Does Highway Official’s Business Pose Interest Conflict?

J.T. (Tom) Hawthorne, an influential San Diego County Republican on the California Transportation Commission, has voted for millions of dollars in highway construction projects that later were awarded to firms doing business with his heavy-equipment dealership, state records show.

Hawthorne, 56, appointed by Gov. George Deukmejian to the commission in February, owns Hawthorne Equipment Co., the exclusive dealership in San Diego County for new Caterpillar construction equipment, and Hawthorne Rent-It Service, an equipment rental firm.

Since his appointment, Hawthorne has voted to finance more than $55.8 million for San Diego highway and trolley construction projects now under contract. State records and interviews reveal that Hawthorne’s Caterpillar customers will receive more than 90% of the money.

State law prohibits any public official from participating in a governmental decision if it is “reasonably foreseeable” that the outcome will have a financial effect on him or a source of income, such as a business customer. Though one state official has told The Times it is “possible” that Hawthorne violated that law, state guidelines are so complicated that it is unclear whether his votes were a conflict of interest.

Hawthorne said he never considered his votes to be a problem because the state Transportation Commission decides how much and when to allocate money for highway projects, not which company will get the work. Choosing the company is left to the California Department of Transportation (Caltrans), and commissioners such as Hawthorne generally have no say in that selection.

Yet Hawthorne conceded that it “crosses my mind” that certain highway projects he votes on could likely translate into more business for his Caterpillar dealership. Hawthorne favors pro-growth measures in the San Diego area and said he sometimes sees his role on the Transportation Commission as an advocate for local highways.

“All these people are our (potential) customers, whoever gets the job,” Hawthorne said. “There isn’t a competitive contract that goes out there for bids that we don’t anticipate that we, hopefully, are going to sell” some equipment because of it.

Asked if it would be unreasonable to conclude that his private business benefited by his actions as a commissioner, Hawthorne said, “No, it’s not unreasonable at all.”

Hawthorne’s business was no secret when he was chosen for the Transportation Commission by Deukmejian and confirmed unanimously by the Senate.

“We obviously are aware of his business,” said Larry Thomas, Deukmejian’s press secretary. “In fact, it was his reputation in that business that weighed heavily in his favor.”

Thomas defended Hawthorne’s appointment as part of the governor’s policy to “appoint people who are extremely knowledgeable about a particular field to a state board or commission that’s involved in that field.”

But a San Diego community activist, who recently opposed Hawthorne’s position on a major highway project, said she has a “problem” with such a close association between business and politics.

“Why was this man appointed to the position he holds?” asked Dorothea Edmiston, whose group, Save Our Canyons, recently failed to change a state proposal to build Interstate 15 through a mid-city neighborhood.

“He’s in a business that makes it a little bit suspicious, when you think about it, when he’s making money from the use of equipment that builds highways,” she said. “These are the highways that he has had a vote on whether they should be extended or widened or whatever.”

In Hawthorne’s world, political and business considerations have been intertwined since he and his father opened the Caterpillar dealership in 1956.

“My involvement (in politics) is from a business point of view,” Hawthorne said in a recent interview. “I think that government affects your business. I’m interested in good government, better government, from my viewpoint, and that’s anybody’s prerogative as a voter.

“If you allow the Sierra Club to run the nation, or the Maxine Waters and Tom Haydens to run the government, then business, basically, would dry up, is my belief.”

The growth of Hawthorne’s business has always been linked to the growth of San Diego. The firm’s well-being is so dependent on earth moving for new homes and industrial plants that, when the industry hit bottom in 1982, Hawthorne feared that his Caterpillar construction equipment division was going to “fold up.”

Today, the business employs 455 people and grosses about $70 million a year in sales. About 15% to 20% of the business comes results from public highway work, Hawthorne estimated.

With headquarters at 4200 Kearny Mesa Road, the company encompasses four divisions that either rent or sell diesel engines, forklifts and construction equipment. A fifth division is Hawthorne’s exclusive Caterpillar dealership for Baja California.

Hawthorne owns the controlling interest in the company, which is considered a potent force in the local construction industry.

“Hawthorne is the distributor for Caterpillar equipment in San Diego, and most of your big earth-moving outfits lean toward Caterpillar if they can afford it. It’s like the Cadillac of dirt-moving equipment,” said Don Kidd, an official with the International Union of Operating Engineers, Local 12.

“I would say this--any new equipment that’s Caterpillar equipment that’s bought in San Diego, I would say the chances are 90% that they are sure to get it from Hawthorne,” Kidd added.

Jerry Richeson, equipment superintendent for Minnesota Asphalt Inc. of El Cajon, said his company recently purchased two front-loaders from Hawthorne. Asked to describe what Hawthorne meant to his company, Richeson responded: “They’re the only game in town.”

