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HomeMy WebLinkAbout39-Community Development CI.,.V OF SAN BERNARDINO - REQUe~T FOR COUNCIL AC""ON From: . REC.D.-AOMUi. OFF. Kenneth J. Henderson, D1rector Subject: RENTAL REHABILITATION PROGRAM 1988 DEe -8 f1! J: 19 ~ It: Community Development Date: December 7, 1988 Synopsis of Previous Council action: The Mayor and Common Council have previously authorized the issuance of a Request for Proposals for escrow services for the City's Rental Rehabilitation Program and selected CD Financial, Inc., as the RRP escrow services company. Recommended motion: That the conflict of interest between CD Financial, Inc., City of San Bernardino Rental Rehabilitation escrow services company, and John Rampello, part owner of CD Financial, Inc., property owner and Rental Rehabilitation participant, be publicly disclosed in accordance with Section 570.11 of the federal regulations and that the City Clerk be directed to provide the U.S. Department of Housing and Urban Develop- ment written confirmation and documentation of such public disclosure. ~~ G. ~~u~ Contact person: Ken Henderson Phone: 5065 Supporting data attached: Staff Report Ward: 1-7 FUNDING REQUIREMENTS: Amount: N/A Source: (AcCL No.) N/A (Acct. DescriPtion) N/A Finance: Council Notes: 75.0262 Agenda Item No. ~1 CIT-. OF SAN BERNARDI"~~ - REQUI'---T FOR COUNCIL ACt )N STAFF REPORT On August 28, 1987, Community Development Financial (CD Financial) submitted a response to a City-issued RFP for escrow services along with four (4) other firms. The Mayor and Common Council eventually selected CD Financial, Inc., to provide escrow services for the City's Rental Rehabilitation Program (RRP)~ During staff's background check of CD Financial, it was determined that one of the investors in CD Financial, Mr. John Rampello, had previously requested financial assistance in order to rehabilitate property located in the City. Accord- ingly, staff forwarded its concerns to the City Attorney's office and asked whether a potential conflict of interest existed if the City were to contract for escrow services for the RRP with CD Financial and also provide RRP financial assistance to an owner of the company. In order to enable the City to resolve this issue, it was determined that the escrow service for Mr. Rampello would be conducted internally by the City and not by CD Financial or staff associated with the firm. Subsequently, staff requested the City Attorney's office to prepare an appropriate agreement regarding escrow services for the RRP and to render an opinion regarding the legality and sufficiency of the proposed agreement. On July 8, 1988, the Community Development Department was advised by the u.S. Department of Housing and Urban Development (HUD) that monitoring of the City's RRP had been scheduled for July 13, 1988. The result of the monitoring performed by HUD reflected only one (1) concern as follows: the possible conflict of interest between the City of San Bernardino and CD Financial (see attached correspondence from HUD dated October 26,1988). On November 9, 1988, the City Attorney's office advised staff, in accordance with HUD's letter dated October 26, 1988, to make a public disclosure of the conflict of interest between the City, Mr. Rampello and CD Financial. In order for the City to apply to HUD for an exemption to Section 570.11 of the federal regulations, the conflict of interest must be publicly disclosed and documentation of such disclosure provided to HUD. I recommend adoption of the form motion. Development KJH/NN/lab/2060 December 7, 1988 75-0264 . " . . , ni-- :.11:\ \!! ~' U... -'-11''''-' Of ~ InCI \nM ~, La VIllI ArM Ofb. AIgIan DC ....~... LoI'AngIIII, CllbnilIOOI5-BI October 26, 1988 Mr. Kenneth Henderson, Director Community Development Department City of San Bernardino City Hall 300 North .0. Street San Bernardino, California 92401 Dear Mr. Henderson: SUBJECT: Monitoring - City of San Bernardino RRP No. R-84/85/86/87 MC-06-0539 This is a follow-up to our letter of September 30, 1988, Concern No.1. We have received our Area Counsel's comments pertaining to the possible Conflict of Interest between the City of San Bernardino and CD Financial (CO), Those comments follow: Governing Regulation Any conflict of interest between CO's contract with the City and the RRP grants to the principal investor of CD, Mr. Rampello, is governed by 24 CFR 511.11(e). The relevant language states: -No person: who is a(n)...consultant... of the grantee...who is in a position to...gain inside information with regard to such (RRP) activities. may obtain a personal or financial interest or benefit from the activity, or have an interest in any contract...with respect thereto...either for themselves or those with whom they have...business ties, during their tenure or for one year thereafter.... Application of the Regulation While Mr. Rampello is not involved in the day to day activities of CO under their agreement with the City. he falls within the prohibition of the regulation by virtue of his business ties with Ms. Bloomingdale and Mr. Nickerson~ the active partners of the company. Through their work in pro- viding financial services under the agreement, the active partners of CO are privy to inside information regarding the City's RRP and its administration; whether or not their work actually places them in a position to influence decision-making of the RRP. " 2 From the ..terials reviewed, it appears that the active partners of CO do not participate or influence the decision-making process for the City's RRP. If they did, it is the City Attorney's opinion that a conflict of interest of that type would violate State law. However, nothing leads us to believe that such is the case here. Regulatory Exception Despite the existence of a conflict of interest, the regulation does allow for an exception. The exception is also found at 24 CFR Sll.ll(e). The granting of an exception is at the descretion of HUD. Before HUD may consider an exception to the conflict of interests provision, the City must make a public disclosure of the conflict and provide HUD with assurances that such a disclosure has been made. If you have any questions regarding these comments, please contact Debra L. Loya, Attorney-Advisor at (213) 251-7100. Sincerely, /;}/ F ank Talask , Supervisory ehab Management Specialist, 9.4CMC 0"