10:51 PM PST on Saturday, November 21, 2009

By DUANE W. GANG
The Press-Enterprise

Two of the developers at the center of a corruption investigation in San Jacinto funneled more than $190,000 into the campaign accounts of Councilman Jim Ayres, prosecutors contend.

At the same time, Ayres repeatedly voted to approve projects favorable to the two businessmen, according to court documents and a review of city records.

He didn’t abstain from voting on the developers’ projects until a month after authorities first searched his home as part of their investigation.

It’s illegal for elected officials to vote on matters in which they have a financial stake. Votes benefiting major contributors, while not always improper, often raise questions about perceived conflicts of interest.

Now, Ayres, 48, is the central figure in a 155-count indictment that accuses him, developers Stephen Holgate and Robert Osborne, and six others of laundering tens of thousands of dollars in campaign funds, as well as tax fraud, bribery and perjury.

Also indicted are Mayor Dale Stubblefield, 41; Councilman John Mansperger, 41; Councilman James Potts, 67; Nancy Ayres, 44, who is Jim Ayres’ wife and a San Jacinto school board member; and businessmen Byron Jerry Ellison Sr., 70, and Scott Shaull, 45.

All have either pleaded not guilty or deferred their arraignments until early December.

Holgate and Osborne are two of the largest developers in San Jacinto, a city of 39,000 people that has seen its population skyrocket in recent years.

Holgate, 62, who split his time between homes in San Jacinto and Roseville, owns dozens of properties throughout San Jacinto and Hemet. The land collectively is assessed at more than $18 million, property records show.

He has plans to develop more than 800,000 square feet of commercial space in the Gateway, a 1,700-acre area at the city’s western entrance that officials hope to transform into a center for new retail, health care and professional businesses.

The Gateway is at the crossroads of the proposed Mid-County Parkway and a realigned Highway 79. The location near the new road could attract new businesses and dramatically increase the value of Holgate’s land.

Meanwhile, Osborne, 69, of Mission Viejo, has housing developments across the city, including tracts along Kirby Street in what he described to City Council members as the city’s “first real gated community,” meeting minutes show.

Osborne also owns a horse farm in San Jacinto along Sanderson Avenue.

The amount of money flowing into the coffers of elected officials, the housing boom and the prospect of a new freeway route into the city — combined with the recent indictments — raise questions about the officials’ motives, said Bob Stern, president of the Center for Governmental Studies in Los Angeles, a nonprofit watchdog group.

“The public may be demanding a new council review these” projects that have yet to start construction, Stern said. “My assumption is they would. They ought to.”

In an interview Thursday, Ayres said the city is unlikely to rethink recent development decisions, even for those specifically identified by investigators as possibly linked to crimes.

Ayres said many of the votes for Holgate and Osborne projects were either 5-0 or 4-1, meaning the items were not controversial and his vote didn’t make a difference.

Holgate and Osborne, along with their attorneys, did not return messages seeking comment.

Mid-County Parkway

Three of Holgate’s larger development proposals are near the proposed route of the Mid-County Parkway.

The parkway is expected to run 16 miles from Highway 79 in San Jacinto to Interstate 215 in Perris and help alleviate the traffic in the San Jacinto Valley.

The mostly four-lane parkway will follow the Ramona Expressway, a rural two-lane road that has become a major thoroughfare for commuters.

The San Jacinto area’s population growth from less than 24,000 in 2000 to more than 39,000 in 2008 has outpaced both road building and job creation, forcing commuters to hit the road each morning, Inland economist John Husing said.

The parkway also will increase the value of nearby land, particularly if the property is located at major intersections, Husing said.

Land at the crossroads of Highway 79 “would be hugely important and valuable” if the Mid-County Parkway is built, Husing said.

According to the grand jury indictment, search warrant affidavits and a review of city records:

Holgate was the true source of more than 30 donations to Ayres’ failed 2006 campaign for the state Assembly and to his successful 2008 City Council re-election bid. Ayres first won election to the council in 1999.

The donations totaled at least $168,238 and began in early 2005 and continued until at least August 2008. In 2006, Assembly campaigns had a $6,600 contribution limit. Local city council races have no donation cap.

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