Monday, May 16, 2011

An echo of San Diego redevelopment agencies in Washington D.C.?

Million-Dollar Wasteland: A Washington Post Investigation
Speculators score, District loses in affordable-housing deal
By Debbie Cenziper
May 15, 2011
Washington Post

It sure looked like a good deal at the time.

A nonprofit developer promised to spend millions renovating three rotting apartment complexes in some of the most blighted neighborhoods of Southeast Washington. It would be one of the largest redevelopment projects in years east of the Anacostia River, helping dozens of low-income renters suffering through roof leaks and winters without heat.

In late 2007, then-Mayor Adrian Fenty sent a letter to the D.C. Council touting the developer’s experience, construction team and financing. The council swiftly approved the deal, lending $3.5 million in federal funds to help pay for the renovation of 98 units priced for the poor.

But the project died before a shovel ever hit dirt.

East of the River Community Development Corp. had taken on nearly $8 million in mortgages to buy complexes riddled with leaks, sewer backups, and buckling stairwells, roofs and floors.

Soon after the city delivered the federal money, the group declared bankruptcy and shut down. The District lost millions of dollars while the project was delayed for years.

But one group reaped millions. A handful of real estate speculators, including three previously convicted in a sweeping housing fraud scandal, had sold the complexes to East of the River based on adjusted appraisals written by one of the sellers’ associates, The Washington Post found.

The project is a case study of the breakdowns in the nation’s $2 billion-a-year affordable-housing program, in which extensive construction delays have derailed the development of thousands of homes.

The District’s East of the River project involved an inexperienced developer that cut an ill-fated deal with savvy speculators under the watch of a local housing agency that failed to protect the government’s investment.

Waste and weak oversight are endemic at housing agencies nationwide. A Post investigation found that about $400 million in affordable-housing funds from the U.S. Department of Housing and Urban Development is tied up in hundreds of troubled construction projects, including the one proposed by East of the River...

DA Absent from SEDC Embezzlement Case

DA Absent from SEDC Embezzlement Case
May 9, 2011
by Will Carless
Voice of San Diego

We've been asked one question a lot in the days since former Southeastern Economic Development Corp. officials Carolyn Y. Smith and Dante Dayacap were charged with embezzlement and misappropriation of public funds: Why didn't San Diego District Attorney Bonnie Dumanis prosecute this case?

Back in 2008, when the SEDC scandal was first breaking, Mayor Jerry Sanders announced at a press conference that he had asked Dumanis to investigate the alleged wrongdoing at the agency. Sanders' move came after a city commissioned audit found SEDC's compensation practices had risen "to the level of fraud."

As I pointed out recently, Dumanis has a special Public Integrity Unit that she created back in 2007, before the SEDC scandal broke.

I put the question to Dumanis' spokesman, Steve Walker, in an email.

His response:

The Attorney General's Office is the appropriate agency to handle this prosecution. Since this is a pending case, the District Attorney's Office will have no further comment at this time.

The California Attorney General's Office does prosecute plenty of people accused of misusing public funds. The state AG investigated the wrongdoing at the city of Bell, for example.

Gary Schons, who heads up the local office of the attorney general, wouldn't go into the matter when I called him. He simply said that his office also has a specialty in prosecuting these sorts of cases.

But, while the AG is an appropriate agency to do the prosecution, it's unclear why Walker would categorize the AG as the appropriate agency. In other words, why is the AG more appropriate than the DA's Public Integrity Unit?

The case, which focuses on a clandestine system of bonuses we uncovered in this story back in 2008, fits the stated scope of the unit, which Dumanis created specifically to root out misuse of public funds and corruption by public and elected officials.

Smith and Dayacap were highly paid, high ranking public officials. (Both made far more than the mayor in 2007.)

Why the AG brought the case instead of Dumanis is unlikely to become public.

As a rule, prosecutors don't discuss pending cases because they don't want to give the impression that they're attempting to try the case in the media, said Professor Heidi Rummel, a former prosecutor and expert in criminal law at the University of Southern California.

Prosecutors want "to avoid any potential unfairness or prejudices to the defendant before he has his day in court," Rummel said.