Companies that do not buy new equipment from Hawthorne sometimes turn to him for parts, service and rental of Caterpillar machines. For example, ABC Construction, which recently won $228,000 worth of highway projects previously voted on by Hawthorne, pays $20,000 to $30,000 annually to rent equipment from Hawthorne, a company official said.

Along with building his business, Hawthorne has been active in community service and politics.

He is a member of the Honorary Deputy Sheriffs’ Assn., the San Diego Rotary Club, the Boy Scouts of America and is an elder in the Reorganized Church of Jesus Christ of Latter-day Saints. He is a director of the Greater San Diego Chamber of Commerce, a director of the Bank of Commerce and a member of the Board of Overseers for UC San Diego.

Although his home is in Escondido, Hawthorne has concentrated his political efforts in San Diego, where his business is. He explained that he is keenly interested in City Council races because council members, through their decisions and appointments to local boards like the Planning Commission, determine whether to permit “restrictions on builders so that they can’t afford to move to San Diego.”

Over the years, Hawthorne has earned the reputation for being a quiet, behind-the-scenes political money man.

A member of the Golden Eagle Club, Hawthorne is one of the San Diego area businessmen who pay $500 annually to support local Republican causes and candidates. He has donated money or raised money for Mayor Roger Hedgecock; Council members Gloria McColl, Dick Murphy, Ed Struiksma, Bill Cleator and Uvaldo Martinez; San Diego County Supervisor Susan Golding; Assembly members Larry Stirling, Sunny Mojonnier and Wadie Deddeh, and state Sen. Jim Ellis.

In 1981, Hawthorne served as co-finance chairman for Deukmejian’s San Diego County campaign. The local chairman of the Deukmejian campaign was Dan Stanford, now the chairman of the state’s Fair Political Practices Commission, which is responsible for enforcing state conflict-of-interest laws.

Hawthorne’s ties to Deukmejian, plus his standing in the construction industry, led to his appointment to the transportation commission. The nine-member commission is a relatively anonymous state body that oversees the planning and financing of highway projects.

Commissioners are paid $100 plus expenses for monthly meetings during their four-year terms.

Hawthorne and his colleagues are not allowed to propose highway projects, but their official blessing is required for those projects to be included in the state’s five-year construction plan.

They also vote to allocate, or release, millions of dollars in public money to pay for the individual highway projects. During the coming fiscal year, commissioners will decide where to spend as much as $975 million in public money, a task that sometimes calls for them to choose between projects.

The bidding process for individual projects is handled by Caltrans after commissioners set aside the money. This arrangement, Caltrans officials say, is designed to prevent a commissioner from steering work toward a favorite contractor.

But even with this safeguard, a Times analysis of state records shows that Hawthorne’s customers have won most of the work in San Diego.

The Times looked at construction projects financed by commissioners since February, 1984, when Hawthorne became a voting member. Although minutes of commission meetings do not identify who is voting, Hawthorne confirmed that he routinely approves project allocations with his colleagues, saying that “not to my recollection” did he miss any of the votes. Only construction jobs were included in the sample; projects to upgrade light signals or landscape highway embankments, for example, were not counted.

- Of the 39 construction projects Hawthorne said he voted on, at least 24--or 61%--were awarded to companies that have purchased or rented equipment from Hawthorne’s business.

- In terms of money, Hawthorne’s customers won awards of at least $51.6 million, an amount that represents nearly 92% of the $55.8 million worth of San Diego projects Hawthorne voted on.

- One steady Hawthorne customer, The Daley Corp., won contracts for six of the 39 jobs, worth almost $22 million. Those projects include a $10.5 million job to create car-pool lanes and perform bridge work along I-15 near Rancho Penasquitos, and another $5.8 million job to revise an Interstate 8 interchange in La Mesa.

Hawthorne voted to release money for the six projects, eventually won by Daley, within eight months after the construction firm purchased two large pieces of equipment from the Caterpillar dealership--a D8L tractor worth $300,000 and a motor grader worth $162,000.

- Three companies that won transportation projects either bought or rented equipment from Hawthorne specifically for the government job.

One company was Minnesota Asphalt, which won a job to refurbish several local highway ramps, a project approved in concept by the transportation commission in August, 1984. The company was awarded the contract for $1 million in November and bought a Caterpillar 966 front-loader from Hawthorne’s dealership to use in the highway work. Since then, the company has purchased a second front-loader from Hawthorne.

A second was Modern Alloys Inc. of Stanton. The company was hired in October to replace the concrete barriers along Interstate 5 near Del Mar, a $233,000 job. To perform the work, it rented a water truck and motor grader in December and January from Hawthorne for $3,000, according to Modern Alloy’s general manager.

