FPPC Warns Hawthorne of Conflict : Transportation Commissioner Told Not to Vote on S.D. Projects

In a strongly worded letter, the state’s political watchdog agency has warned that it will take legal action against California Transportation Commissioner J.T. (Tom) Hawthorne if he continues to vote on San Diego County highway construction projects that materially benefit his business. Hawthorne is the area’s exclusive dealer for Caterpillar heavy equipment.

The state Fair Political Practices Commission also found that votes by Hawthorne during his first 18 months on the nine-member commission posed a conflict of interest since his business customers received 90% of the $55.6 million worth of projects approved for the San Diego area. The agency declined, however, to disclose the number of conflicts or to levy penalties, which could reach $2,000 for each violation.

Hawthorne, an Escondido resident whose business is in Kearny Mesa, said Tuesday the FPPC warning has persuaded him to abstain from voting to fund future San Diego County transportation projects. If the restriction hampers his commission duties, Hawthorne said, he would resign.

“That’s yet to be determined,” said Hawthorne, an influential Republican appointed to the commission in February, 1984, by Gov. George Deukmejian. “If I find that it does impair my ability, I’ll step aside for someone else to do a better job . . . I’m going to wait and see how that develops.”

San Diego acting Mayor Ed Struiksma, who has concentrated on transportation issues, said Hawthorne’s decision to abstain from votes on local projects is a “significant blow to San Diego.”

“He has been a real champion for transportation issues in San Diego County,” Struiksma said, adding that Hawthorne supports the construction of local highways and has been instrumental in freeing state funds for the San Diego Trolley. “What he’s done is he’s always voted on the basis of what’s good for San Diego County.”

Hawthorne is the only commission member from San Diego County, and his term ends in 1988. Commission members are paid $100 plus expenses for monthly meetings.

The FPPC investigation began after The Times revealed in June that 24 of 39 San Diego County highway and trolley construction projects between February, 1984, and June, 1985, were awarded to firms that rented or bought heavy equipment from Hawthorne’s Caterpillar dealership.

In all, Hawthorne’s customers received $51.6 million of the $55.6 million in construction projects approved by Hawthorne and his colleagues, The Times reported. Some of the findings included:

- Three companies awarded the construction work either bought or rented equipment from Hawthorne’s company specifically for the government job. For instance, Minnesota Asphalt won a $1-million bid to refurbish several local highway ramps in November, 1984, and then bought a Caterpillar 966 front-loader from Hawthorne’s dealership specifically for the job.

- The Daley Corp., a steady Hawthorne customer, won $22 million worth of the San Diego County business. Hawthorne voted to release the money for the six transportation jobs--eventually won by Daley--within eight months after the company purchased $462,000 in equipment from his dealership.

Hawthorne acknowledged last summer that it “crosses my mind” that the transportation projects he approves could mean more business for his Hawthorne Machinery Co., which sells and rents heavy equipment to contractors. He is chairman of the board and 97% owner of the family business, which the FPPC found has $12 million in tangible assets and had a pre-tax annual income of $2 million during the last fiscal year.

Hawthorne maintained that his votes did not pose a conflict of interest because he and other commissioners only decide when and how much state money will be allocated for a transportation project, not which company will get the job. The California Department of Transportation (Caltrans) bids the projects and selects the construction companies.

The votes also were defended by a spokesman for Deukmejian, who said Hawthorne’s business was well-known when he was chosen for the commission and unanimously confirmed by the California Senate.

The FPPC disagrees.

In a letter dated April 23 and received Monday by Hawthorne, FPPC Enforcement Chief Roger Brown wrote that the agency “has determined that state law prohibits you from participating as a member of the California Transportation Commission in certain decisions involving San Diego highway and trolley construction projects.”

Brown wrote that about 20% of Hawthorne’s business in heavy equipment sales and rentals “is generated from the purchase and rental of equipment and tools to perform state construction jobs.”

“Here, because your company is the sole distributor of Caterpillar products in San Diego County, and customers of your business have obtained more than 90% of the funds voted for San Diego projects, it is substantially likely, indeed it is almost a certainty, that any decision to allocate funds for San Diego projects will benefit your business,” Brown wrote.

Brown advised Hawthorne that he could vote on funding for San Diego County projects if each decision would bring in less than $30,000 to his firm, or if it would not have a “material financial effect” on one of his customers.

If Hawthorne has a customer who ranks in the Fortune 500, he would be allowed to vote only on projects that would bring that customer less than $1 million, said FPPC spokeswoman Lynn Montgomery. On the other end, Hawthorne could vote on projects worth no more than $10,000 to his smallest customers.

While Brown stopped short of telling Hawthorne he could not vote on San Diego County projects, the guidelines in his letter apparently left the commissioner little room for an out. “You recently voted on both a $34-million and a $169,000 San Diego area project,” Brown wrote.

“The Enforcement Division will monitor your participation in commission meetings to determine whether you are complying with the guidelines of this letter. If you continue to participate in decisions in which you have a disqualifying financial interest, the commission will consider the commencement of legal proceedings against you,” Brown wrote.

Montgomery said Hawthorne is not only prohibited from voting on these projects, but he “cannot lobby or try and push his position” with other commissioners.

Hawthorne said he has talked with FPPC attorneys and decided to abstain from future votes on San Diego County projects. Statistics supplied by a Caltrans official show that local projects accounted for nearly 8% of the construction work approved by the commission in 1985.

Struiksma said Hawthorne has been an advocate for San Diego construction projects, helping to free $21 million in state funds last year for trolley construction. Hawthorne has also been active in supporting the extension of California 52 east from Interstate 805 to Santee and construction of California 56 between Interstates 15 and 5.

Hawthorne said he will still vote on projects in other areas of California.

“When jobs are let in this area, I’m going to have to abstain from voting on them,” he said. “When they come before the commission, when the actual financial requirements are made by the commission in San Diego County, those are the things that I will abstain from . . . . After this filing (by the FPPC), I know a lot more than I knew before.

“It’s just one of the Catch-22s of the political process. I think that an overriding element is that my expertise will still be beneficial to the rest of the state. Hopefully, that benefit will be to the other 57 counties. Just because I won’t vote on one county, hopefully my expertise won’t affect my other decisions.”

Hawthorne added that he may step down if he determines that his abstentions will erode his effectiveness as a transportation commissioner.

“This is something that I will have to reckon with, the inability to be a commissioner,” Hawthorne said. “I don’t know. That’s yet to be determined.”

State Senate President Pro Tem David A. Roberti, who called for Hawthorne’s resignation after the Times article, said through a spokesman that he was satisfied with the FPPC warning.

“It’s a very strong letter and Roberti agrees with it,” said Robert Forsyth, the senator’s press secretary.

Deukmejian’s office did not issue a reaction to the FPPC warning.