A local accounting professor testified Wednesday that Tom Shepard & Associates lost more than $130,000 by running San Diego Mayor Roger Hedgecock's 1983 campaign--a claim that Hedgecock dismissed as "a complete fraud" based on a "biased, selective" analysis of the political consultant's financial records.
During a daylong war of numbers, attorneys in Hedgecock's felony retrial battled over one of the central issues in the case: the question of whether Shepard's consulting firm was, as the prosecution contends, essentially a political laundering service used to funnel illegal contributions to Hedgecock's campaign, or whether, as the defense argues, it was a legitimate business willing to absorb a financial loss to enhance its reputation by running a successful citywide campaign.
Arthur Brodshatzer, a San Diego State University professor and certified public accountant who testified during Hedgecock's first trial, was on the witness stand for more than three hours Wednesday, seeking to lead the eight-woman, four-man jury through a maze of numbers and financial transactions that prosecutors contend document how Hedgecock allegedly conspired with three of his prominent backers to use Shepard's firm as a pipeline for illegal donations to the mayor's 1983 race.
In a lengthy, often confusing and occasionally comic test of wills, the opposing attorneys consistently used the same set of facts but diametrically opposed theories and interpretations in their questioning in an attempt to direct Brodshatzer's testimony into areas most favorable to their respective positions.
By day's end, both sides believed that they had scored key points with the jury, including disclosures or contentions that:
- Shepard's firm lost between $137,887 and $157,386, "and probably more," while coordinating Hedgecock's campaign from August, 1982, through May, 1983, according to Brodshatzer. However, in addition to vigorously disputing the validity of the accountant's theory, defense attorney Michael Pancer also got Brodshatzer to concede that Shepard's firm conceivably could have used the Hedgecock campaign as a "loss leader" designed to attract other clients.
- Former J. David & Co. principal Nancy Hoover purportedly received tax deductions in excess of $100,000 for investments that she and J. David founder J. David (Jerry) Dominelli made in Tom Shepard & Associates throughout 1982 and 1983. Pancer's attempt to introduce into evidence a tax form documenting Hoover's deductions touched off a heated debate with Deputy Dist. Atty. Charles Wickersham, who accused the defense attorney of "trial by trickery" and blocked, at least temporarily, the tax form's acceptance by Superior Court Judge William L. Todd Jr.
- Hoover contributed $250 to Hedgecock, the maximum individual donation allowed under local election laws, in June, 1981--a revelation that raises questions about one of the major underpinnings of the prosecution's case. One of the cornerstones of the alleged conspiracy, prosecutors contend, was a crucial November, 1981, luncheon at which Hedgecock reportedly agreed to reconcile with Hoover and cease criticizing her for leaving her husband to live with Dominelli. Noting that Hoover's $250 contribution preceded that luncheon by more than five months, Hedgecock concluded, "So much for the reconciliation theory."
Most of Wednesday's court session was devoted to a verbal and statistical joust between Pancer and Brodshatzer, who was paid $175 per hour by the district attorney's office as an "expert witness.' (Pancer, who represented Hedgecock in the mayor's first trial, is serving as co-counsel to chief defense attorney Oscar Goodman in the retrial.)
During his cross-examination, Pancer relentlessly chipped away at the accounting professor's assertion that Shepard's firm lost about 39 cents on every dollar that it spent on Hedgecock's behalf, compared to a 31-cent profit on every dollar that the firm received from other clients. However, Brodshatzer, who seemed to relish the verbal give-and-take with Pancer, just as tenaciously sought to hold his ground by defending his analyses of the Hedgecock campaign's and Shepard firm's finances.
Between August, 1982, and May, 1983--the month in which Hedgecock won a special mayoral race to succeed Pete Wilson after the latter's election to the U.S. Senate --Shepard's firm received $352,247 from Hedgecock's campaign committee and paid $337,568 in campaign-related bills, Brodshatzer testified.
While those figures produce a $14,679 surplus, one of Brodshatzer's major conclusions is that if a pro-rated portion of Tom Shepard & Associates' staff expenses, overhead and operating costs had been charged to the Hedgecock campaign, the firm actually "lost" between $137,887 and $157,386, depending on the accounting method used.