Eighteen months after leading the local battle against gay marriage—and shortly after an aborted plan to move to Tracy and run for U.S. Congress—Larry Pegram promised that his campaign for San Jose City Council would be about fixing the city’s pressing money troubles, not social issues. Since that time, Pegram has emphasized his commitment to balanced budgets and cited his own credentials as a professional financial planner.
But Pegram’s own financial history does not demonstrate the kind of business record that inspires trust in managing the people’s money.
His recently-publicized 1996 bankruptcy, during which he either purposely or inadvertently filed under the name “Lawrence Pellman,” appears to be just one chapter in a checkered career.
Three years before filing for bankruptcy, Pegram created a partnership with a name incorporating his initials, LRP Realty. Using contacts with the San Jose Rotary Club, he stitched together a group of associates to buy two apartment complexes in Concord, according to Dan McDonald, a retired insurance man and longtime Rotarian.
“The idea was to clean them up, fix them up, get the rents up and then resell them,” McDonald recalls.
Within 18 months, both apartments faced foreclosure.
“Larry ran the properties into the ground,” McDonald says. “It was really mismanaged. And there was a lot of money unaccounted for.”
McDonald, who has invested in local businesses, including Metro, says he had to take over one of the apartments in order to rescue the deal. He says he provided funds to Pegram, mistakenly believing that the other partners, many of whom were longtime friends, would recover some of their investment out of the transaction.
“I paid off the loans, and subsequently gave Larry a check for something like $25,000,” McDonald recalls. “He was supposed to take that money and distribute it to the partners. And he never did that.”
Pegram confirms most of McDonald’s account, pointing out that the deal happened almost 20 years ago and he therefore does not recall the details.
“If he gave me a check, he didn’t give it to me personally,” Pegram says, explaining that while he handled the transaction, the check “was made out to the partners and not to me.”
“The money would have been used to satisfy the obligations of the partnership.”
He says he lost at least $25,000 on the deal himself, though he took some management fees. McDonald says none of the partners ever took legal action against Pegram because the amounts weren’t big enough to justify litigation expenses, and they knew he was broke.
“I guess we all figured, why beat up on the guy?”
McDonald, a notoriously pleasant and soft-spoken man who by all accounts never has a bad word to say about anyone, is blunt in his assessment of Pegram.
“I think he’s an incompetent shyster,” McDonald says. “Larry Pegram has the unique ability to look you in the eye and lie.”
In response, Pegram says he considers McDonald a friend: “I know of no instance when I was untruthful with Mr. McDonald.”
Following LRP, Pegram became a financial planner for World Financial Group, a multi-level marketing company which, during the time Pegram worked there, was repeatedly charged with fraud and misrepresentation, and was the subject of several class action lawsuits and disciplinary action from the National Association Of Securities Dealers. (The company has since been sold to a new owner and reportedly cleaned up its act.)
Pegram, 65, has hop-scotched though various careers in the 46 years he has been in San Jose. Throughout that time, he has found himself in various forms of trouble, and not just because of his radical political views.
After serving for seven years on the San Jose police force, Pegram was elected to the City Council in 1974. There, he became known as one of the “Fearsome Foursome” along with David Runyon, Joe Colla and Al Garza. This developer-friendly voting bloc forced a controlled-growth city manager from office before being brought up on bribery charges.
Pegram was never charged with any wrongdoing, but Garza was indicted and convicted of charges that involved an envelope of cash. Runyon was arrested and forced to quit the council for drunken indiscretions. Colla and Pegram faded from public view.
Ex-mayor Tom McEnery, a member of the planning commission who had clashed with the Fearsome Foursome over its sprawl-friendly agenda, was appointed to take over Runyon’s seat. McEnery says Pegram and his cohorts had “a kind of pay-to-play mentality” with regards to developers.
“They wanted San Jose to have very relaxed development policies, and that was exactly the wrong direction the city needed to go in,” McEnery says. “They weren’t concerned with building San Jose’s tax base. They were more concerned with accommodating developers and sprawl.”
When asked for his opinion about why the Fearsome Four were so chummy with development interests, McEnery invokes the old adage: “Follow the money,” he says.
McEnery, who famously reversed the city’s economic development policies during his two terms as mayor, says he understands why his friend, Mayor Chuck Reed, endorsed Pegram despite his controversial history. Reed sees himself as locked in a battle with public employee unions, and Pegram has been their harshest critic—although his opponent, Donald Rocha, has recently demonstrated an independent streak, breaking with labor to endorse union-opposed Measures V and W.
“I think Chuck looks at Pegram the way FDR and Churchill looked at Stalin,” McEnery says, quoting Roosevelt: “’He may be a son of a bitch, but he’s our son of a bitch.’”