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Monday, Aug. 11, 2008 | Former Centre City Development Corp. President Nancy Graham had a deeper and potentially more profitable relationship than previously known with the affiliate of a developer with a CCDC-sponsored project, according to newly obtained court records.
Graham was promised continuing profit participation in a 2002 deal with a Florida developer that has raised questions about her dealings in San Diego with an affiliate of the company.
Graham’s former business stood to profit significantly from a joint venture with The Related Group and Lennar Homes to build a mixed-use, multi-building condominium project in Lantana, Fla., south of West Palm Beach, the city where Graham served as mayor in the 1990s.
Court documents show Graham and her former husband, Kevin Lawler, were guaranteed payment of $394,000 for their participation in the deal with The Related Group and Lennar. The husband-and-wife duo’s former business, N-K Ventures, also stood to reap ongoing profits from participating in the condominium project. Court records show that Graham and Lawler were also promised 25 percent of any profits netted by The Related Group and Lennar. Units continued to be sold until April 2006.
Graham said in May that her former business had been sold to her husband in early 2006 and said its involvement in the Moorings project amounted to selling the site to the larger developers.
According to court records, however, her business was responsible for doing more, including lobbying for grant funding. Knowing the end date of her involvement is the key measurement to understanding whether she had a conflict of interest in its affiliate’s negotiations with CCDC.
As inquiries advance into Graham’s previous relationship with The Related Group — both the City Attorney’s Office and CCDC have opened investigations — questions remain about when Graham’s former business earned profits and when she sold her stake to her former husband. Those dates are vital to answering questions about whether she had a subsequent conflict of interest by participating in the downtown proposal’s negotiations.
State and local laws prohibit public officials from influencing decisions that can benefit themselves, their spouses or their business associates. The laws extend the prohibition for a year after receiving money from a source.
It is not known whether Graham and Lawler were paid by the two developers, and if so, when. The only indication of their profits is contained in the court records of a lawsuit filed against them in 2006 by a business associate seeking a share of their profits. N-K Ventures settled the matter for $1 million in 2007, court records show.
Asked in May about her previous business dealings, Graham said she had cut all ties with her former husband Lawler and N-K Ventures, the business the two formed using the first letters of their first names. Graham said she had not been involved in N-K Ventures since 2004. That year, Graham resigned from a similar redevelopment job in Florida after questions were raised about her company’s connection to The Related Group.
Graham resigned July 24, citing the health of her mother. She exited, though, after having changed her about her involvement in negotiations of the skyscraper. After initially saying she had not participated, she later acknowledged participating in some aspects of the project — but only after documents surfaced revealing that participation.
If N-K Ventures ever received more than $2,000 from The Related Group while Graham was an owner, she would have been prohibited from influencing decisions about the developers or their related business entities for the next year.
“The idea is that you should be free from any financial interest in decisions being made by government,” said Bob Stern, a former state Fair Political Practices Commission attorney who helped write the state law. “Entities that you receive income from or that you have an investment in should not be benefiting from your decision — even if you’re not benefiting directly. The philosophy is that your decision should be made for the benefit of the community.”
Violating that conflict-of-interest law can result in a fine from the FPPC as high as $5,000 per violation. Conflicts can also be punished as crimes under state law.
In May, Graham acknowledged participating in the condominium project and said her business had no say in the Related-Lennar project. She said she and her husband had “flipped” the site to the developers, a term indicating she quickly sold the property for a profit.
Court records show N-K Ventures’ involvement went further. The company was required to pursue road improvement and other grant funding from the Lantana town government, to assist and advise on the project’s architectural design and to work as a liaison with the town of Lantana on all site-planning matters.
When asked in May about the business deal, Graham said she no longer had any interest in N-K Ventures. She said she’d divorced her husband and sold him her interest in N-K Ventures in “early 2006.” Court records show the two separated in July 2006 and were ultimately divorced Sept. 4, 2007.
