investment. Did he tell you at that time that he had signed over that account to Hoover?

A: No.

Q: As collateral for a loan?

A: No. Did not discuss it at all at that time.

Q: When is the first time you found out that Mr. Hedgecock had said that he had turned that account over to Ms. Hoover?

A: At the February 12th meeting.

Q: All right. Did he tell you at that meeting when he had accomplished that transfer?

A: He indicated it had happened, that it had actually been assigned or orally pledged to her back in the fall of the year, and that he believed the transaction had taken place physically in December.

Q: Mr. McDade ... do you have any additional relevant facts that you wish to present to the grand jury?

A: Yes, I do.

Q: All right.

A: If I can review my notes for just a moment.

I think very briefly, since I am a subject of this investigation, that it would be helpful for you to know something about me and my involvement with politics, because I think that is relevant in considering whether or not I did anything wrong in these transactions.

I have been involved in political activities for twenty years beginning with the Goldwater campaign as a lowly precinct worker, and working in a number of volunteer and community-oriented political activities up until the 1975 campaign with Roger Hedgecock.

The first time I was involved — 1976. Excuse me. The first time I was involved in the actual running of a campaign was that campaign. Subsequently in 1977 I was part of the campaign team, once again a group of volunteers who ran Bill Lowery’s first election campaign for city council.

I have served as a campaign advisor to Assemblyman Larry Sterling, to Bill Lowery, primarily while he was on the city council. As I indicated to you in previous testimony, I ran Pete Wilson's re- election campaign in 1979. In 1981 I ran Susan Golding’s successful campaign for the city council. In 1982 I briefly was the campaign consultant to Deborah Szekely in an aborted bid for congress, and also for a losing judge candidate, Harvey Neiman and gave advice to both of those.

I have served as campaign attorney for Dick Murphy and for Bill Lowery. In those capacities, I worked very closely with Dan Stanford, who is now the head of the Fair Political Practices Commission. And, frankly, if you want further testimony as to my attention to campaign law and my habit for seeing candidates and campaigns comply with it, I would suggest that you call any of those people, including Mr. Stanford, who I helped train in campaign law, as witnesses. Mr. Hamilton I was going to suggest as a witness, but he has already, by his own admission, indicated that we have worked together in the past. If you want to get him under oath, you can find out what he really thinks.

But I would point out that I have had experience in this and, as a result, have been a stickler over the years for seeing that campaigns comply to the best of my knowledge with the campaign law.

Numerous questions that have been directed at me I haven’t been able to give you specific dates and times for things that took place. Most of those pertain to the period 1979 through 1981, and I would only point out to you that during that period of time I was very actively involved in running other campaigns. I wasn’t attached to the Hedgecock campaign with as much detail as I was in 1983.

I have even given seminars in the past on campaign law compliance jointly with Dana Reed, who is currently with the governor’s office.

I believe I do have a firm knowledge of campaign law, and I would never tolerate a campaign violation in a campaign that I worked in. If anything was done wrong in the 1983 Roger Hedgecock campaign, it was done without my knowledge.

I gave you a list of things that I was involved in during the 1983 campaign that was fairly extensive. Some of the things, that I was not involved in directly that you may have questions about is the area of, fund-raising, where, as I have indicated, in no campaign have I ever been a fundraiser per se. If a friend wants to pass along a contribution to a candidate, I will carry it in, but I am not known in political circles as having any ability in the fundraising area. I would help out in the planning of fund-raising events. I have given aid and comfort to the volunteers who were working on that.

I have talked about the preparation of the campaign reports, that that was principally Pete Aylward and volunteers, reviewed by Pete Davis, and then in turn I would look at them. I would say as I sit here today I have probably spent less than a total of two hours, even including subsequent to the election, in reviewing the 1983 campaign reports. I also was not active in volunteer operations as far as any of the management aspects of that type of work.

The 1983 campaign was a very, very difficult operation. I have previously alluded to the fact that you cannot compare a campaign operation with a business or with business practices in any way, because it just doesn’t fit. I think you are going to find it much easier to judge the situation if you look at it from the standpoint of understanding that a political campaign is primarily a volunteer effort with some paid direction at the top, if you are lucky. In this particular campaign we had over 2000 volunteers. These people were all working in decentralized fashion, and I think in their own way were all trying to do whatever they could to help a man be elected whom they believed in.