The third company was Herzog Contracting. The company was hired to build a 4.5-mile extension from the San Diego trolley from 13th and Commercial streets to Euclid Avenue, an eastern spur that city officials say will be the first step in a commuter line to stretch to El Cajon. The first week on the job in June, 1984, Herzog rented a Hawthorne bulldozer for $1,500. Now Herzog has run up a $15,000 bill with Hawthorne for a series of rentals and repairs.

During his first commission meeting in February, 1984, Hawthorne helped persuade the commission to approve a $3.5 million allocation to start the Euclid trolley line construction. In August, 1984--two months after Herzog began renting his equipment--Hawthorne voted another $9.5 million to keep the construction project going. At the time of the second vote it was public knowledge that Herzog had the contract and that Herzog would get most of the additional money.

One of Hawthorne’s competitors said he didn’t think companies purchased or rented equipment from the San Diego Caterpillar dealership because its owner is on the transportation commission. Bill Johnson, who owns the Caterpillar dealership in Riverside, said, “The purchaser would buy where the purchaser gets the best value.

“I would guess that many of the purchasers aren’t even aware that he is on the transportation board. Maybe some of the big purchasers are aware of it, but the vast majority of them would not be aware of it.”

Hawthorne said he was unaware that Herzog rented equipment from his company for the trolley work, or that others of his customers were receiving transportation projects he had voted to finance.

“I never thought of it as a conflict of interest because of the competitiveness of the business,” he added. “When I allocated funds to a project because of my vote here, I have no awareness of who’s going to get it or what kind of equipment they’re going to use, because the bid comes up at a later date, on a low-bid to the state basis.

“I’m not sitting there as a tractor salesman. I’m sitting there as someone trying to do his best as a transportation commissioner.”

Hawthorne has never asked the FPPC for a ruling on his votes.

In a 1975 case, the FPPC ruled that a Marin Municipal Water District director, who also owned a construction supply firm in his district, should refrain from discussing or voting on lifting a moratorium on water connections if there was a “sufficient likelihood” that new construction meant sales for his company.

Lynn Montgomery, spokeswoman for the FPPC, declined to say whether there is such a likelihood in Hawthorne’s case but said there is a “possibility” the transportation commissioner may have acted in a conflict of interest.

“Public officials are in a position of trust,” Montgomery said. “The courts have said that they should be aware of not only the actual improprieties but the appearance of improprieties.”

Thomas, Deukmejian’s press secretary, said there is no appearance of impropriety in Hawthorne’s case.

Speaking about Hawthorne’s business, Thomas said, “ . . . you’re talking about the best and the only service in town that could meet the needs of the contractor. Does it surprise you that a local contractor would go to him?”

Thomas acknowledged that Hawthorne’s business would benefit from highway projects financed in the San Diego area.

“If the economy is strong and if freeways are being built and if you are associated with the freeway business and if you are a respected businessman, you are generally going to benefit,” he said.

“But it is not a legal conflict,” Thomas said. “That doesn’t make for a legal, or even a generalized conflict of interest.”

Hawthorne said his votes for San Diego projects are largely perfunctory, like a “consent item.” He said his financing votes affect the “timing” of highway and trolley jobs, which are destined to be built at some point because they are included in the state’s transportation plan.

Yet Hawthorne said he does make a difference on the commission because, “I know something about construction and the budgets” and can help steer money toward San Diego projects.

“When they ask what’s going on in San Diego, and they want to evaluate whether to build 40th Street or Route 52 over here, they would look to someone who is familiar with San Diego. ‘What do you know about that project? How important is it? Give us the information that you have,’ ” Hawthorne said.

But in at least one case where he lobbied for a local major highway construction project, Hawthorne said, “It crossed my mind that I would like to see it built, and I’d like to have it use Caterpillar equipment.”

That project--a 2.2 mile stretch of I-15 over what is now 40th Street--has been the focus of considerable debate. Edmiston and other mid-city residents have fought the freeway, asking the state to put it underground so it would not disrupt the neighborhood. Caltrans, however, offered to cover only one block.

The years-long fight came before the city council recently, and Hawthorne appeared before council in April and May. Identifying himself as a transportation commissioner, he warned that the city would lose $27 million in state and federal money for the I-15 segment if it did not accept the state’s proposal.

Hawthorne never mentioned that he was San Diego’s only Caterpillar dealer, or that he is the reelection finance chairman for Councilwoman Gloria McColl, through whose district the highway passes. McColl made the motion to accept the state’s offer.

Asked how it looked for a state transportation commissioner to push a highway contract he hoped would enhance his equipment business, Hawthorne said some people could “read into” his actions a selfish motive, something he insists was not the case.

To those people, Hawthorne said, his involvement “has the appearance of sin.”

Times Staff Writer Kenneth F. Bunting contributed to this report.