At the time of their first divorce filing, Graham’s and Lawler’s control of N-K Ventures was governed by a document they called the “Membership Interest Purchase Agreement,” something they referenced but did not file during their divorce proceedings. It is not known how they divided control of the company, though it is still active in Florida and is registered under Lawler’s name. Neither the agreement nor its terms were provided to the court.
While proceeding with the divorce in 2007, Graham and Lawler went to great lengths to hide their assets and their business interests from public view — essentially shopping for a judge who would not make them disclose their assets.
Though the two were required by Florida law to divulge how they were splitting up their finances, a judge ultimately waived that obligation. Getting that waiver, though, was a lengthy process that led them to file for divorce in counties on both coasts. Graham said last week that they filed in three different counties because they sought confidentiality.
“We did not want to make all of our records public,” Graham said. “We had to basically go to Jacksonville, Fla., to find a judge that would not” require financial disclosures. She hung up on a reporter before answering additional questions; she did not return a subsequent call for comment.
Lawler first filed for divorce in December 2006 in Hendry County, a sparsely populated county in Florida’s interior, west of Palm Beach County, where they lived. According to court filings, he and Graham described their marriage as being “irretrievably broken,” citing their geographic separation. Graham had moved to San Diego to take the CCDC job; Lawler stayed in Florida.
They said they’d equitably divided their assets — including their interests in N-K Ventures.
But they didn’t want to share the details with the Hendry County judge, Bruce Kyle. And, on July 2, 2007, Kyle issued an order refusing to allow their divorce to advance until they disclosed their finances. In Florida, financial disclosures can be lengthy, with requirements for submitting such things as income tax returns, months of pay stubs, and corporate tax returns.
Nine days later, Graham and her husband asked again: Could they be divorced without disclosing their finances? Again, the judge said no.
Within five weeks, Lawler had withdrawn his divorce request from Hendry and filed a separate request in Duval County in northern Florida, the county home to the city of Jacksonville. Graham similarly filed for divorce in San Diego County. The Duval County courts worked quickly. On Sept. 4, 2007, a judge there granted a divorce to Lawler and Graham.
They didn’t have to disclose their finances.
At the same time their divorce was moving forward, so was the court case against their business, as well as the Related affiliate’s downtown San Diego skyscraper proposal.
CCDC, the nonprofit downtown redevelopment agency that Graham led, selected a Related Group affiliate, a company called Related of California, in March 2007 to exclusively negotiate the development terms of the 7th and Market project.
Graham said in May that she had recused herself from negotiations or discussions about the 7th and Market project, a step she indicated that she took out of an abundance of caution. Documents obtained by voiceofsandiego.org later revealed that she attended multiple discussions as the project’s specifics were being negotiated.
Graham met with the company and CCDC staffers as negotiations advanced, copies of her personal calendar indicate.
Graham has been dogged before by her relationship with The Related Group and its affiliates. While serving as mayor of West Palm Beach, Fla. from 1991 to 1999, Graham led efforts to redevelop the city’s downtown, which culminated with the Related Companies constructing CityPlace, a $500 million revitalization project that built homes, restaurants and businesses in the city’s downtown.
Graham went back to public office in 2003, while the condominium construction project moved forward, taking a job as executive director of West Palm Beach’s Downtown Development Authority. Her continuing relationship with Related caused friction while Graham served as the authority’s director, leading to her resignation from that post after the mayor of West Palm Beach expressed concerns about Graham’s connections to The Related Group.
The privately owned Related Companies, which is based in New York and has a California-based affiliate working in downtown San Diego, is a minority owner of the Florida-based Related Group, said Joanna Rose, a Related Companies spokeswoman. The two entities are financial partners and affiliates.
Related of California, the local affiliate, is still in negotiations with CCDC about the project’s specifics. A final agreement, which would require City Council approval, has not been completed. CCDC’s board, which can make a recommendation to the council, has delayed a decision pending the results of an internal investigation into the company’s selection. It was launched within a week of Graham’s resignation.
Derek Danziger, a CCDC spokesman, said the redevelopment agency’s board wants the review finished by early September so the project can be discussed at CCDC’s late September board meeting.
“That would all be dependent on whether the review finds anything,” Danziger said.