Home News Long Beach Councilmember May Be Investigated For Potential Conflict Of Interest

Long Beach Councilmember May Be Investigated For Potential Conflict Of Interest

Following a city attorney-commissioned independent review of Councilmember Jeannine Pearce’s employment by an executive with Urban Commons – the company that owns the lease to the Queen Mary in her district – the Fair Political Practices Commission (FPPC) confirmed it had received a complaint regarding a potential conflict of interest and was weighing whether to investigate.

“I can confirm the FPPC Enforcement Division received a complaint regarding the councilmember on Monday [September 9],” FPPC Communications Director Jay Wierenga said via e-mail. “All complaints are taken under review to determine whether or not to open an investigation. . . . A review generally takes a few days to 14 days, although some can by regulation take longer. Complaints are either rejected or opened into investigation.” If an investigation were to be opened, he stated, “There is no set timetable on an investigation . . . but generally speaking the majority are concluded with[in] a half year and up to a year. A small number, generally speaking, take longer than that. It all depends on each case.”

City Attorney Charles Parkin sent the FPPC a letter on September 12 indicating that his office is “fully prepared to cooperate” with an investigation.

Although Pearce claims to have informed the city attorney’s office of her business relationship with Dan Zaharoni, chief development officer for Urban Commons, before it commenced in 2018, Parkin told the Business Journal that he first heard of it in a May 30 article by the Long Beach Post.

“I know she said she asked our office, but we have no record of her ever asking for an opinion from my office. So she never reached out to us,” Parkin wrote in an e-mail to the Business Journal. “We contacted her when we opened our review and she obtained her attorney and then we worked with her counsel.”

According to findings by Best Best & Krieger, an outside law firm hired by the city attorney’s office to look into the facts of the matter, Pearce received $11,222 in income from Zaharoni’s firm, DHS Verde LLC, in 2018. She did not disclose this income in her Form 700 – which elected officials and public employees who influence governmental decisions must submit to ensure that they are making decisions in the best interest of the public and not for personal financial gain – for that year. However, she later amended that form on July 10, 2019, following a report on her work for Zaharoni by the Long Beach Post – but she only reported $10,000 in income.

According to the Best Best & Krieger report, Pearce’s work for DHS Verde LLC involved securing a cannabis dispensary permit in Culver City for From the Earth, another of Zaharoni’s companies. Ultimately that effort proved unsuccessful, per the report.

In 2019, Pearce received $30,000 from Zaharoni’s firm Global Growth International, a property management enterprise controlled by Zaharoni, for work performed for From the Earth related to establishing an associated nonprofit entity. Best Best & Krieger did not receive an explanation as to why Pearce was not paid directly through From the Earth. The report noted that Zaharoni was responsible for structuring payments to Pearce. “It raises the question of whether there has been an effort to conceal the true purpose of the work and source of payments to Ms. Pearce as being for and with other than a full-service cannabis management company with potential interests in the city,” the report stated.

Asked about this payment structure, Zaharoni told the Business Journal via e-mail that the nonprofit entity Pearce had been asked to assist with – a foundation – was in its infancy when she joined the effort, so “there were no accounts or funds established, and we could not hire anyone under that banner.” He continued, “Until we could establish active accounts and the necessary approvals for the foundation, we sought her assistance with real estate matters. Because her work at the time was in real estate, it was appropriate to pay her through GGI. She was never paid by Urban Commons or associated with the Queen Mary.”

The Best Best & Krieger report also questioned why Pearce failed to report income from Zaharoni-controlled businesses on her Form 700 for 2018. “Further, Ms. Pearce failed to disclose the income from DHS Verde in her 2018 Annual Form 700, and there is a question whether that failure to disclose was inadvertent or deliberate,” the report stated.

Ultimately, the consultant found that, per the Political Reform Act, Pearce has a “prohibited and disqualifying financial interest in any governmental decision that has a reasonably foreseeable material financial effect on Mr. Zaharoni.” The report explained that while it is difficult to determine what impact on Zaharoni’s personal finances any decisions related to the Queen Mary might have, it is likely that decisions affecting Urban Commons and the Queen Mary will have “a measurable financial benefit or loss on Mr. Zaharoni as an employee and Director of Development of Urban Commons Queensway.”

Pearce was found to have made at least one action as a councilmember that might have violated the Political Reform Act due to this conflict of interest. At a city council meeting on March 12, 2019, Pearce proposed an item requesting the city manager work with Urban Commons to determine the cost of a feasibility study pertaining to a gondola system that would connect Downtown Long Beach to the Queen Mary. According to Best Best & Krieger, this proposal was originally brought to the city by Zaharoni.

