Roth Failed to Tell How He Acquired Shares in Firm : Inquiry: O.C. supervisor held stock in a company formed by a political consultant and longtime friend.

SANTA ANA —  Orange County Supervisor Don R. Roth failed to disclose in a government filing last year how he had acquired a 2% stake in a fledgling sunscreen lotion company started by prominent Costa Mesa political consultant Harvey Englander.

Roth never paid for the stock, Englander said this week. But the consultant gave conflicting accounts of how Roth came to hold the shares in mid-1990. Initially, Englander said the shares were a gift to Roth, a longtime friend and client. Later, Englander told The Times that the stock was compensation for Roth’s role as a company director.

In either case, political finance experts say, Roth was required by state law not only to disclose that he owned an interest in the company--which he did do in the filing covering 1990--but to identify it as a gift or as a form of income.

Englander also acknowledged that--like two other Roth political associates--he gave the supervisor free use of a vacation condominium. And as with the others, Roth failed to report the gift on his disclosure form.

Roth, 71, declined to discuss the issue Thursday.

While Englander stressed to The Times that he never sought to influence any county business through his financial dealings with Roth, political reform activists say the undisclosed ties between the two men create the appearance of a conflict of interest.

As a widely regarded political consultant, Englander has run campaigns for local, state and national officials. For example, he currently represents state Sen. Diane Watson in her campaign for a Los Angeles County supervisorial seat and state Senate President Pro Tem David A. Roberti.

Englander also does work in public relations, marketing and surveying for corporate clients ranging from hospitals and waste haulers to mobile park owners and the cable industry, often representing them before lawmakers.

Over the last decade, Englander has done campaign work for Roth in Anaheim and in his two later races for county supervisor in 1986 and 1990. But it was not previously known that Roth had been a director and shareholder in an Englander company.

The issue of Roth’s financial relationship with Englander comes amid disclosures in the past two weeks that Roth failed to report gifts and trips from several other local business people and, in one instance, voted in favor of a county permit directly affecting those people.

Roth, now the focus of an inquiry by the FBI into alleged political influence peddling, acknowledged in his state-required economic disclosure statement for 1990 that he owned common stock in the sunscreen company, called Before Play.

But the supervisor did not say in the report how he got the stock, as political finance experts say he was required to do since he did not purchase it himself. And Englander’s association with the company was not mentioned either.

Englander said he does not believe the stock in the privately held company was worth much, adding that Roth sold the stock back to him in August, 1991, for $10. Roth, however, placed its value between $1,000 and $10,000 in his disclosure statement.

“By looking at his report, you would assume that (Roth) had bought that stock with his own money,” said Shirley Grindle, a local activist who has pushed for reforms in the county’s campaign finance laws. “You would not assume that it was given to him by a leading political consultant. That is misleading.”

State and local officials are required to report all gifts above $50, as well as any non-governmental income above $250. They must also report most private investments, with the exception of personal bank accounts, government bonds, IRAs, and a few other categories.

The law, passed in 1974 in the wake of Watergate, was meant to put greater light on the personal finances of public officials and expose potential conflicts of interest, which might color decisions.

In late 1989, Englander used $145,000 of his own money to start Before Play, a company that sells sunscreen packaged in custom-made golf balls, court records show. A subsidiary, Baby League, makes baby bottles shaped as baseballs and footballs.

Englander also owns a successful campaign management company in Costa Mesa.

Englander said Wednesday that at the time he was starting up the sunscreen business, he recruited 11 public figures whom he knew--including former Angel third baseman Doug DeCinces and ex-football player Efrain Herrera--to serve on the board of the company and help publicize it.

Roth was the only politician, Englander said.

Each of the directors was given an unspecified number of shares of stock representing 2% of the company’s ownership, he said.

When asked initially Wednesday about Roth’s stock, Englander described it as “a gift” to a longtime friend who is “a surrogate grandfather to my children.”

While Englander has worked on Roth’s political campaigns dating back to Roth’s days on the Anaheim City Council in the early 1980s, the two also socialize out of the office.

In offering Roth the Before Play stock, Englander said, “I was hoping the company might take off, and (Roth) would have some money, and we’d all have some money. . . . This was a fun company.”

