Special Section: San Jacinto Corruption Probe
Two of the developers at the center of a corruption investigation in San Jacinto funneled more than $190,000 into the campaign accounts of Councilman Jim Ayres, prosecutors contend.
At the same time, Ayres repeatedly voted to approve projects favorable to the two businessmen, according to court documents and a review of city records.
He didn't abstain from voting on the developers' projects until a month after authorities first searched his home as part of their investigation.
It's illegal for elected officials to vote on matters in which they have a financial stake. Votes benefiting major contributors, while not always improper, often raise questions about perceived conflicts of interest.
Now, Ayres, 48, is the central figure in a 155-count indictment that accuses him, developers Stephen Holgate and Robert Osborne, and six others of laundering tens of thousands of dollars in campaign funds, as well as tax fraud, bribery and perjury.
Also indicted are Mayor Dale Stubblefield, 41; Councilman John Mansperger, 41; Councilman James Potts, 67; Nancy Ayres, 44, who is Jim Ayres' wife and a San Jacinto school board member; and businessmen Byron Jerry Ellison Sr., 70, and Scott Shaull, 45.
All have either pleaded not guilty or deferred their arraignments until early December.
Holgate and Osborne are two of the largest developers in San Jacinto, a city of 39,000 people that has seen its population skyrocket in recent years.
Holgate, 62, who split his time between homes in San Jacinto and Roseville, owns dozens of properties throughout San Jacinto and Hemet. The land collectively is assessed at more than $18 million, property records show.
He has plans to develop more than 800,000 square feet of commercial space in the Gateway, a 1,700-acre area at the city's western entrance that officials hope to transform into a center for new retail, health care and professional businesses.
The Gateway is at the crossroads of the proposed Mid-County Parkway and a realigned Highway 79. The location near the new road could attract new businesses and dramatically increase the value of Holgate's land.
Meanwhile, Osborne, 69, of Mission Viejo, has housing developments across the city, including tracts along Kirby Street in what he described to City Council members as the city's "first real gated community," meeting minutes show.
Osborne also owns a horse farm in San Jacinto along Sanderson Avenue.
The amount of money flowing into the coffers of elected officials, the housing boom and the prospect of a new freeway route into the city -- combined with the recent indictments -- raise questions about the officials' motives, said Bob Stern, president of the Center for Governmental Studies in Los Angeles, a nonprofit watchdog group.
"The public may be demanding a new council review these" projects that have yet to start construction, Stern said. "My assumption is they would. They ought to."
In an interview Thursday, Ayres said the city is unlikely to rethink recent development decisions, even for those specifically identified by investigators as possibly linked to crimes.
Ayres said many of the votes for Holgate and Osborne projects were either 5-0 or 4-1, meaning the items were not controversial and his vote didn't make a difference.
Holgate and Osborne, along with their attorneys, did not return messages seeking comment.
Mid-County Parkway
Three of Holgate's larger development proposals are near the proposed route of the Mid-County Parkway.
The parkway is expected to run 16 miles from Highway 79 in San Jacinto to Interstate 215 in Perris and help alleviate the traffic in the San Jacinto Valley.
The mostly four-lane parkway will follow the Ramona Expressway, a rural two-lane road that has become a major thoroughfare for commuters.
The San Jacinto area's population growth from less than 24,000 in 2000 to more than 39,000 in 2008 has outpaced both road building and job creation, forcing commuters to hit the road each morning, Inland economist John Husing said.
The parkway also will increase the value of nearby land, particularly if the property is located at major intersections, Husing said.
Land at the crossroads of Highway 79 "would be hugely important and valuable" if the Mid-County Parkway is built, Husing said.
According to the grand jury indictment, search warrant affidavits and a review of city records:
Holgate was the true source of more than 30 donations to Ayres' failed 2006 campaign for the state Assembly and to his successful 2008 City Council re-election bid. Ayres first won election to the council in 1999.
The donations totaled at least $168,238 and began in early 2005 and continued until at least August 2008. In 2006, Assembly campaigns had a $6,600 contribution limit. Local city council races have no donation cap.
The council in January 2006 -- with Ayres making the motion -- gave their approval in a 4-0 vote to a Holgate project at 1870 N. Ramona Blvd. Holgate has proposed commercial space, RV storage and 464 apartments on the site.
Stubblefield was absent from the meeting. Then-council members Ken Shaw, Chris Carlson and Robert Ritchie also voted in favor of the project.
The location is near possible routes for a realigned Highway 79.
