Housing Staff Didn’t Break Federal Law, Report Says

A much-criticized real estate deal between the San Diego Housing Commission and a prominent local broker was made without adequate review by elected and appointed officials but did not violate any federal laws, according to a federal report released Monday.

The report said Housing Commission staff members spent more than $600,000 in federal funds to renovate and furnish new offices the agency currently occupies without explicit permission to spend that amount from the commission or the San Diego Housing Authority.

The report, by the U.S. General Accounting Office, examined a deal between the commission and Robert J. Lichter, president of John Burnham & Co. commercial brokerage firm. Lichter stands to make as much as $1 million from the transaction, in which he invested none of his own money.

George E. Grant, manager of the GAO’s Los Angeles regional office, said his staff “found no violations of federal law” in the commission’s use of federal Housing and Urban Development funds to acquire, renovate and furnish the building.

But Grant said he identified “a number of questionable practices” in the paper work done to document the commission’s spending.

“We found that the commission did not have clear and complete documentation supporting the acquisition and renovation of the facility or showing that the San Diego Housing Authority clearly understood or approved the transactions in advance,” Grant wrote in a letter to Rep. Jim Bates (D-San Diego), who requested the report. “We also found that the commission did not follow its procurement policy in purchasing office furniture and exercise equipment.

“We believe that more prudent practices should have been employed in these public business transactions because of their unusual and complex nature,” Grant said.

Bates called the study a “lukewarm and weak report,” and insisted that the commission was wrong to obtain “gold-plated” office space with money that could have gone to help low-income people find housing.

“I don’t know that any organization has to break federal law to raise concerns,” Bates said. “There are a number of things that so far have gone unanswered that need to be addressed.”

At the heart of the deal was a $1.5-million low-interest loan the commission made to Lichter so he could buy an office and warehouse building at 1625 Newton Ave., on the edge of downtown San Diego. The commission used an additional $1 million to buy the land on which Lichter’s building sits.

As part of the transaction, the commission agreed to lease its land to Lichter for $100,000 a year while paying $221,000 to lease office space in the building from Lichter.

The GAO report said the deal with Lichter was struck before it was examined in detail by the San Diego City Council, which sits as the Housing Authority, or by the Housing Commission, whose members are appointed by the council. The report also said there was inadequate review of the renovation.

In addition, the report said, Ben Montijo, the commission’s executive director, did not follow proper bidding procedures when he bought a $7,000 desk and wall unit for his office and $6,000 worth of exercise equipment for commission employees. Montijo failed to solicit formal bids on the furniture and equipment, despite rules applying to purchases and contracts of more than $5,000, the report said.

Since the deal was struck in 1984, Housing Commission officials have insisted that Lichter’s financial gain means little because the commission could net as much as $2 million in profit and savings on office and warehouse rent in the next 10 years.

Commission officials have rebuffed criticism of specific parts of the deal--such as the low-interest loan to Lichter--by saying that the entire transaction must be viewed as a single partnership.

“We conducted the public’s business in a private-sector way, which gives the taxpayers a very excellent economic deal,” Montijo said. “It was really a good deal.”

Montijo said the commission and the Housing Authority were informed as often as possible during negotiations on the deal and during renovation of the building.

“All the points were clearly presented,” he said.

Montijo said the commission’s error, if it made any, was in not following accounting practices that would satisfy the General Accounting Office.

“They’re saying that everything was not neatly in its files, but we had it scattered about here,” he said. “We’re not accountants, and we don’t always have everything as neatly as they would like.”

The GAO’s review did not examine whether the deal violated any state or local laws, because a lawsuit addressing those issues has been filed in San Diego Superior Court.