On the contribution side, you had over 4500 individual contributions. To give you some idea of the scope and magnitude of what that meant, the computer program which we installed in ah effort to try and keep accurate records of contributions was designed to handle 1200 contributions. When 4500 contributions came in, we had a physical breakdown of machinery, we had a physical breakdown of people. It was a situation where we scrambled and did the best we could. To the best of my knowledge, the reporting is quite accurate and consists of all the information that was available to the campaign personnel at that time.

The campaign is not something that is directed from the top at all times in a very monolithic fashion. It is something where people out in the field are making decisions, where campaign workers sometimes do stupid things, and where the blame eventually rests with the people at the top regardless. It is a situation that is unfortunate, but it is part of the price we pay for democracy in this country.

I think that I would just conclude by making a very clear-cut statement to you:

I have never knowingly violated a campaign law. I have never conspired to violate a campaign law. I have never knowingly tolerated in a campaign I have been associated with a violation of campaign law.

I thank you for your attention.

Q: Do you feel that you have stated all you wanted to state, Mr. McDade?

A: All I am capable of stating at five o’clock in the afternoon.

Mr. Hamilton: Thank you very much.

The Witness: Thank you.

Below are excerpts from Assistant District Attorney Richard Huffman’s summation to members of the grand jury, followed by questions from the jurors.

Mr. Huffman: All right. May I suggest you read the indictment, and then I would like to take a chance to give you an overall discussion of the evidence, if we may.

(Recess.)

The Foreman: We will proceed.

Mr. Huffman: Ladies and gentlemen, before I commence to discuss the facts, I suppose it is appropriate at this stage, you folks have listened now intently for weeks, you have listened to eighty-two witnesses and received 179 exhibits, and it might be presumptuous of me to go through the facts in detail. You have received the indictment and had a chance to read it, and it does lay out the basic factual theory of our case.

I might inquire, first of all, if in the minds of any jurors it would be helpful for me to review the facts in greater detail, or would you prefer that I focused on some specific items?

Juror Tait: Wait for specific items to be asked, my proposal is.

Mr. Huffman: May I just address one or two items then, rather than overview the facts with you, because again I don’t want to take your time and insult your intelligence, and you have already reviewed these things.

There is one item that I want to make sure that was clearly understood. There was discussion during Mr. McDade’s testimony in which you will recall he acknowledged that Shepard and Associates were in the early part of 1982 working on the cleaning of this particular computer list; that is, in-putting data for contributors and for voter results from different elections. That it was suggested to you that activity was being done pursuant to a contract wherein Mr. Shepard allegedly brought into the firm this valuable list for which he paid a consideration. . . .

I ask that you recall in your mind when the firm of Shepard and Associates was created, there were four partners,

Shepard, Franck, Meadow and Dennis. Their offices were located on the fourth floor of the particular building.

In grand jury exhibit 5 there are a number of contracts for services, back in March of 1982, with Mr. Kripke, for example, in which the letterhead in the exhibit 5a shows all four partners and shows an address at 1205 Prospect, Suite 465. And if you look at the contract for services that was signed by Mr. Hedgecock, Mr. McDade, and members of his committee, this is the official contract, the official beginning of the consulting representation that occurred in August of 1982.

Look at that stationery. The stationery has three partners now, and well it should. You recall the testimony, Mr. Dennis had testified the firm was not there any longer. The testimony also is they moved from the fourth floor to the third floor sometime around June or late spring of ’82. The new address is 1205 Prospect, Suite 338. This stationery in point of time represents the new status of the firm in a time after July of 1982.

Now, the contract that we are offered, and this contract was found in exhibit 33, this is Mr. Shepard’s records as delivered to the grand jury pursuant to subpoena; is a document purportedly seen by Mr. Hedgecock and Mr. Shepard on January 1st, 1982. The document could not have been signed on that date. It is on the stationery with the three partners. It would be very prescient on the part of the partners to recognize that one of them would be leaving in six months and exclude him from the stationery, and it has an address on it of a suite that they weren’t even using.

