Sixteen years ago, Ted Stein was an up-and-coming real estate developer from Encino with an interest in public policy and a yearning to get involved in Los Angeles city government.
Daniel P. Garcia, who was president of the city Planning Commission and a trusted advisor to then-Mayor Tom Bradley, gave his friend the boost he needed, recommending Stein for a seat on the commission, thereby launching the developer on an extraordinary rise to civic power.
What neither man revealed at the time -- or has since -- is that Stein had arranged an apparently lucrative real estate deal for Garcia two years earlier.
Stein helped Garcia develop a 30-unit apartment complex in Glendale for no money down -- a real estate investment that was Garcia's most valuable holding and netted him, by one estimate, $170,000 when he sold the property several years later.
At the same time, Garcia voted twice as Planning Commission president in favor of Stein building projects in Los Angeles, records show.
Stein joined Garcia as a fixture in the city's most elite governing class, a group of largely unknown political appointees who serve on commissions that oversee city agencies and hand out untold millions in government contracts no matter who is in the mayor's office.
Stein resigned from his latest post as president of the Airport Commission last month after The Times disclosed that county and federal prosecutors were investigating him as a figure in a "pay to play" probe at City Hall. Stein has denied demanding political contributions from contractors.
A Times investigation shows that Stein may have engaged in his own form of pay to play at the start of his civic career.
Both Stein and Garcia deny a quid pro quo. Stein said he arranged the real estate venture for the former Planning Commission president because he was his best friend. Garcia said he recommended Stein for the Planning Commission because he was capable and hardworking.
Garcia, now a senior vice president of the Kaiser Foundation Health Plan and Hospitals, at first acknowledged that he had erred in not disqualifying himself from voting on Stein projects.
"If it happened that way, then I made a mistake," said Garcia, who is in charge of, among other things, business ethics at Kaiser. "My reputation being destroyed over something like this? It makes me sick. It makes me feel like I want to die."
During subsequent interviews, however, Garcia changed his position, asserting that Stein's role in the Glendale investment was so small that it did not require public disclosure.
"Would I do it again today? No ... simply because I don't like to have to go through these questions," said Garcia, a decorated Vietnam War veteran who was widely seen as a skillful and principled referee on the Planning Commission between polarized forces of growth and no growth.
"But in my mind, I had never entered into a partnership with Ted," he said. "I was not a business associate of Ted's. I followed his suggestion and entered into a partnership that developed an apartment complex. I was not actively engaged in it, and then I sold it. And it was not in the city of Los Angeles. So, as far as I was thinking at the time, I don't think ... there would be a conflict."
Records and interviews show that Stein played a substantial role in the Garcia deal. The developer introduced Garcia to the bank that owned the Glendale property, built the apartment house for a fee, helped manage it and once even represented the Garcia partnership in court in a tenant dispute.
An analysis of the deal by one expert suggests that it put tens of thousands of dollars into Garcia's pocket.
Based on a review of public and some private documents furnished by Garcia, David Dale-Johnson, an associate professor of real estate finance at USC, estimated Garcia's likely share of after-tax profits at $170,000.
"On the face of it, even with the risk, it appears to have been a very nice deal, given there was no initial cash investment," Dale-Johnson said.
Garcia, who said he retained only sketchy records of the transaction, estimated that he may have made $60,000 -- or even lost money because of the substantial cash contributions he made to keep the partnership going when rental income was insufficient.
Whatever the amount, Garcia wouldn't have made the investment without Stein's help.
Here, as told in interviews and gleaned from old records on microfilm, in archives and bound volumes, is the inside story of an insiders' deal.
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The vacant lot on Justin Avenue in Glendale offered attractive views on either side. To the south lay the hills of Griffith Park, to the north the San Gabriel Mountains. An earlier developer had cleared the land of homes but gone bust, leaving his lender, Independence Bank, no choice but to take the property back.
Anxious to get the land off its books, Independence approached Stein, a lawyer turned home builder who had already financed several projects through the bank.
