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Changes could be coming to the San Diego Housing Commission, as the city grapples with a public corruption case against a broker hired by the agency to help it purchase two hotels for homeless housing last year.
The city attorney has abruptly taken control of a lawsuit alleging fraud and a violation of anti-corruption laws by the broker, and the City Council has asked the city’s independent budget analyst to examine ways that other cities govern their low-income housing agencies, which could lead to agency reforms.
Last month, during a closed session meeting, the City Council put City Attorney Mara Elliott in charge of an anticipated lawsuit against the broker, Jim Neil, and his company, Kidder Matthews, and directed the agency to terminate a contract it had signed with another law firm, Noon & Associates, to handle the litigation.
In a confidential letter sent to City Council members and Housing Commission board members and leadership, Elliott directed Chuck Christensen, the commission’s general counsel, to assist with the transition but to otherwise maintain his responsibilities for the agency.
“At the conclusion of the Special Meeting, the (Council) authorized the City Attorney to represent the SDHC in the previously authorized litigation against Jim Neil, Kidder Matthews, Inc. … with regard to the purchase of hotel properties,” reads the confidential letter, which was reviewed by Voice of San Diego and confirmed with two sources.
Tuesday afternoon, following another closed-session City Council meeting, Elliott’s office announced it had filed a lawsuit against Neil and Kidder Matthews. The city attorney argued that Neil “made fraudulent representations to the Housing Commission, violated conflict-of-interest disclosure laws, and had a prohibited financial interest in one of the contracts they participated in making.”
In February, the Housing Commission’s legal counsel learned that Neil – after signing a contract to help the agency acquire hotels to turn into long-term housing for homeless residents – purchased 40,0000 shares of stock in the company that owned one of the hotels. Other Housing Commission staffers learned of Neil’s investment last year, but told legal counsel they did not realize that it represented a potential violation of the anti-corruption laws that Elliott is now suing over.
Elliott’s release said the city is also suing Neil over commissions he received exceeding his agreed-upon rate with the Housing Commission, both in the sale of the Mission Valley hotel owned by the company in which Neil invested, and in the sale of another hotel in Kearny Mesa.
The Housing Commission is a uniquely arranged entity. It was formed by the city in 1979 to handle housing policy in San Diego. It is an independent agency, with its own seven-member board appointed by the mayor and confirmed by the City Council, that can either lease or build property for low-income residents. Its board oversees those decisions, but the agency is also overseen by the City Council, acting as the San Diego Housing Authority. In that role, the City Council controls the agency’s budget and whether it issues bonds or enters into labor agreements. The Housing Commission’s board can also refer any issue to the City Council, at which point it becomes the final authority on it.
Last month, the City Council, acting as the Housing Authority, asked the independent budget analyst to research other ways that cities in California had organized the relationship between the city and the agency that oversees low-income housing programs, like the San Diego Housing Commission.
That request followed briefing by Elliott outlining the unusual structure that allows the agency to be overseen by two separate boards.
City Councilmen Chris Cate and Sean Elo-Rivera had asked the city attorney for guidance on whether they were allowed to have joint meetings between the two boards, and if the two boards were allowed to discuss confidential matters discussed in closed session between each other.
The two boards are allowed to hold joint open-session meetings – but the employment contract for Rick Gentry, the Housing Commission’s president, prohibits joint closed-session meetings, Elliott concluded. She said there were legal ways that the two groups could discuss things they had learned in closed session.
Elliott’s letter to the Housing Commission on her newfound role overseeing the Neil lawsuit underscores the extent to which the matter had been batted back and forth between the two agencies in a series of closed-session meetings.
In a March 19 closed-session meeting, according to Elliott’s letter, the Housing Commission’s board referred the Neil issue to the Housing Authority. “The (Housing Authority) discussed the Referred Question at several subsequent Housing Authority meetings,” the letter reads. In a July 20 meeting, the Housing Authority put Elliott in charge of the issue.
At the informational meeting on the legal arrangement of the Housing Commission and Housing Authority, Cate, Elo-Rivera and Councilwomen Monica Montgomery-Steppe and Marni von Wilpert expressed interest in an independent budget analyst survey of other models used by California cities. Elliott said at the outset of the meeting that if the Council was interested in exploring alternative models, they should request that of the IBA.
Following the meeting, Cate and Elo-Rivera wrote the IBA a memo detailing the request.
“To complement this report, it would be useful for the Housing Authority to understand how other cities and jurisdictions structure their housing authority and, if applicable, housing commission, and the policies utilized to govern those housing authorities so that we can determine if updates and changes to our current structures, policies and practices are necessary to align with best practices across the state,” the July 21 memo reads.