But later in the day, Englander said, “I started thinking about that” and came to the conclusion that the stock was not a gift among friends, but rather was compensation for Roth’s services as a director of the company.

While Englander would not specify what those services included, he said that Roth attended several meetings of the board and in general “talked the company up” in the community.

But it does not matter under the state’s Political Reform Act whether the stock is a gift or compensation; either should have been reported in Roth’s economic disclosure statements, according to Robert M. Stern, a co-author of the reform act, and Lisa Foster, executive director of California Common Cause in Los Angeles.

In addition to the stake in Before Play, Englander said that he had given Roth the use of his two-bedroom condominium in Palm Desert “a couple” of times for weekend getaways in the last several years.

This, too, went unreported in Roth’s economic statement, although political finance experts say the gifts should have been disclosed under state law.

Officials at the Fair Political Practices Commission, which regulates such issues for the state, declined to comment.

The Times reported earlier this month that Roth since late 1990 has accepted three trips to Santa Catalina Island and what amounted to an interest-free, $8,500 loan through an unusual rental agreement with the Dougher family, which owns more than a dozen trailer parks in Orange County.

None of these gifts was reported in Roth’s annual filings.

Roth also did not disclose that on several occasions in recent years, he and his ex-wife had vacationed at the Palm Springs area condominium of local developer Magdy Hanna.

Just four months ago, Roth voted to approve a $5-million condominium project that Hanna had proposed to build on land that he is buying from the Dougher family in Midway City.

The FBI has begun investigating Roth’s relationship with the Dougher family in an attempt to determine whether the supervisor had traded undisclosed gifts for political favors, the FBI has said.

Englander maintained that his own financial relationship with Roth posed no public policy problems, in part because the stock he gave Roth was worth little, if anything, at the time.

While he refused to release any financial records for Before Play, Englander said the company has lost money since it began, even after investors guaranteed $300,000 in loans.

And although Roth listed the value of his stock at between $1,000 and $10,000 in his disclosure statement for 1990, Englander said, “I think he overstated the value.”

After other directors each pledged substantial loans to the company, Roth decided he could not commit the time or money needed to stay on as a director, Englander said. So Roth sold back his stock, in August, 1991, to the company for $10, Englander said.

Roth reported the sale of the stock at less than $1,000 on his disclosure statement covering 1991.

Several political finance activists and political lobbyists said that, regardless of how much the stock was worth, it poses an appearance problem for Roth and Englander.

“In our business, everything is perception,” said Eileen Padberg, a prominent political consultant in Orange County and a competitor of Englander. “And whether this (Roth stock issue) was truly innocent or not, when you put your client and/or an elected official in a position that tends to erode public confidence, that’s always a problem.”

Asked about a potential conflict of interest between Roth and firms for whom Englander works, Englander said flatly that he works in public relations--not lobbying--and that he has never himself appeared before the Board of Supervisors.

Through the years, however, Englander has worked as a consultant for several companies that have done business before the county, including Western Waste Corp. and Solag Disposal, both of which have trash-hauling franchise agreements with the county, as well as for several development firms.

In recent months, county sources said, Englander has also met with most of the five supervisors and their staffs to discuss a major issue--how much to tax cable television companies for the right to run their lines on public land.

Englander represents several cable companies that have successfully fought a tax rate hike in court, but the supervisors--including Roth--have agreed to press on with the legal battle in an appellate court.

In light of Englander’s involvement in such public issues, Grindle said Roth showed “very poor taste” in accepting the stock from Englander and failing to report it.

“Roth is a great supporter of complete disclosure, but he obviously doesn’t practice it,” she said.

Foster of Common Cause said that the stock issue points up flaws in the state’s political finance laws, which she argued do not adequately regulate lobbyists and consultants in their financial dealings with politicians.

“Lobbyists should not be giving gifts of any sort to lawmakers. It’s too easy for the relationship to become close and friendly in a way that suggests that lobbyists wield more influence than any member of the public could hope to achieve, and that’s a problem,” Foster said.

The bottom line is influence, Foster said. When politicians get calls each day from lobbyists and average citizens, she said, “who’s line do you think they’re going to answer?”