Wednesday, Aug. 13, 2008 | While still married to former Centre City Development Corp. President Nancy Graham, Kevin Lawler received payments from an affiliate of a developer doing business with CCDC.
According to Florida court depositions, their business, N-K Ventures, was paid at least $7.5 million for its participation in a Lantana, Fla., condominium project with The Related Group and Lennar Homes. Lawler, now Graham’s ex-husband, testified under oath last year that he received a $250,000 payment as recently as May 2007.
At the time, Graham and Lawler were separated and had filed for divorce. However, Lawler also testified that N-K Ventures received a $250,000 payment in April 2006 — three months before he and Graham were separated. Graham and Lawler stayed legally married until Sept. 4, 2007.
If Graham received more than $500 of the April 2006 payment, she would have been prohibited by state and local conflict-of-interest law from influencing any decisions that benefited The Related Group, Lennar and their connected business entities for one year.
Within that one-year window, Related of California was chosen by CCDC’s board as the preferred developer of a 41-story, $409-million condominium and hotel project at 7th Avenue and Market Street in downtown San Diego. According to her calendars, Graham met with a board member to discuss the project on March 12, 2007. Her involvement continued as the project was reviewed and refined, according to those personal calendars. She attended meetings with the developers and staff members through February 2008.
The payment detail brings into greater focus the relationship between Graham, her former business and the affiliate of a developer doing business with CCDC. The May 2007 payment raises questions about whether she would have benefited from a payment to her husband while the two were separated. The April 2006 payment also raises questions about whether Graham may have profited and, if so, whether she had a conflict she did not disclose.
State and local laws prohibit public officials from influencing decisions that can benefit themselves, their spouses and their business associates. The laws extend the prohibition for a year after receiving money from a source. The state Fair Political Practices Commission has advised that a prohibition to a spouse extends until a divorce is finalized.
Fred Maas, CCDC’s chairman, said he was unaware of the two payments to N-K Ventures and said their revelation was further justification for the internal investigation CCDC launched July 30. The agency has hired an outside law firm to review the timeline of events relating to the 7th and Market project.
“I’m done getting in the middle of this and defending this,” Maas said. “The bottom line is that there are serious questions here. I want to get to the bottom of it. The layers of the onion are very troubling.”
Two separate projects are involved. In Lantana, Fla., Graham and her husband jointly developed a condominium project with The Related Group and Lennar.
When first asked in May about her financial interests in that deal, Graham said her involvement had amounted to “flipping” the site to The Related Group and Lennar. She said she sold her interest in N-K Ventures to her husband in early 2006. They split up their interests in the company sometime in 2006, according to their Florida divorce records.
They did not disclose how they’d divided the company, those records show, deliberately working to find a judge who would allow them to conceal their finances at the time of their divorce.
In San Diego, Related of California, an affiliate of the Florida company, is working to build a downtown skyscraper at 7th and Market. When first asked about her participation in that project’s negotiations at CCDC, Graham said she had recused herself.
A memo surfaced in late June showing that Graham had signed off on an administrative extension to Related’s exclusive agreement to negotiate with the city. Graham then admitted she’d been involved in “some minor things.”
Her personal calendars, obtained by voiceofsandiego.org, subsequently revealed that she was scheduled to attend meetings with the developers about their project. She did not return a call Tuesday.
Graham resigned her post July 24, citing her mother’s declining health. She exited a week after the publication of her calendars revealed the discrepancy in her story.
The project has been proposed by Related of California along with CityLink Investment Corp. Together, Related and CityLink aim to build a 41-story, $409-million condominium and hotel at 7th Avenue and Market Street. It is slated to benefit from an $8.7 million city subsidy in exchange for including affordable housing units.
Since Graham’s resignation, the City Attorney’s Office and CCDC have begun investigations into the circumstances surrounding the local skyscraper project. The FBI has also conducted at least one interview about the project, according to the interviewee. Karen-Huff Willis, chairwoman of the Black Historical Society of San Diego, said she was interviewed Tuesday by an FBI special agent.
State and local laws prohibit government employees from acting with a conflict of interest in their official capacity. State Government Code Section 1090 forbids officials from having any financial connection to a contract they participate in. The law is fundamentally underpinned by the expectation that government officials must serve the public interest, not their own.
In a 1962 opinion about conflicts, the California Supreme Court said: “The object … is to remove or limit the possibility of any personal influence, either directly or indirectly which might bear on an official’s decision, as well as to void contracts which are actually obtained through fraud or dishonest conduct.”
Stacey Fulhorst, executive director of the San Diego Ethics Commission, declined comment about Graham’s case but spoke generally about conflict laws. She pointed to a 2002 Fair Political Practices Commission advice letter that addressed a similar circumstance. The letter says an official’s economic interests include the spouse’s — even if the couple is separated or estranged. “The only time a spouse’s interests cease to be those of the city official is when the divorce is finalized by the court,” Fulhorst said.
Whether the May 2007 payment of $250,000 gave Graham a conflict of interest in her dealings with the developer’s California affiliate depends on whether Graham knew her husband received the money, said Bob Stern, a former Fair Political Practices Commission attorney who helped write the state’s conflict-of-interest law.
“It really comes down to a factual question: What did the official know and when did the official know it?” Stern said. “If the official did know it — there’s clearly a problem there.”
He added: “You would not automatically say the official is in violation if the official can say there’s no way I knew about this. The separation does matter in my mind, it’s a whole different relationship at that point.”