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San Diego Union-Tribune
12/28/2001

Contract required Malcolm to put needs of energy firm first

By Ronald W. Powell
Staff Writer
At the height of the energy crisis, Port Commissioner David Malcolm was being paid $20,000 a month by Duke Energy under a contract that required him to put the power company's interests ahead of all others, including those of the Port District.
     Duke, which operates the South Bay Power Plant on tidelands controlled by the San Diego Unified Port District, has been accused of charging customers more than is warranted.
     In the contract, Malcolm agreed to "act in the best interests of Duke" and "not assist any competitor of Duke, specifically including the Port District," according to a confidential letter from the port's attorney to members of the Port Commission. The letter, dated Dec. 18, was obtained by The San Diego Union-Tribune this week.
     Port attorney David Chapman wrote the letter to commissioners to inform them of information gathered this month in depositions for a lawsuit filed against Malcolm by a Sacramento lawyer.
     Although it had been previously reported that Malcolm worked as a consultant to Duke, the terms of his contract had not been disclosed. He served as a consultant to the company from May 2000 until Duke terminated the agreement in late April 2001.
     Critics say Malcolm breached the public trust and should resign from the Port Commission.
     Malcolm said yesterday that he regrets taking the Duke job, which called for him to help Duke obtain operating agreements for other publicly owned power plants around the country.
     "I certainly could have used better judgment, and I apologize for that," Malcolm said yesterday. "If I had it to do over again, I wouldn't have entered into the agreement."
     But, Malcolm said, he did not break the law.
     "Nothing was hidden. I fully disclosed and reported," he said.
     In his letter to port commissioners, Chapman said Malcolm was within the law because he abstained from votes and discussions involving Duke and the power plant after he became a consultant.
    But lawyer Michael Aguirre, who has filed a class-action lawsuit against Duke and other energy companies alleging rampant overcharging of customers during the energy crisis, said the Duke-Malcolm relationship should be investigated by the state Attorney General's Office.
    "The amount of money he was paid not only raises questions of fundamental integrity, but raises questions about whether Duke was involved in a scheme to pay off a key member of the Port District while ripping off the people of San Diego County," said Aguirre, who is a candidate for district attorney.
    Aguirre said an attorney general's investigation could determine whether Malcolm has funneled information to Duke about port matters. In June, the Port Commission formed a committee to investigate Duke's conduct as a power plant operator. The committee recently hired an auditor and an energy expert to assist the investigation.		     "It's a matter of where his loyalty lies," Aguirre said. "There's an inherent conflict between his working for Duke and his working for the port."
     Before Malcolm went to work for Duke, he played a key role in negotiating a 101/2-year lease that grants the company the right to operate the power plant on the Chula Vista waterfront. The lease was signed in April 1999.
     The port leased the plant to Duke for $110 million over the term of the deal. That's the same amount the port paid to buy the plant from San Diego Gas & Electric Co. in 1998.
     Chula Vista City Councilman Steve Padilla said yesterday he does not have enough information to judge Malcolm's conduct, but said he intends to look into it since Malcolm represents Chula Vista on the seven-member Port Commission.
     "You always want your representative to be your representative," said Padilla, who is running for mayor of Chula Vista. "I don't know if the language in the contract translates into a conflict of interest or is just standard language in a consulting contract. Have other port commissioners taken consultancies and had to recuse themselves? That's just some of the questions."
     Chula Vista City Councilwoman Mary Salas, who has previously called for Malcolm's resignation from the Port Commission, said yesterday that he should resign and an investigation should be conducted.
     "Unfortunately, it's a pattern -- something that's been talked about in hushed tones for years," said Salas, who is also a Chula Vista mayoral candidate. "But the leadership in Chula Vista has chosen to close their eyes and look the other way."
     Malcolm said he plans to serve out his second term, which expires in January 2003.
     Duke spokesman Tom Williams said the consultancy was not a payoff to Malcolm. "Not in any way, shape or form," Williams said.
     The pending lawsuit against Malcolm, a Republican, was filed by Tony Miller, a Democrat who once served on the board of the State Fair Political Practices Commission and was acting secretary of state in 1994. It accuses Malcolm of violating state law by failing to disclose some of his financial interests from 1995 to 1999 while serving on the Port Commission. The accusations in the suit do not pertain to Malcolm's contract with Duke.
     The lawsuit is scheduled for trial Jan. 25 in San Diego Superior Court.

Copyright 2001 Union-Tribune Publishing Co.


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