“At the time Ms. Pearce brought this matter to the city council, spoke on it, moved for its approval and voted on it, she had financial interest in Mr. Zaharoni under the [Political Reform] Act. . . . Thus, her actions and vote could have been in violation of the Act, and her vote would be a nullity or void,” the report stated.

In a September 6 memo to the mayor, city council, city manager and assistant city manager, Parkin stated that Pearce and her staff should not be contacted by the council or city staff regarding issues related to the cannabis industry, and that Pearce “may reduce herself from voting on or seeking the influence voting on any city council items affecting the cannabis industry.”

Following the issuance of the report, Pearce sent out a statement applauding the work of the city attorney’s office in addressing the matter and noting that she had cooperated fully with Parkin. “As is always the case with every elected official, I will continue to weigh potential conflict of interest issues on a case-by-case basis and will recuse myself when appropriate,” she stated.

When asked if she would like to comment further, her office sent the Business Journal a formal letter, addressed to Parkin, from the Law Offices of Olson Hagel & Fishburn LLP. The letter argued that the Best Best & Krieger’s findings did not accurately consider Pearce’s financial interests, noting that the work she performed for Zaharoni’s companies was unrelated to Urban Commons or the Queen Mary. Further, the report stated, “Councilmember Pearce is not aware of any facts to indicate that Mr. Zaharoni stands to receive any financial benefit or detriment as a result of the city council deciding to authorize the feasibility study [for a gondola system]. . . nor was she aware of any such facts at the time of the governmental decision.”

In an e-mailed statement sent with the letter, Pearce said: “As stated in the attached letter from my counsel, the report released by the City Attorney’s office does not consider all the relevant facts, and therefore cannot conclude that a conflict of interest violation in fact occurred. When concern was raised months ago, I asked the City Attorney for a meeting so we could address the concerns immediately. I will continue to cooperate fully as I have already done with the City Attorney’s office should there be an inquiry from the FPPC. I look forward to the conclusion of this process and to continuing to serve as the Councilmember of the Second District.”  

A spokesperson for Urban Commons said the company “was neither aware of nor familiar with discussions held between Daniel Zaharoni and Long Beach Councilwoman Jeannine Pearce, and it was not privy to or associated with any payments made by Mr. Zaharoni to the councilwoman.”

Zaharoni’s Take

When sought for comment for this article, Zaharoni agreed to respond to a handful of questions via e-mail.

Regarding how Pearce came to work for entities controlled by Zaharoni, he said, “Councilmember Pearce and I had a great friendship for several years. Last year, we spoke about our interest in nonprofit work. Following the conversation, we agreed that her experience and skill set would be an ideal match to help support my vision for the From The Earth Foundation, a 501(c)(3) organization dedicated to empowering communities and seeking judicial reform. Because we share the same sentiments to give back to our communities, she was brought on as an independent contractor several months later to help establish the foundation.”

Asked whether he felt that Pearce should be precluded from voting on items related to the Queen Mary or Urban Commons, Zaharoni stated, “Councilmember Pearce should preclude herself from voting on related items. To ensure best practices and the interest of the community at large, Councilmember Pearce and I agreed she would not join the team if it violated any ethical obligations. To ensure this, she told me she sought out the expertise of the LB City Attorney, who confirmed there would be no issue as there were no upcoming votes on related items. In the event of a potential future conflict, she noted she would excuse herself.

“We were unaware that she voted on a related item – and if we had been made aware, my advisement to Councilmember Pearce would be to not vote.”

Zaharoni’s response indicated that, as Parkin stated, Pearce had said she contacted his office for advice before entering into business dealings with Zaharoni. But, again, Parkin maintains she never did.

Asked if Zaharoni himself, or even Urban Commons, had contacted the city attorney’s office regarding Pearce’s paid work for his businesses, he responded: “At the time of hire, Councilwoman Pearce advised me that she spoke to the city attorney and that he had approved her to take the position. Neither the city attorney nor any other city staff contacted me to discuss the matters referenced by the recent city report which outlined Councilwoman Pearce’s conduct. To my knowledge, the Long Beach City Attorney has not contacted any representative of Urban Commons.”

Lastly, asked whether he plans to employ Pearce again in the future, Zaharoni stated, “We ended our relationship with Councilmember Pearce on August 10.”

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