This document, ladies and gentlemen, is a fraud. It was introduced into the records, given to this grand jury to cover up something. What is it that it is covering up? It is covering up a relationship which you have heard well testified to by witnesses before this grand jury, that as soon as Shepard started his operation, their basic task was preparing for the campaign, and that is certainly consistent with Ms. MacHutchin who was invited to participate in February and by April was meeting with Mr. Shepard and setting up the ‘friend-raisers.’

You remember the trouble she got in when she failed to include a sign-up list, and Mr. Hedgecock told her quite pointedly to get a sign-up list so we can get names, we can get them down to Tom Shepard and Tom Shepard can put them into his computer. That computer is the connecting link from the early days of the preparation of this campaign on into the creation of Shepard and Associates.

You will recall the expenditures that were made in 1981 ranging up to $11,000 for computer service. The first six months of 1982, $1000 is expended by the Hedgecock election campaign, and there is a good reason for it. It is in the words of Mr. Hedgecock when he told his friend, Jean Kauth, at one of these meetings that they would have access to the computer, that they would be able to get organized, and they would have their campaign off to a running start, and it would be a good deal.

And indeed it was a good deal. Shepard and Associates worked for free, its entire staff, for the first seven full months of 1982. Now, there is no contract, there is no conceivable manner in which that could be anything but a campaign contribution.

I want to bring to your attention, and again doing this very selectively, since you have heard all of the evidence, Mr. Hedgecock was asked by the Fair Political Practices Commission in March of 1984, and you heard the tape played here — much of it dealt with things that have not been before you, and it would be easy to miss some of these items, but sometimes a single answer sets a tone for a particular case. You will recall Mr. Brown, reading from page twenty of the transcript, asked this question of Mr. Hedgecock, and he was referring to when Mr. Shepard left Hedgecock’s employ:

“At the time that he” — meaning Shepard — “left your staff, had you and he discussed in any way whether you intended to run for mayor of San Diego?

“Answer: ‘No.’ ”

Now, ladies and gentlemen, that is incredible. There were meetings going on starting in July of 1980. Mr. Hedgecock was only re-elected in June of 1980, and the committee was formed and functioning in July of 1980, and Mr. Shepard and Mr. Hedgecock and Mr. McDade were active participants in the planning for the office of mayor of San Diego. When Mr. Shepard’s office was created, it was created, I suggest to you, for a dual purpose. This is part of the conspiracy and why it is important to you. There is a dual purpose. Nancy Hoover, I would suggest, was helping out two friends, Roger Hedgecock and Tom Shepard. The path to glory was the same, as long as Roger Hedgecock rose and became successful, Tom Shepard would become, and his statements indicate, the premier political consultant in San Diego. And the way to do it is by providing substantial support.

Let’s think about that support for just a moment. San Diego is a city with a reform ordinance that limits contributions from persons or from organizations. It puts $250 per person per election. Nancy Hoover, no matter how wealthy, can contribute $250 in the primary, $250 in the general, and that is it. She can solicit friends and she can do all those things.

There was a need for more than that. This capital contribution arrangement that was set up had a dual purpose, helping Shepard get started, but also allowed him to function in this environment. He was paid every month. Read the documents. His rents and leases were paid. Mr. Shepard never lost a dime in any of these activities that he was doing free. He was able to function in his business working free for the first seven months of the year by reason of capital contributions. That is, Nancy Hoover paid the bill or Jerry Dominelli paid the bill. . . .

Now, one other item I need to talk to you about, and then I will answer your specific questions — two items.

You have been through the facts, and you know the sequence of events that actually took place as best we can display them for you. Then you know that the house of cards came down at the end of 1983 and into 1984. J. David and Company collapsed, and was in the process of collapsing by the testimony for a number of weeks. We need to analyze the activities of the people in light of that collapse as it demonstrates the issue of this case.

This case has to do with withholding from the public the true identity of contributors and the true identity of sources of the funds. Let’s think about that for a minute. By this time Mr. Hedgecock had obtained his loan or his sale [to Hoover] of the Inabinett [promissory] note for $16,000 on November 8th, [1982], On November 15th, when the special election was called, he called Mr. Kaufman [Hoover’s attorney] two days later and said, “Don’t record the note, don’t tell the obligors. I will take care of it.” And take care of it he did. He collected the money on that note until 1984. In December of 1982 his wife was having correspondence with the Inabinetts, and with the possible refinancing. They got their money on December 20th of 1982, the same day they contributed $10,000 to an investment fund in J. David. Never disclosed in the campaign statement for the period that closed eleven days later in 1982.

