After saying he had been careful not to vote on council decisions regarding a federal housing program, Modesto Councilman Joe Muratore started checking his record two weeks ago and found he had voted once in early 2010, he said.
Muratore publicly admitted the mistake Wednesday and produced a letter from a state watchdog agency that concludes that his Jan. 26, 2010, vote was a violation of state law.
On that date, the City Council voted to accept $25 million in federal funding from the second phase of the Neighborhood Stabilization Program, a decision that was bound to benefit Trinity Ventures. Ryan
Swehla, a co-owner of Trinity, is a partner with Muratore in Benchmark Commercial Real Estate Serv-ices.
Muratore, who was elected in November 2009, said he was an inexperienced councilman when he cast the vote.
"I should not have voted," he said. "Because Ryan is part of Trinity and we own a business together, that was a close enough relationship" to pose a conflict.
Muratore is under a cloud of suspicion because of a $62,500 commission paid to Benchmark for brokering the sale of a Tully Road apartment complex to Trinity eight months ago through the housing program.
After the city notified Muratore and Swehla on Aug. 2 that the deal likely violated the conflict-of-
interest rules of the federal Department of Housing and Urban Development, the councilman checked city records and discovered the single vote, he said.
Muratore said he promptly had his attorney notify the California Fair Political Practices Commission, a state agency that ensures that local government officials are complying with conflict-of-interest laws. The FPPC response, dated Monday, is a warning letter with no administrative prosecution or fines.
The letter notes that Muratore had received city attorney advice that it was OK to participate in the decision.
Muratore said he decided to release the letter this week to be open with the public. An FPPC spokeswoman declined to give a copy to The Bee or confirm that the letter had been sent to Muratore, citing a 10-day waiting period for disclosing decisions.
Conflict raises questions
Earlier this month, City Attorney Susana Alcala Wood refused The Bee's request for copies of any legal advice she had given Muratore regarding the housing program. She said any advice given was confidential.
Muratore said he wouldn't talk about the advice received from Wood because it's a sensitive issue.
A group with concerns about the councilman's business connections said the January 2010 vote should be more thoroughly investigated.
"He admitted he had a conflict. We need to know more about what the conflict was," said Dave Thomas of the Stanislaus Taxpayers Association.
According to the FPPC letter, Muratore has an indirect financial interest in Trinity Ventures and his vote violated the law because it was reasonably clear that Trinity would profit from the council decision.
Trinity and other developers have used low-interest loans from the first two phases of the NSP to buy and renovate foreclosed properties for rental housing.
The FPPC said it was closing the case but warned it would retain the information and that any further violations could result in fines up to $5,000 per violation.
Mayor Jim Ridenour and others said they were surprised by the quick response from the FPPC, an agency that can take months or years to investigate a complaint.
Ridenour said Muratore still has to deal with the HUD violation. Benchmark has returned the $62,500 commission to the city; officials have demanded that Benchmark also return any program funds it received for property management services.
Ridenour said HUD has yet to respond to his request this month to have the Office of Inspector General expand its investigation of the city's NSP projects, a probe expected to take six to nine months.
HUD rules at issue
The city program has been rocked by allegations of mismanagement, conflicts of interest and inefficient spending of taxpayer funds.
Muratore and Swehla hope to resolve the issue with HUD sooner. Under the general rules for federal housing programs, elected officials for the agency receiving funding are not supposed to reap financial returns from the program.
But federal officials consider exceptions on a case-by-case basis. HUD could consider whether Benchmark's involvement with the transaction furthered the purposes of the program and provided a cost benefit, or whether inside information was used to gain an advantage.
Muratore said he will try to show he was distanced from the city's decision to loan Trinity $1.3 million for buying the Tully Road complex from Delta Bank.
"The council was not the body that made the loan decisions," he said.
Bee staff writer Ken Carlson can be reached at kcarlson@modbee.com or (209) 578-2321.
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