San Diego — Steve Peace and John DeBello go way back. While still in high school in 1971, the pair, along with Costa Dillon and Mike Grant, put together a student movie called Do They Accept Traveler's Checks in Babusuland? that netted them second place in the Eastman Kodak "Young People's Movie Awards."

Virtually inseparable, Peace and DeBello went off to UCSD; in 1973, they founded Four Square Productions, an industrial filmmaking outfit run out of a tattered office on a back street in National City. The company made much of its money by filming high school and junior college football games for local coaches.

Then in 1977 they produced the cult classic Attack of the Killer Tomatoes!, the climax of which featured Peace with drawn sword leading a charge against an army of angry red vegetables. Later they made three sequels -- including one that featured the then-unknown George Clooney -- and hawked the rights for cartoons and toys, making purported millions.

In the meantime, with ever-loyal DeBello watching the store, Democrat Peace embarked on a decades-long political career that took him to the state assembly and senate. Along the way, there was plenty of money for Four Square and its owners -- and lots of controversy to match.

By the late 1980s, the firm was profiting handsomely from political business it did for Peace's own campaign, as well as the campaigns of Democratic state senator Waddie Deddeh and others. In 1987, the Los Angeles Times reported that Tomatoes cowriter Costa Dillon was working out of Peace's assembly office in Chula Vista, receiving $32,000 a year as an aide to assembly Speaker Willie Brown. "He has been doing whatever I need to have him do," Brown told the paper. After six months, Dillon took a leave of absence from that job to go back to work on one of the Killer Tomatoes sequels.

As the years went on and Peace advanced in the legislature, corporations with legislative agendas began paying Four Square big money for services, which came to include not only film production but public relations and political consulting as well.

In July 2000, then U-T columnist Don Bauder reported that Sempra Energy had hired Four Square to outline "strategic direction" for the company. Four Square also handled opposition to a ballot campaign that had been mounted against a utility-deregulation bill backed by Sempra, of which Peace was a legislative champion. One of its commercials won a 1998 Pollie Award.

Four Square president DeBello told Bauder that there was nothing wrong with Four Square's deals with Sempra because Peace, then listed as the firm's chief financial officer and said to own 29 percent of the company, "does not see the scripts, doesn't see the projects."

In 1998, Four Square had a contract with the San Diego Padres to make commercials on behalf of the team's push for a taxpayer-subsidized downtown ballpark. At the same time, Peace was pushing for a fee on cars rented on port district property; the $3.50 fee was used to pay for a parking lot convenient to the new ballpark. "Steve is a huge baseball fan," DeBello explained.

Peace left the legislature in 2002, vowed briefly to make yet another sequel, then for a short time became finance director to Democratic governor Gray Davis before he was recalled. Peace finally ended up working as "senior advisor" to Padres owner John Moores. Meanwhile, DeBello continued to run Four Square.

But that would soon change. According to a lawsuit that Four Square filed against DeBello on May 3, 2006, in early 2004 a female employee filed a "workplace complaint" against DeBello. An investigator subsequently hired by Four Square discovered that DeBello had allegedly initiated "trips to adult entertainment clubs with female employees" and had engaged in "inappropriate touching of female employees." In addition, according to the complaint, DeBello had offered "increased pay for an employee with whom he attempted to initiate a relationship" and had made "inappropriate sexual comments to female employees."

As a result of those findings, the suit continued, DeBello agreed to leave the company under the terms of a 12-month "personal services agreement," signed August 11, 2004. According to Four Square's allegations, he received a total of $830,000, $330,000 for "services" and $500,000 for the 29 shares of company stock he owned. In return, DeBello agreed not to compete with Four Square for two years, from August 10, 2004, until August 10, 2006. A list of 50 Four Square customers was attached to the agreement, including Sempra, the Port of San Diego, General Atomics, DARPA, Qualcomm, and the San Diego Chargers.

Four Square's complaint charged that DeBello, who had created a company called Loma Media, broke his noncompete pledge by "concocting a detailed plan to undermine and disparage Four Square and blatantly competing for Four Square's clients." He was allegedly assisted in this "conspiracy" by Janet Dahle, formerly Four Square's vice president for business development, whom DeBello allegedly recruited away from Four Square.

"DeBello and Dahle made statements to actual and potential clients that Four Square was a 'shell of a company,' that it was 'not what it used to be' since DeBello's departure and that Four Square's 'CEO had no production experience'; all of these statements are patently false."

According to the complaint, DeBello persuaded Computer Sciences Corporation, a major government contractor and former Four Square client, to use his services. The CSC contract was said to be worth $1 million to Four Square. "Last year, CSC representatives contacted Four Square to ask that DeBello work as a consultant on the project, decreasing the value of the project to Plaintiff," the complaint charges. "This year, CSC representatives decided to contract directly with Four Square's subcontractors on the project."

DeBello's attorneys responded that the sexual harassment charges against DeBello were false, as were the allegations he violated the non-compete agreement. "Imagine you have been accused of sexual harassment by a co-worker," began a brief filed last August 18. "An allegation is made, some type of investigation undertaken and then...nothing. No formal proceedings are brought within the company; you are not fired; no civil or criminal complaint is filed. However, now you no longer feel welcome at the company, and you decide to leave your employment of your own accord.

"You leave with the understanding that the allegation of sexual harassment, which has not been proven, is to remain confidential as part of your employment file. The reason for maintaining confidentiality is self-evident. If such an allegation becomes public, the mere accusation even without proof would be an irremovable stain upon your reputation. Damage to your personal life and career would be assured."

The filing continued, "Instead of focusing on the facts relevant to its claims, Plaintiff has pled, for the public to view, allegations that are solely intended to embarrass, humiliate and intimidate Defendants into quickly settling the action." (Through his lawyer, DeBello declined comment.)

But what happened to Steve Peace, DeBello's longtime friend, coproducer, and Four Square partner? The August 2004 services agreement between Four Square and DeBello was signed on behalf of the company by three individuals: Arturo Castanares, Peace's top legislative aide during his time in the state senate; Robert Matzenauer; and G. Gordon Browning, Peace's stepfather.

Reached by phone last week, ex-Peace aide Castanares, who owns Cornerstone Strategies, a political consulting and lobbying firm, said that he represents his parents, whom he said bought out Peace's interest in Four Square sometime in 2002 while Peace was still in the legislature. In 2004, Castanares said, his parents purchased DeBello's stake as part of the services agreement now at issue. Then in 2006, Castanares said, his parents bought the remaining balance of the firm from Peace's relatives. According to County records, on March 26 of this year Peace, his wife Cheryl, Browning, and Matzenauer jointly sold the building adjacent to Montgomery Field that had been Four Square's headquarters for $4.8 million.

"The business is changing," Castanares said. "We are moving to National City, and we aren't going to do video work anymore. You can't compete with guys who can do that kind of thing on a computer in the living room." He declined to comment on any aspect of the pending lawsuit.

But court records suggest that Castanares does not have the best relationship with his lawyer, Nadia Bermudez. On July 17, according to the documents, Bermudez notified Castanares that she was asking the court to let her quit the case because her client was not returning phone calls and had "breached an agreement" regarding "attorney's expenses or fees." The court will consider that request on August 17, the same day it will consider a motion by DeBello's lawyer for summary judgment. If successful, the motion would decide the case in DeBello's favor without a trial. A motion by Bermudez to postpone that hearing for 90 days was denied on July 26. The trial is currently scheduled for September.