Witness: District pushed poor underwriter
The county official says she was told he 'has to be on that list'
By Aaron Burgin
June 14, 2013
Gary Cabello, 54, bond financier, is accused of offering thing of value to a school official and bribery
A former San Diego County investment officer was taken aback when Sweetwater schools officials pushed to have the least qualified bidder selected to market Proposition O construction bonds, she testified to the grand jury.
Michelle Durgy, now the chief investment officer for the city and county of San Francisco, served on a panel to help select the underwriter.
The committee did not select Gary Allen Cabello, who is now charged with bribing officials at Sweetwater and Southwestern College to obtain multimillion dollar underwriting contracts for his company, Alta Vista Financial. He has pleaded not guilty.
Durgy testified that Sweetwater officials told her Alta Vista would have to be selected.
“And I said, 'Oh no, that is not happening,’” Durgy told the grand jury.
South County Grand Jury transcripts Vol. 5 Download .PDF
Her testimony was among the 4,000 pages of grand jury transcripts a judge released last month, amid objections from defense attorneys who claimed the release would prejudice potential jurors against their clients.
Durgy was on the selection committee for the Sweetwater Union High School District’s $644 million bond because the county advises districts on certain financial matters such as bond issuances and investment management.
Following the firms’ interviews, the selection committee picked two major underwriting firms and two minority-owned firms as their recommendations to the board. The list did not include Alta Vista.
When former Sweetwater Chief Financial Officer Dianne Russo saw this, she quickly objected and said that Alta Vista must be included, Durgy testified.
“At that point, Diane spoke up again and said, “Oh, (former Sweetwater Superintendent) Jesus Gandara... is not going to like this,” Durgy said. “And I said, ‘Well, too bad. That’s who we selected.’ She said, ‘No, no, Michelle, you don’t understand. Alta Vista has to be on that list.’”
Of the 10 firms that interviewed, Durgy said that Alta Vista performed the worst. They were admittedly unprepared and she described their presentation as thin.
“They started off by saying, ‘Wow, we are not really prepared today, we kind of pieced this,’” Durgy said. “And I thought, oh, you know, this is not professional at all.
“And I ... came away thinking... I gave them an opportunity to redeem themselves and that certainly was not the case, and I am unimpressed with this. And I scored them the lowest out of all the firms because they were — it was pretty sad.”
Durgy testified that she thought Russo was kidding at first, but then Russo said that not only did Gandara expect them to be on the list — he wanted them to be the lead underwriter.
Durgy said she was eventually overruled by the rest of the selection committee, and Alta Vista was included.
Durgy said that the recommendation was that Alta Vista play a minor role in the underwriting. Ultimately, however, Cabello’s firm participated in underwriting nearly $350 million in bonds at Sweetwater and Southwestern College.
Durgy said she compiled all relevant correspondence in a memo at the request of her boss, County Treasurer Dan McAllister, after Durgy raised concerns about the integrity of the process.