Saturday, Aug. 30, 2008 | The scope of potential conflicts of interest at the Centre City Development Corp. once again expanded Friday, a day when the agency’s attorney resigned and one of the city’s largest proposed hotels withdrew from downtown.

The downtown redevelopment agency’s lead counsel, Helen Holmes Peak, who has received income from Lennar Corp., resigned after she acknowledged participating in discussions that she shouldn’t have about one of the company’s projects at CCDC. She said she was unaware of the earlier financial connection to Lennar and didn’t know the company was still involved with the project.

That development, Ballpark Village, was dealt a separate setback Friday as Marriott International jettisoned its plans for a 1,929-room hotel on the 7.1-acre site east of Petco Park.

Within the last week, CCDC has expanded an investigation to determine whether Graham’s involvement in any downtown project during her tenure was inappropriately tainted by her undisclosed income from Lennar and The Related Group, whom she partnered with on a Florida condominium deal. She made nearly $3 million from that deal, court records show, but did not report it in required conflict-of-interest disclosure forms.

Both Lennar and an affiliate of Related had development projects before CCDC, and records show Graham was involved in negotiations on the deals.

Now, CCDC Chairman Fred Maas said he’ll recommend that the probe again expand to include Peak’s involvement with Lennar projects during her time at the agency, where she has worked since 2001. CCDC’s board will discuss the recommendation Sept. 10.

Peak’s departure comes as the fallout continues spreading from Graham’s July 24 resignation. Earlier in the week, CCDC suspended efforts to build a new City Hall after a potential conflict with an agency consultant was disclosed. The lead financial analyst examining whether a new City Hall would save money subsequently went to work for one of the companies involved in the project.

At the time, Maas warned that the probe would expand beyond Graham’s troubles. “This is not going to be pretty,” Maas said.

Peak’s potential conflict arises from her Escondido law firm, Lounsbery Ferguson Altona & Peak, of which she owns 25 percent. One of her partners represented Lennar on an Escondido-area development.

Peak reported receiving more than $10,000 from Lennar in 2007, according to her annual financial disclosure form. But she said her law firm also received money in 2005 and 2006 that she did not disclose. In her resignation letter, she said she had been unaware of the income.

Peak also said she was unaware of Lennar’s continuing involvement in Ballpark Village. The company is part owner of the land east of Petco Park, but has essentially been a silent partner in the latest effort to revamp the allowable uses on the 7.1-acre site. Lennar has not been listed on documentation submitted to or prepared by CCDC.

“I did not know or have reason to believe I should have disqualified myself from those meetings” about Ballpark Village, Peak wrote in her resignation letter.

Maas said Peak provided “administrative and procedural guidance” on Ballpark Village and was not involved in any “deal points.” But he was not sure whether she had been involved in the project’s original 2005 approval.

“Did it arise to the level of a conflict? I don’t know without knowing the details,” Maas said. “There are some things that are minor and administrative. But she needed to act quickly and I agree with her.”

As CCDC’s investigation moves forward, Marriott’s withdrawal clouds the effort to build a large hotel near the ballpark. JMI Realty, the lead developer of Ballpark Village, said it is unsure what its next steps are. The company said in a statement that it will consider continuing efforts to secure approval for a hotel even without an identified tenant.

Marriott decided within the last week to withdraw because of the state of the economy, Marriott senior vice president Christopher Rose said. CCDC’s investigation into Graham’s potential conflicts did not play a role, he said.

“That was not a consideration,” Rose said. “It was strictly a capital markets issue.”

Bruce Baltin, a hospitality industry analyst with PKF Consulting in Los Angeles, said Marriott’s decision is not unusual in the current market. Borrowing money to finance major projects is becoming more expensive, he said, particularly for larger hotels.

“It’s not at all surprising given the uncertainty in the economy,” Baltin said. “There are many projects being slowed down. This is one of many.”

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