Let’s take ourselves to the end of this time. Let’s take ourselves to the end of 1983. What is happening? Now, by this time you have the house renovation in process. You have this remarkable transition from very defined transactions all running through blind trusts to no transaction documented. The deal, as we understand it, is for some amount of money, and Mr. Hedgecock has pledged his interbank or J. David banking account for that. Indeed, we see in the documents some item indicating a change of name. When it was put in, we don’t know.

What else do we know about it? We know that its purpose was to generate enough income to pay off the remodeling. If that is true, then why would Mr. Hedgecock cut himself off of $6000 in additional income by making a transfer in December of 1982 or ’83 when it is not demanded?

Then we have Mr. McDade’s testimony, if you believe it, where he talks to Roger Hedgecock on January 15th when some lady is complaining about her investment, goes to Roger and says, “What about your investment, aren’t you concerned? Do you think it is still safe?” He says, “I am not worried about it. My investment is safe.” He doesn’t say, “I am not worried about it, I transferred it to Nancy Hoover.”

It is not until February 12th of 1984 that we have this discussion of the document, that the account has been transferred. It is either transferred now on December 1st, January 1st, as one of the letters say, or January 3rd. All of which I suggest is motivated not by the failure of the contractors to get paid but by the imminent bankruptcy of J. David and Company. . . .

On February 12th, the political group meets on that Sunday to settle affairs. And on that Sunday what do they do? Roger Hedgecock says, “I borrowed $130,000.” He doesn’t tell them how it is calculated.

If you recall listening carefully to Mr. McDade’s testimony, what did he say they did about the cost statements that supported it? He said either Roger or Shepard was going to get a hold of Parin Columna and get the cost documents that jibed with the loan. They were going to document the $130,000 figure that Roger Hedgecock had given them, and indeed they had to. By Monday, Nancy Hoover had signed the agreements that they were going to have a $130,000 loan.

If you look in your grand jury exhibit 13, you find two cost sheets. We don’t know, I don’t think any of us know, how much money went into that house, but I think the clear inference is that J. David and Company and Nancy Hoover spent far more than $130,000. The one cost sheet that Mr. Shepard digs up miraculously was in the amount of $130,088 as the cost incurred thus far.

The cost sheet showing $169,923 before profit is somewhat troublesome.

I suggest that there was in the February 12th event a deliberate attempt to manufacture documents to cover unlawful transactions that had not been properly reported.

You have before you the accounting figures for Shepard and Associates that we have gone through, and I just want to make one comment in that inquiry, and then I will take your specific questions. We did the accounting with you in the most conservative way I know how to do it. In the sense if we couldn’t establish something absolutely one hundred percent, we excluded it. . . .

If you take conservatively the numbers of the period of June ’82 to August of ’82 when we can find payroll records, that is all we have payroll records for, that is $3077.99 in direct labor costs on the most conservative method. If you add to that the period of 9-82 to 6-30-83, the identified labor costs that I suggest to you were unlawful campaign contributions amount to $32,995.23.

If you add the computer in, it is another $4000, but they say they contracted for the computer, and let’s give them the benefit of that doubt. . . .

So by any calculation, I suggest, ladies and gentlemen, we have established the unlawful contributions and the fabrication of evidence. . . .

May I answer your specific questions before we finish, assuming there are some? Yes, sir, Mr. Tate.

Juror Tate: Why is this letter that Roger wrote to London so important to be in here, that letter of recommendation for Dominelli?

Mr. Huffman: The reason is that the position I think that you have been given from the testimony is of great distance between Mr. Hedgecock and Mr. Dominelli. He didn’t know anything about the contributions. Mr. Shepard didn’t know anything about the contributions. Nobody knows anything about Mr. Dominelli. There is, however, evidence of Mr. Hedgecock coming in, as you will recall, to speak with Mr. Dominelli immediately following the primary election and bringing to his attention — this is through attorney Storm. We know the meeting took place when Mr. Hedgecock brings to his attention the need for financial support. We know from Mr. Dominelli’s outbursts, at least early in 1983, in February, that he was a provider of financial support.