That Dumanis' office isn't prosecuting the case is irrelevant because, as a public prosecutor, she represents the government as much as her colleagues at the Attorney General's Office, Rummel said. As such, she should be as wary of prejudicing the case by what she says publicly as she would be if her office was prosecuting it.

The precaution of not talking about a case extends not just to the case itself, but also to the reasons why a prosecutor did or didn't take the case on, Rummel said.

Complicating the SEDC matter is the fact that the original investigation wasn't done by the DA or the AG or even any state agency. It was done by the FBI, which usually teams with U.S. Attorney's Office to prosecute the subjects of its investigations.

I learned in court on Wednesday that Dayacap had received a "target letter" from the U.S. Attorney's Office more than a year ago. But at some point between then and now, the federal government decided not to prosecute and instead the case ended up at the state level.

(FBI spokesman Darryl Foxworth wouldn't comment on the case either.)

Certainly, the passing-around of the Smith/Dayacap prosecution has confused the two defendant's lawyers. Jerry Coughlan, who is defending Smith, and Marc Carlos, who's representing Dayacap, both told me on Wednesday that they had no idea the Attorney General's Office was involved in the case before their clients were served with arrest warrants.

If I find out any more about why Schons, not Dumanis, brought the case, I'll pass it along.

Monday, May 02, 2011

San Diego budget plan: more prosecutors after library and recreation cuts

From Libraries to Lawyers: Shifting Budget Priorities
May 1, 2011
by Liam Dillon
Voice of San Diego

San Diego's library system has eroded over the past six years. Mayor Jerry Sanders freely admits it.

"We've taken them down to a very small percentage of what they used to be," Sanders said at a recent budget forum.

Libraries used to be a greater budget priority. While nearly every city department has seen cuts during a decade of San Diego budget deficits, reductions to libraries have been deeper. Its budget has decreased from $38.7 million in Sanders' first budget in 2007 to $30.1 million under the mayor's proposal for next year. Its percentage of the city's day-to-day operating budget will have g0ne down by more than 1 percent, too.

As libraries have lost, others have gained.

In 2007, the City Attorney's Office received $36.2 million, or $2.5 million less than libraries. Its proposed 2012 allocation will be $42.4 million, or $12 million more than libraries. The percentage the attorney's office receives of the city budget has gone up by 0.3 percent since 2007 as well.

City Attorney Jan Goldsmith argues his department's budget has increased because of costs outside his control, such as paying for a share of the city's growing retirement obligations. Beyond the vagaries of the city budgeting, Sanders, City Council members and even a key library supporter defended the city attorney for keeping the city out of trouble and from racking up outside legal costs.

The downside of cutting libraries is clear. They'll be closed. For attorneys, the effects are less obvious. A smaller legal department could mean lost lawsuits, missed opportunities or bigger bills for outside contracts. But as the mayor and council stress the need to protect public safety and other front line city services in a time of continued budget pressure, they'll have to come to terms with the realization that the city's team of lawyers costs increasingly more than its team of librarians.

The City Attorney's Office files or defends lawsuits involving the city, provides legal advice to the mayor, council and all departments, and prosecutes about 35,000 misdemeanor cases a year. Good lawyers cost money, Goldsmith said in an interview. The fact that they have cost more in the past six years, he said, has little to do with him.

Nearly the entire $4 million hike in his budget this year came from costs associated with rising pension and other retirement obligations, an increase he couldn't do anything about. Further, Goldsmith contended his office took that hit more than others because its costs are almost all personnel.

Goldsmith's office has spent less than its budget the last two years. He's left some positions empty and replaced higher paid jobs with lower level ones. Goldsmith also said he decreased costs for outside attorneys, but those savings primarily appear in other department's budgets.

"Each year we've come in with a plan on how we're going to do our fair share," Goldsmith said.

But for some, it's not fair enough. At a recent community budget forum, Sanders answered a written question about a chart that showed the city attorney's budget larger than the library's.

"Please explain how this is shared pain," the question asked.

Sanders responded that attorneys are expensive, and it costs more to hire outside counsel than do legal work in-house...