Members of the Housing Commission board appear to be at odds over the agency’s public response to the revelation that a broker it hired to negotiate the purchase of a Mission Valley hotel invested in the company selling the hotel right before the deal closed.
Just after Voice of San Diego published the story detailing the potentially criminal conflict of interest Friday, a Housing Commission official sent a public statement that called the purchase a “great acquisition.”
But two San Diego Housing Commission board members disavowed the statement, and said they didn’t approve it and don’t necessarily agree with it.
After inking a deal to represent the Housing Commission as it sought hotels to turn into housing for homeless people as part of the state’s pandemic response, the broker, Jim Neil, purchased 40,000 shares in the company that owned the Residence Inn Mission Valley. Then Neil helped the Housing Commission purchase the hotel for $67 million, according to a 16-page memo by the law firm Christensen & Spath.
In response to the story, Scott Marshall, the Housing Commission’s vice president of communications, defended the hotel purchase. Marshall declined to answer questions before the story’s publication.
“While SDHC does not comment upon actual litigation or investigation, we are compelled to highlight that nothing contained in the Voice of San Diego’s article, in any way, casts doubt on the value or the excellent condition of the property acquired,” Marshall wrote.
He argued an independent appraisal pegged the hotel’s value above the purchase price, the lender that financed half of the transaction conducted its own appraisal and that the state’s housing department accepted the appraisal when it approved a nearly $30 million grant.
Neil also negotiated himself a $502,500 commission, paid by the Housing Commission, as part of the purchase, even though his contract with the agency stipulated that he’d receive $250,000 per hotel purchase he negotiated, the legal memo alleged.
“The sole issue is whether, by virtue of alleged violation of various laws, the commercial broker shall be required to reimburse SDHC for the $502,500 paid as a commission,” Marshall wrote. “This issue will be resolved through the legal system. No other part or the propriety of the transaction itself is even in question.”
A seven-member board guides the Housing Commission’s policy and has final approval of property acquisitions and other financial decisions. The legal memo outlining Neil’s alleged violation went to the commission’s board in closed session earlier this year, and later to the City Council, which governs the agency in its capacity as the Housing Authority of the city of San Diego.
Now, the chair of the San Diego Housing Commission’s board and another board member have come forward to renounce Marshall’s statement.
Stefanie Benvenuto, chair of the Housing Commission, said in an interview that the statement was not approved or vetted by the board, and that she disagreed with it.
“What I think is the most important thing to communicate is the Housing Commission will do everything in its power to hold folks accountable if it’s found illegal action occurred,” she said. “We take our job as stewards of public trust and public dollars seriously. The statement answered questions that weren’t asked. Your story wasn’t about whether it was a good deal or whether we should house homeless people, it was about an action that could have been criminal.”
Housing Commissioner Ryan Clumpner disavowed Marshall’s statement as well, specifically its assertion that the “sole issue” is whether Neil will have to reimburse $502,500.
“While I am respecting the request of the CEO and legal counsel not to comment on this matter, the statement issued was not reviewed by or discussed, to my knowledge, with any commissioners,” he wrote. “It does not represent my views. I do not believe in limiting legal options before we know all the facts, especially in public.”
Before the conflict of interest revelation, the hotel purchase had already been scrutinized as comparably expensive by the Union-Tribune in February. At the time, the Housing Commission defended the transaction on similar terms as it did in its Friday statement.
But two days after the Union-Tribune’s article published, the agency’s legal counsel “first became aware” of Neil’s stock purchase. The agency investigated the matter, leading to the March 1 memo outlining its findings, which was provided in closed session meetings to both Housing Commission board members and the City Council. That document recommended forwarding the agency’s findings to the district attorney for potential criminal prosecution.
Mayor Todd Gloria, in his own public statement, did not echo the commission’s assertion that the sole issue was whether Neil is required to return his $502,500 commission.
“I’m deeply concerned about these revelations regarding the hotel purchase in Mission Valley. Appropriate action must be taken. This is not how city entities, entrusted with taxpayer dollars, should be doing business and I encourage a law enforcement investigation,” he wrote.