The document is significant because it establishes an attitude of the mayor of the city towards Mr. Dominelli that is consistent with a person who has received the benefit of it. We are not alleging that to be a criminal act. We are rather pointing it out to you as an item, if you believe it, to be consistent with what we have depicted by way of a relationship with Mr. Dominelli and a greater awareness of Mr. Dominelli’s participation than everyone would like you to believe.

It is incredible, for example, that Mr. Shepard went through all those hundreds of thousands of dollars and only looked at the backs of the checks.

Juror Tate: Thank you.

Juror Armino: I am sorry, I have a real problem with this thing with Mr. — I have a real problem with the thing with Mr. McDade.

Mr. Huffman: Okay.

Juror Armino: You know, it is the guy at the top that has to take responsibility for all the stuff that goes on. And, granted, at the end, you know, “Yes, I have done this for twenty years,” and he lists all the people that he has, you know, done campaigns for, and that is very impressive and all that.

But I have a problem with a few real glaring things, like Mr. Woodard driving the mayor around, and like the amounts — he knew Nancy Hoover was giving money but not specific amounts. Well, he knew it had to be huge amounts, the computer, and like you say it was really like it was for free. I mean, he was there all the time. He made a number of Freudian slips. I don’t know. I just have a real problem with all of that.

Mr. Huffman: First of all, those are very legitimate concerns that you express. By the fact that we have not included him in the proposed indictment does not mean that we take substantial issue with your concerns.

I think as you look at McDade, for example, the matter of Mr. Woodard. He denies knowing about Mr. Woodard. All we know — all we can prove is that someone else told him. Ms. MacHutchin said she told him sometime in May. He denies that. So that certainly puts his credibility in issue. And his statement is, had he known that Woodard was being paid to drive the mayor around, he would have said that is a campaign violation, and well he should, because it is absolutely correct.

Now, the question is: Have we proven that Mr. McDade, first of all, was aware of the conspiracy? And he may well have been. And your suggestion that he was is a credible suggestion. Did he, however, with the specific intent to agree, join and participate in it, or did he step back at a distance and ignore?

Now, criminal law is different from normal civil law principles. In other words, the guy at the top in business, in the theories of agency, is responsible for what the folks down at the bottom do. Even if you don’t know about it, the Latin principle, respondeat superior, meaning a guy on the top is responsible. Criminal law is different. We have to establish knowledge and a specific criminal mind on the part of the individual involved.

That is why we spent the time talking about who told Mr. Hedgecock what, and is why I think this concept, this fraudulent contract, is so very, very significant to this case, because his signature is on it and it demonstrates a participation.

With regard to the other defendants, I think we have demonstrated a substantial participation from which you could reasonably infer a criminal mind.

Mr. McDade’s case is not that clear. I suppose what we did in looking at it is say to ourselves as prosecutors, down the line do you think we are going to be able to show beyond a reasonable doubt that Mr. McDade actually participated, or did he maintain, as you have described it, the paper bag over the head? You can stand around and watch a crime, it doesn’t make you a criminal unless you aid and assist in its participation. As I review the evidence of the other witnesses, I am not fully convinced that that can be demonstrated. That is why we left him out.

I would say this to you: If in the judgment of the jury, and this is something you should debate within your deliberations, you folks believe that we have inappropriately omitted him, I am more than happy to sit down and discuss it with you, if that is the judgment of the twelve of the jurors. We are here asking for your judgment.

Juror Armino: What happens if we give an indictment for some or all of the other people and they go to court and more stuff comes out and you hear a different side to Mr. McDade? Then do you review that again, or is he just okay here?

Mr. Huffman: Not necessarily. You know, criminal cases are living things in the sense if you indict people, as we have requested you to do, this case will change its shape and nature as time goes on. We will learn more things. The case will become stronger or it will become less strong, because it is a very complex case involving many, many people.

As you have observed, I think many people have not been candid. Somewhere along the line candor may come to some of these people. What that shows about the case, I don’t know.

The answer is, as the case develops, we will be with the case and we will do with it as in our judgment is appropriate. So that is the best answer I can give you. It is not much of an answer, but that is the best I can give you.

Yes, ma’am.

