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Two cases that reached Oakland’s Public Ethics Commission this week reveal a chronic lack of awareness around, and failure to comply with, conflict-of-interest, nepotism, and ethics rules within the city’s housing department.
According to ethics commission investigators, two city employees, one current and one former, wrongfully participated in the process of awarding major loans to non-profit housing developers in 2019, despite their close personal and professional connections to one of the developers. Neither employee initially filled out mandatory annual disclosure forms to report potential conflicts of interest.
Oakland’s ethics policies, many based on state or federal law, are meant to prevent city employees from using their positions to enrich themselves or play favorites with contractors they’re tied to.
According to ethics commission investigators, in 2019 Everett Cleveland, Jr., the city’s housing development coordinator, improperly participated in the process of scoring the applications of housing developers seeking $19 million in city loans when he should have recused himself. One of the developers was Community Housing Development Corporation, a company run by his father-in-law. Investigators also said that Norma Thompson, a longtime city employee who retired in 2017, came back to work for the city’s housing department that same year and helped with the funding awards even though she was employed by Community Housing Development Corporation for part of the time.
At Monday’s Public Ethics Commission (PEC) meeting, staff told commissioners they’d like to pursue a new, lighter approach to penalizing Cleveland and Thompson. Instead of the typical fine—which in this case could amount to tens of thousands of dollars—staff is recommending a “diversion agreement,” where the cases would be dismissed once the pair completes ethics training courses. The commission has never approved this kind of an agreement before.
“When there’s a larger systemic issue at play, we try to address the real issue here and not necessarily look for examples to make out of individuals,” said Kellie Johnson, PEC enforcement chief, explaining the departure from standard financial penalties.
Johnson noted that almost none of Cleveland or Thompson’s supervisors or colleagues identified the clear conflicts of interest they had with respect to Community Housing Development Corporation (CHDC). Instead, investigators found that conflict of interest violations were commonplace in the housing department, and that some high-up staff admitted to knowing nothing about ethics codes. Johnson noted that Oakland’s Government Ethics Act was adopted in 2014, and many long-term employees never got trained on compliance.
“It was a storm of negligence that collided into these violations,” Johnson told the commission.
Applicant for public funds was father-in-law and employer of two city staffers
Cleveland began working for the city in 2018 with the understanding that he’d lead the process of awarding loans to affordable housing projects in 2019, according to a PEC staff memo. Cleveland told investigators that it was common knowledge in the city’s housing department that he was the son-in-law of Don Gilmore, a well-known affordable housing developer and the director of CHDC. According to the ethics commission’s investigation, no one in the housing department identified the relationship as an issue that would affect Cleveland’s role in the funding decision, until well into the process.
Cleveland, Gilmore, and Thompson all did not respond to The Oaklandside’s requests for interviews.
CHDC submitted four proposals for loans in the 2019 funding round. As housing staff reviewed all the applications to make sure they were complete, Cleveland was responsible for reviewing one of CHDC’s applications, for funding for its Harp Plaza project, because Cleveland was already managing the project, which had received a city loan in 2017 too, the memo says. He was assigned to “score” the application, as well, assessing how well it met the criteria for funding, until Christia Katz Mulvey, housing development manager, joined the process in a supervising role and noted this could create a conflict of interest.
She and another supervisor reassigned Cleveland to score the proposals of two other developers competing with CHDC for the funding.
“It does not appear that he specifically intended to confer an undue benefit on CHDC,” Johnson wrote in the PEC staff memo. However, she added that some emails demonstrated that Cleveland weighed in on questions about CHDC’s applications, despite his insistence that he provided “no input whatsoever” regarding the developer’s proposals.
Investigators said Cleveland told them he was never worried about his involvement in the process appearing improper, because he’s a “worker bee” who follows orders. “He said such concerns are a matter for his supervisors, not him.”
According to the investigators, then-Assistant City Administrator Maraskeshia Smith told them that the housing department didn’t have a policy on conflicts of interest in the funding process. “Smith was not aware of any conflicts policy, written or otherwise, provided to the Respondent, nor did she recall any formal policy on avoiding an appearance of impropriety,” the memo says. Smith, who no longer works from Oakland, did not respond to requests for interviews.