In April 2006, Holgate's company, Shelbran Investments, inked a deal to provide the city $300,000 for a new fire station in exchange for a development agreement for his land in the Gateway.
Holgate's Gateway Plaza proposal calls for a 707,000-square-foot shopping center on about 70 acres at the southeast corner of Cawston Avenue and the Ramona Expressway.
The land remains vacant with only a sign telling passersby about the proposal. But the agreement Holgate signed with the city would streamline the development process for Gateway Plaza. The deal passed 5-0, with Ayres making the motion to approve.
Ayres, Stubblefield, Shaw, Ritchie and Carlson voted yes.
In May and June 2009, Ayres abstained from a vote to give Holgate approval to construct a 13-acre, 129,873-square-foot commercial project on the southwest corner of Cawston Avenue and the Ramona Expressway.
It was his first time abstaining on a Holgate project since at least 2005. He withdrew from the vote and discussion to avoid any misconception, since he is Holgate's neighbor, minutes show.
Stubblefield, Mansperger and Potts voted to approve the project. Councilman Steve Di Memmo voted no.
Parkway Questions
The council's vote changed the property's zoning to the "general commercial" category. The new zoning designation makes the land more valuable, and Holgate would receive more money if regional transportation officials bought portions of his land for the Mid-County Parkway.
From the time of the vote, Holgate's motivations and whether he would build the project, which would include a three-story hotel, commercial and office space, came under question.
Shelbran Investments, according to court documents, "would gain a major financial benefit" if the Riverside County Transportation Commission purchased the property for the parkway.
In fact, a former city planner told an investigator that Holgate informed city officials he never intended to build the project, according to court documents.
By the time of the May 21 vote, the district attorney's investigation was well under way. An investigator attended the council meeting.
Di Memmo, the only councilman not included in the indictment, questioned the project at the time. Di Memmo suggested the zoning change could hurt the county transportation commission by forcing the agency to spend more for parkway land.
Di Memmo voted against the project. "It didn't seem right," he said in an interview last week.
"Why don't you wait and see if the Mid-County Parkway is going to go through?" he said in the interview. As proposed, one route for the parkway would go through some of the buildings on Holgate's proposed site, Di Memmo said.
Ayres said Thursday that the projects Holgate proposed should not be reconsidered.
"I don't know why that would be a concern now," Ayres said.
Other Holgate projects that Ayres and the City Council voted on include:
In September 2003, Ayres signed an agreement to buy a home in a small subdivision Holgate planned. Three years later, Ayres and the other council members at the time approved the final tract map for the development.
Ayres made the motion and the matter was passed in a 5-0 vote. Stubblefield, Shaw, Ritchie and Carlson also voted in favor.
In February 2008, Ayres voted to change the name of the street where he lives from Ayres Court to Shelbran Court to help market Holgate's company. Along with Ayres, Mansperger, Ritchie and Carlson voted for the change. Stubblefield was absent.
Osborne Development
Ayres also cast votes for housing projects backed by Osborne and his Osborne Development Company. According to the company's Web site, Osborne has more than 40 years of experience building custom homes and residential communities throughout Southern California.
Osborne Development is marketing two housing developments in San Jacinto, two in Hemet and another in Winchester.
According to the grand jury indictment, Osborne was the true source of $22,500 in contributions to Ayres' Assembly campaign from June 2005 through June 2007. Osborne also donated another $10,600 to Ayres' council campaign, records show.
Ayres regularly voted to approve Osborne's projects and negotiated in closed session for the city to purchase land from Osborne for the city's Sanderson Avenue widening project. Osborne owns a horse farm on the street.
In June 2006, the council approved an agreement with Osborne for the development of the company's Cheyenne community, a project of almost 30 homes on the east side Kirby Street.
The vote was 5-0, with Ayres, Shaw, Stubblefield, Ritchie and Carlson voting in favor of the agreement.
Homes in the community range in size from 1,500 square feet to 2,200 square feet and include "many of the design extras you might only expect to find in far more expensive homes," according to the company's Web site.
In June 2007, the council approved another project along Kirby, this time on the west side of the street. The community on about 5 acres would include 36 housing units. Osborne told the council that the development is not restricted to seniors and would be the first real gated community in San Jacinto, minutes show.
Plans call for the project to include a park and a brick and wrought-iron fence at the development's entry.
Ayres, Stubblefield and Mansperger vote to approve the plan. Ritchie voted no, and Carlson was absent.
Staff writers Dug Begley, Gail Wesson and Michael Perrault contributed to this story.
Reach Duane W. Gang at 951-368-9547 or dgang@PE.com