Juror Tanner: About McDade, the whole underlying —

Juror Folts: Can’t hear.

Juror Tanner: The whole underlying structure of Shepard and Associates and the papers filed show to me, anyway, show there must have been an intelligence behind it, someone very knowledgeable about election laws, because while there have been omissions incurred, still there was so much intelligent filing and trying to bypass the law, somebody knew, somebody knew how to advise. And when the advice wasn’t taken, for one reason or another, they ran into difficulties. But the whole thing was structured, the whole thing here shows structure of knowledge.

Secondly, when the witnesses, many of them, when you asked or others asked, “Did you consult with anybody before you came here,” some of them said, if I recall, that they did have conversations with McDade. Now, I don’t say that — I just throw that out for what it is worth.

Mr. Huffman: He did speak to, apparently, about six people that we can identify, before, after, during the process of their appearances.

I concur with your observation that this is a very sophisticated activity. This shows considerable intelligence. I do not necessarily concede that that means Mr. McDade must of necessity be a defendant. He certainly was around as an advisor. But remember, too, we are dealing with four proposed defendants who are extraordinarily intelligent people. Mr. Hedgecock is an attorney, a very experienced man in government from the evidence you have. Mr. Shepard is a highly intelligent person, very experienced in government. Ms. Hoover and Mr. Dominelli are certainly people who have been very experienced in finance and business. So none of these people are stupid.

I don’t know that from the evidence we can safely assume Mr. McDade in as a defendant. You have an absolute right to the suspicion you have, and I don’t disagree with you.

The Foreman: Mr. Huffman. I don’t know whether you don’t want to answer the question or not, but I think Mrs. Armino’s question was in the event there is an indictment and a subsequent trial, and in the course of that trial more evidence comes out that Mr. McDade was in fact deeply involved, is he still liable for indictment or arraignment, or whatever process existing, or does he get completely wiped out because we didn’t indict him here?

Mr. Huffman: No. Your action does not preclude further examination. It would require a new look at it separately. We can’t simply amend the indictment. But without question, your action, if you choose not to indict Mr. McDade, does not preclude further examination at a later time. That is absolutely within our right and power, and your grand jury could reconsider it at another time if that evidence came to light.

Juror Clanton: It has always I think been a little confusing as far as I was concerned, was that, was any part of the mortgage money they have on his house — we don’t know how much it is, at least 160,000 or so, I gather — was any part of that money used, otherwise supposedly used, in the house but actually was shifted over illegally to the campaign? I have never understood quite the significance of the loan for the house that was tied into the total campaign.

Mr. Huffman: The loan for the house comes during a period of time that Mr. Hedgeeock has been elected and is getting set for a future election. We don’t know what if any significance that loan has on the campaign.

The more important issue is the statements of economic interests where that loan, if it is a loan, comes to him.

There’s two issues, really. First is the source of the funds, in an effort, again, to hide Mr. Dominelli from public viewing, we contend is a violation of the reporting requirements. In other words, he should have been reported since it was his contractor and his money that was paying for this.

Secondly, we believe that if the amount is, for example, $169,000, and all that is shown, all that is agreed to is the loan, and all that Nancy Hoover and Dominelli get back is that which represents the 130,000, then the remaining 39,000 is a gift that should have been reported, or if it is used for the campaign. We don’t know here it went because we can’t trace it that far.

Juror Clanton: All right.

Juror Mortimer: Mr. Huffman, maybe you might go into a little bit more detail on what is required in the statement of economic interest. Some of the people might not realize.

Mr. Huffman: In the statement of economic interest, where in this instance you have received income from a particular source of more than $250, you are required at any time for your reporting period covered by that to report the name of the person or entity that is the source of income. There are places there to check whether it is under a thousand, more than a thousand, more than 10,000. That statement of economic interest is then filed and becomes a public record so that citizens’ groups can determine where those of us who hold public office get our money. The same is true of loans. One must report loans at least other than from regular banks where you have — if you look at my statement, you are not going to find much because the mortgage on my house from the bank isn’t the type of thing that falls within it. But a loan, say, from Nancy Hoover does, a loan from J. David Dominelli falls within it.

You can’t report just the fact of a loan with the wrong name. You have to put the name of the persons who were actually the source. The same thing applies with gifts.