Cleveland eventually filled out a Form 700 disclosure sheet, a document used to list a public employee’s financial interests, including real estate, investments, and jobs, but said he was not told to do so until the ethics case had already been initiated.
Ultimately, Cleveland was asked to completely recuse himself from the process of reviewing developer applications because of his connection with the CHDC director. One of CHDC’s applications was eventually selected for a funding award, but the investigators said the city attorney was tipped off about the potential conflict of interest and ended up having the funding offer rescinded.
Unlike Cleveland, Thompson has worked on and off for Oakland for three decades, officially retiring in 2017 but returning to help with the 2019 funding awards in different capacities. At one point, Thompson was supervising Cleveland. Over the years she also worked, volunteered, and consulted for CHDC, including, according to the ethics commission’s investigation, just before coming back to Oakland in 2019, and during one or two months when she was also working on the city’s funding awards, although she was not paid for her work there.
At Monday’s PEC meeting, Johnson stressed that the city itself invited Thompson back out of retirement, despite widespread awareness of her work with CHDC.
Thompson told investigators that she took actions to avoid any appearance of a conflict of interest, resigning from her CHDC board position before returning to Oakland, for example. Unlike Cleveland, she was never assigned to review CHDC applications specifically, but she did discuss all the applications in staff meetings, and in one case spoke supportively about CHDC.
“Both Norma and CHDC believed that they took the proper steps to avoid even the appearance of conflict of interest and fully disclosed to the City of Oakland the nature of her work with CHDC,” Thompson’s lawyer told investigators. She claimed that neither Thompson nor CHDC, “nor, apparently, the Housing Department of the City,” were aware of laws around conflicts of interests.
“Each has had a longstanding relationship with the City, and neither would have deliberately done anything to damage that relationship,” the lawyer told investigators. She said it was “always the thought” that Thompson would return to CHDC after concluding her work with the city in 2019.
Oakland does have “revolving door” laws prohibiting a city employee from working for an organization that won a contract within the past year, if that employee participated in awarding that contract. In this case, investigators say, Thompson got a consulting job with CHDC while the developer was in the process of entering into a contract with Oakland.
“In her interview with the PEC, Thompson said she was unfamiliar with the revolving door provisions,” ethics commission investigators wrote in their report. “Thompson and her lawyer pointed out that the ‘housing community’ in the Bay Area is very small, and they believe the revolving-door provisions are commonly violated.”
Systemic issue or ‘mind-boggling’ mistake?
At Monday night’s Public Ethics Commission meeting, commissioners told staff they’d be open to a diversion agreement in Cleveland’s case but that they were split over pursuing the lighter consequence for Thompson. Staff will come back to the commission with a recommendation in May, but had sought input this week because diversion agreements have never been used by Oakland before.
Some commissioners initially balked at the idea of forgoing a fine in one or both of the cases, saying the conflict of interest violations were egregious and that avoiding them should have been common sense.
“I can’t imagine that people working in the business could find it appropriate to divert funds to a relative,” said Commissioner Joseph Tuman. “It’s mind-boggling to me that it did not occur to him.”
Two of Cleveland’s colleagues, including Katz Mulvey, called in to attest to his character, saying he “tries to do the right thing all the time,” and noting that he was new to the city and began as a temporary worker. In both cases, Johnson said, there was confusion around what temporary workers are required to do or disclose.
But in Thompson’s case, Tuman noted she had previously worked for the city for many years. “How can you not know about conflicts of interest?” he said.
While Tuman ended up voting in favor of pursuing a diversion agreement in both cases, Commissioners Michael MacDonald and Jerett Yan ultimately voted against it for Thomspon, who left the city around the end of 2019. MacDonald questioned the benefit of a training program if she no longer works for the city, and Yan called the penalty “a little light.”
Johnson adamantly argued that Cleveland and Thompson aren’t the problem, and that Oakland needs systemic reforms.
“Just because we happened to catch this particular person, I’m explaining to you that this was a practice of the department,” she told commissioners. “Do you hold Ms. Thompson responsible for something this department has allowed to happen for many, many, many years?”
The city did not respond to a request for comment on these cases or any plans to change housing department practices.
Commissioners said they may recommend policy changes to ensure compliance with ethics laws in the future.