Broker Says Housing Commission Staff OK’d Investment That Launched Probe

San Diego Housing Commission officials not only knew the broker they hired to help purchase hotels last year had invested in the company that sold one of the hotels, they even told him it was OK, the broker said in his first public comments since the alleged conflict of interest came to light three months ago.

Jim Neil, the broker for Kidder Matthews who helped the San Diego Housing Commission orchestrate the purchase of two hotels to be used as long-term housing for homeless residents, issued a statement Wednesday morning through the PR firm Paragon Communications, a week after City Attorney Mara Elliott announced a lawsuit alleging he made fraudulent representations to the Housing Commission, violated disclosure and conflict-of-interest laws and received a commission in excess of his contract.

The statement said Neil intends to contest Elliott’s civil suit and defend his professional reputation.

“The City Attorney’s release contains a long series of accusations rife with omissions of critical facts to support their flawed narrative of Jim Neil’s work on behalf of the City of San Diego,” the statement, attributed to Neil’s legal team, says.

But the statement also makes a series of factual assertions that, if true, would put Housing Commission staff in the center of the dispute. Jaycob Bytel, the spokesman who sent the statement, in an email declined to provide any text messages, emails or other evidence to support the contentions in the statement but wrote “there is documentation of all of our facts and they will be released in the course of defending the litigation.”

In response, three Housing Commission board members and one City Council member – each of whom have been briefed on the matter in closed session – told Voice of San Diego that Neil’s version of events was news to them. Both the Housing Commission’s board and the City Council, acting as the Housing Authority, oversee Housing Commission staff.

In May, Voice of San Diego revealed that a confidential Housing Commission legal analysis outlined that the agency’s legal counsel in February “became aware” that Neil had purchased 40,000 shares in the Chatham Lodging Trust, a real estate investment trust that owned the company that owned the Residence Inn Hotel Circle, between the time that he signed a contract to help the company purchase hotels for homeless housing, and Aug. 5, when the Housing Commission agreed to terms to buy the hotel.

In the document, legal counsel concluded that Neil had a criminal conflict of interest and recommended that the agency’s board and the City Council forward the matter to the district attorney for prosecution.

At the time, the Housing Commission acknowledged in written questions to San Diego City Council members, also reviewed by Voice of San Diego, that two staff members knew of the stock purchase prior to February. Michael Pavco, the agency’s then-senior vice president of real estate who has since left the agency, and Pari Zaker, its vice president of development, learned about it “at some time,” according to the responses to Council questions.

Neither could say whether they learned about it before or after the commission purchased the hotel, and Zaker told commission staff that she knew she wasn’t allowed to make such an investment, but thought it might be different for a third-party broker. Pavco left the Housing Commission in March.

Neil’s version of events argues that multiple people at the Housing Commission knew of his investment, and signed off on it.

“The City Attorney fails to mention that Mr. Neil had proactively disclosed his holdings to senior staff at the Housing Commission prior to the transaction,” the statement reads. “Housing Commission senior staff informed him he could proceed with the stock purchase. The City Attorney’s office was again fully aware of this before issuing its press release.”

That was news to Councilman Chris Cate, who oversees the commission in the Council’s role as the San Diego Housing Authority. He said that information was never conveyed to the Housing Authority in its multiple closed-session hearings on the matter.

“At no point was it disclosed to me as a Housing Authority member that a stock transaction was disclosed during the purchase transactions, or approved of by staff,” Cate said. “I hope a thorough investigation gets to the bottom of who knew what and when did they know.”

The other eight members of the City Council either didn’t immediately respond to questions, or declined to comment.

But three Housing Commission board members had reactions similar to Cate’s.

“This is the first time I’ve heard any suggestion that the agency authorized his stock purchases,” said board member Ryan Clumpner, who has likewise been briefed on the issue in multiple closed sessions. “Either it’s false, or the board was not informed of key facts.”

Stefanie Benvenuto, chair of the Housing Commission board, pointed to the need for a legal investigation.

“The statement released by Mr. Neil is not in accordance with what was shared with the housing commissioners, but as I believe that the priority right now is a thorough legal investigation to get to the truth and not a distracting back and forth in the press, I’ll leave my comment at that,” Benvenuto said.

Neil brokered two hotel purchases for the city last year; the other was for a similar property, the Residence Inn Kearny Mesa, which was not owned by the Chatham Lodging Trust. For the Kearny Mesa purchase, Neil negotiated a $592,500 commission from the seller, which Elliott argued in the release accompanying the city’s lawsuit exceeded the $250,000 limit for his commission stipulated in his contract. But the Housing Commission, not the seller, paid the $502,500 commission he earned on that sale, also in excess of the max commission in his contract, Elliott argued in the lawsuit.

In his statement, Neil said the city insisted that it, not the seller, pay the transaction on the Mission Valley hotel.

“It was the City who proposed that Mr. Neil’s commission on the Hotel Circle purchase be paid by the City, in order to benefit the City,” the statement reads. “Mr. Neil followed the City attorney’s direction as to who would pay the commission and how it would be paid. The City has clear documentation of this but chose to ignore it.”

That – along with the allegation that senior staff approved Neil’s stock purchase – counted as news Mitch Mitchell, another Housing Commission board member. (Disclosure: Mitchell is also a member of Voice of San Diego’s board of directors.)

“My only comment is that I am completely unaware of either of these two assertions he is making,” Mitchell said.

Neil’s statement also stands on a few points on which the Housing Commission’s legal analysis provided a detailed breakdown.

For instance, he argues that the state conflict-of-interest law that Elliott has sued him over includes an exemption for instances in which the investment accounts for less than 3 percent of the total company’s stock. Neil said his investment represented only 0.085 percent of the company’s stock.

The legal analysis contemplates that exemption, and acknowledges that it’s possible it applies, but says it’s impossible to determine whether the gains on the purchase also represent less than 5 percent of his annual income – another provision of the law – since he did not file a required statement of economic interests, known as a Form 700.

Ultimately, though, the commission’s legal counsel concluded it didn’t matter whether the exemption applied, because he collected a commission on the purchase. The legal analysis concluded he would have been clear if the seller, rather than the commission, had paid the commission.

Neil’s statement also argued that he did, contra Elliott’s lawsuit, disclose his investment, by telling senior officials of his plans. But it does not address his failure to file a Form 700, which the legal counsel’s analysis concluded he was obligated to do, because he qualified as a public official for the transaction.