Does that help?

Yes, Mr. Nares.

Juror Nares: Regarding the previous question regarding gifts, I assume there must be a minimum. What is it, a hundred dollars?

The reason I mention this, because we are talking about that limousine trip to Del Mar which costs $180. Was it the fact that it wasn’t reported was the violation, or because it could have been just a friend, a gift to another friend.

Mr. Huffman: We haven’t alleged it as a violation.

We better go back to the overt acts for a minute. The law of conspiracy is this: When two people or more get together and agree with the specific intent to commit a crime, the crime is essentially complete, and we simply require them to do an act. It can be a lawful act in the furtherance, meaning there needs to be some demonstrative effort towards getting the job done. That completes the crime of conspiracy.

Now, we have alleged overt acts. Each of these, many of them, are not violations. For example, filing statements of limited partnership are not violations. We are simply pointing out through this process for you descriptively the activities done in the furtherance.

I am told, also there is a fifty-dollar limitation on gifts, also.

Juror Nares: That is what I was wondering.

Mr. Huffman: Any other questions?

Juror Armino: Since Mr. Hedgeeock was supposed to have all this legal counsel from Mr. McDade and Mr. Aylward and all that, it seems really strange that he would not realize the importance of making those disclosures accurate or think that he could get away with it, or that they — that both lawyers didn’t know. Do you know what I am trying to say?

Mr. Huffman: I know where you are headed. If you have this, why are you not including it? But for the total collapse of J. David and Company, I respectfully suggest you never would have seen this, because we wouldn’t know about the settle up of some of these loans and the relationship of Shepard and Hoover, because it would have gone on undetected.

You know, it is sort of like, well, it must have been dumb to amend it. It is not dumb. I suggest you go back. There is a pattern. Think about the Inabinett note, for example. Why would you call up Mr. Kaufman on November 17th and tell him, “Don’t record it and don’t tell the obligor”? The city council has just declared a special election two days before that. If you record that note and it shows Roger Hedgeeock collected $16,000 from Nancy Hoover in the middle of the election race, that would be a recorded public document. If you put it in your statement of economic interest and opponents may go routing through your statements of economic interest, as they do regularly, and report that, “Look at this, you have got $16,000” or “over 10,000 from Nancy Hoover,” and it becomes an issue. . . .

Yes, Mr. Chadrow.

Juror Chadrow: Maybe I have gotten confused along the line somewhere. If I understood correctly, when Mr. McDade was here he indicated that he didn’t know anything about the loan until 1984, from Nancy Hoover, and then he was terribly upset about it. And then they all got together hurriedly to see what solution could be applicable to it.

Mr. Huffman: Right.

Juror Chadrow: Wasn’t he the architect of the solution?

Mr. Huffman: Yes, he was one of the architects of the solution. He and Peter Ay 1 ward, who was present with Shepard and Associates. The committee got together and they came to the solution by saying, “How much did you say the loan was, Mr. Hedgecock?”

“I say it is $130,000.”

Mr. Aylward’s tasks were to draft the document that memorialized this alleged transaction. Mr. Shepard’s task was to get from Parin Columna cost documents that verified the transaction, and McDade and MacHutchin were participants in that discussion process. And then Mr. Cushman’s responsibility was to get the loan through San Diego Trust long enough to cover the sale of the property.

Juror Chadrow: I understand all that.

Mr. Huffman: Okay.

Juror Chadrow: But the very fact he was so involved in the solution — I can understand him being unhappy about it, and what have you. But the fact at that point in time he jumped in actively and knowing that it was the wrong thing to do. I am puzzled about this whole absolution.

Mr. Huffman: It is an unusual position for me, Mr. Chadrow, to be the one speaking on behalf of a proposed defendant [McDade]. I want you to know that. It is not my usual caricature.

But, first of all, the testimony, however, is that he, while not knowing about it, you remember he said he had it explained to him by Mr. Hedgecock, was satisfied again in the integrity of his friend, and trusted Mr. Hedgecock. Now, you don’t necessarily have to believe that. But the question-is: Can I prove from that that he did have knowledge of the loan or of its unlawful nature, or did he assist more particularly in the preparation of or goal towards covering that up at the time of the filing of the statement of economic interest? That is where I am a little concerned on the proof.

