REDWOOD CITY -- A Clayton city councilman's former business associates raised doubts about his integrity Wednesday at the start of an embezzlement trial that could shake up this year's council race.
They accused Vice Mayor Joe Medrano of twisting information and ignoring phone calls about money they say was misappropriated.
The testimony came on the second day of the prosecution's felony embezzlement case against Medrano. It also comes nearly a month before voters will decide between Medrano and four other Clayton council candidates running for three seats.
If found guilty, Medrano would not be eligible to hold a council seat. The verdict would not, however, come in time to remove his name from the Nov. 6 ballot. The trial is expected to last a week and include testimony from Medrano.
The case centers around Medrano's business dealings with iPass, a wireless network provider for whom Medrano was an insurance broker.
The business relationship unraveled in June 2009 after new leadership took over and had questions about the insurance package Medrano had presented to the company, according prosecutors and prosecution witnesses.
During the presentation, new chief financial officer Steven Gatoff became suspicious of the information, he testified Wednesday. The dollar amount for the insurance seemed high for a company of iPass' size and the fact no other insurance company offered a competitive quote when asked seemed
So Gatoff said he asked another broker to investigate whether the other companies had actually been contacted; they reported not being given a chance to compete, Gatoff testified being told. iPass hired another broker the next month and later got the same insurance for half the price, Gatoff testified.
Prosecutors allege that after iPass parted ways with Medrano, he was still responsible for forwarding two iPass checks to insurance provider Travelers Insurance but never did, putting the company's insurance coverage in jeopardy. Prosecutors said Medrano deposited the $159,000 into his own business account.
A former attorney for iPass testified that he tried to reach Medrano by phone several times, and when he finally did, Medrano spoke rapidly until he was asked about the money.
"He almost whispered that he didn't have it anymore and he didn't mean to keep it," said attorney Paul Levy, who suggested they could work out a payment plan. Medrano then hung up, Levy said.
A former chief financial officer for iPass had a more positive opinion of Medrano when questioned by a defense attorney.
Frank Verdecanna, who worked for iPass from 2000 to June 2009, said he uses Medrano as his broker at his new company. When a defense attorney asked Verdecanna if he had any concern about Medrano, Verdecanna said the criminal case concerned him a little, but that the dispute with iPass had not stopped him from hiring Medrano. The defense pointed out that Medrano and iPass had exchanged about $12 million in premiums over the years without incident.
Medrano has pleaded not guilty and has said he will be found innocent once the jury hears his side of the story. The defense has not called any witnesses yet.
Medrano's trial has not become a campaign issue. A resident questioned Medrano about the criminal case at a forum on Monday, the day the trial began. Medrano, who has pleaded not guilty, assured voters he was innocent and that a jury would conclude that, too.
"I did not embezzle any funds; it's a civil dispute," Medrano told voters at the candidate forum. Medrano and iPass have sued each other in civil court over this matter.
The four other Clayton council candidates -- Jim Diaz, Howard Geller, Kevin Liberman and Julie Pierce -- refused to address the issue when asked.
David DeBolt covers Concord and Clayton. Contact him at 925-943-8048.