I have referred to that meeting as Black Sunday. I mean when they really cleaned house on setting up the documents. But I don’t think that that still puts Mr. McDade into the position of being proven to be a conspirator on the filing of the false statements. If you disagree with me, I am not here as his advocate.

Juror Chadrow: I understand.

Mr. Huffman: Then tell me with your vote that is what you want to do, and we will discuss it with you.

Juror Teemsma: 57.

Mr. Huffman: Okay. We put that in simply because we believe that is the concluding act directed towards this particular coverup.

Now, Mr. Cushman, we are not accusing Mr. Cushman of doing anything wrong by getting the loan. It just simply describes it as an act that was necessary for Mr. Hedgecock, Hoover, and others to settle this matter up and get it off the public books. That is the only reason we put it in.

Again, merely because somebody participates in an act at someone’s direction does not make them criminal because it is alleged in an overt act.

Juror Chidester: What act was that again?

Mr. Huffman: 57.

Juror Chidester: 57?

Mr. Huffman: Yes.

Juror Chidester: Mine stops at 49.

Juror Clanton: Mine stops at 53.

Mr. Huffman: There is no coverup, I will tell you that.

First of all, let me give you mine. Is there anybody else that is missing overt acts?

Juror De Venney: How many are we supposed to have?

Juror Tate: This one has an extra page in it.

Juror Armino: I have two of them, I think.

Mr. Huffman: We try to do that periodically to show our humanity.

Juror Chidester: Yours doesn’t have it either.

Juror Clanton: We get to 53 and we run out.

(Pause in proceedings.)

Juror Hamilton: There is a short page.

Juror Tate: Right before.

Juror Armino: I have an extra 57. Do you want me to tear it out and give it to him?

Mr. Huffman: He has a 57 over here.

Juror Chidester: Could we make a suggestion, adjourn to lunch?

The Foreman: We are almost finished with this.

Juror Chidester: I want to read this.

Mr. Huffman: Here is what I would suggest: If you have no further questions of me, then that would be the appropriate time for the reporter and the district attorney to retire and the matter will be then submitted to you, and you may schedule your deliberations, hopefully, for such conveniences as lunch, things of that type.

I might say, incidentally, assuming you are towards the end, whatever you do with this case, we have been treated with great courtesy by you folks, and you have spent countless hours here in the heat.

Whatever you do is to your credit, that as citizens you have spent this time, and we certainly appreciate the manner in which we have been treated. I say that now because you may do bad things to us.

Yes, Ms. Lavell.

Juror Lavell: One further question. Maybe you can’t answer this, because it was never brought up yet, but do you know or have you found out or can you tell us if either Tom Shepard and/or Nancy Hoover ever put any of this stuff on their income tax return, that Nancy invested in this corporation, and supposedly she wrote off the loss? I hope she did, or she is a poor businesswoman. And that Tom Shepard claimed he got all of this to supposedly run a business?

Mr. Huffman: We don’t really know. We don’t have their tax returns, nor do we have the ability to get them, and therefore, we can’t speculate as to that.

Juror Tanner: Will the federal grand jury be able to get their tax returns?

Mr. Huffman: That is a matter I leave to the federal authorities.

Juror Tanner: But do they routinely do that?

Mr. Huffman: The federal government certainly has tax audit powers.

Thank you very much.

(Noon recess.)

San Diego, California, Wednesday, September 19, 1984, 4:00 p.m.

The following proceedings were held in open court in Department 1, Honorable William T. Low, judge presiding:

The Clerk: Your honor, I show fifteen present.

The Court: How many?

The Clerk: Fifteen.

The Court: Mr. Egan, does the grand jury have an indictment to return?

The Foreman: We do.

The Court: Has the indictment been found and issued by at least twelve grand jurors, each of whom attended the taking of all of the evidence and who concurred in return of the indictment?

The Foreman: Yes.

The Court: Has the indictment been endorsed as a true bill and signed by you as foreman?

The Foreman: Yes.

The Court: Would you present it to the clerk please.

(The foreman hands the document to the clerk.)

The Court: Very well. The court has received the indictment. Anything further, Mr. Egan?

The Foreman: No.

The Court: Thank you, ladies and gentlemen. You are excused at this time.