By Mark Gutglueck
In a deal worked out through the county’s real estate services department, the San Bernardino County Board of Supervisors last month entered the county into a $14.6 million lease arrangement on a building owned by a figure involved in a real estate lease/bribery scandal two decades ago that sent two top county administrators to federal prison and resulted in the criminal conviction of a former county supervisor.
It does not appear that the county staff members who recommended the county enter into the contract or the lawyer that vetted it knew of the newly-leased property’s landlord’s connection to the three county officials implicated in the now-two decade past bribery case.
At the board of supervisors’ last meeting in 2017, held on December 19, the board was presented with a recommendation from the county’s director of real estate services, Terry Thompson, and the director of the county’s transitional services department, Gilbert Ramos, that the county enter into a $14,036,184 lease agreement with 27th Street TAD, LLC, for approximately 38,150 square feet of office space located at the northwest corner of 27th Street and Little Mountain Drive in San Bernardino, also described as Assessor Parcel No. (APN) 0148-021-66-0000, for occupancy by the transitional assistance department for the ten year period beginning August 1, 2019 and running through July 31, 2029.
The transitional assistance department, which is sometimes referred to by its acronym TAD, provides a wide array of federal and state mandated social services and income assistance programs to the residents of San Bernardino County, particularly those whose loss of jobs or income has put them at risk of becoming, or has rendered them, homeless. The current San Bernardino transitional assistance office, located within 33,792 square feet of office space at 2050 North Massachusetts Avenue, in particular draws a clientele from the west end of the City of San Bernardino and unincorporated area of Muscoy and its surrounding vicinities.
According to Thompson and Ramos, the transitional assistance department and the department of human services reviewed their operational needs at the Massachusetts site and determined the site is no longer viable, as the current facility does not provide room for improvements and there are limited expansion opportunities. The transitional assistance department is restructuring its operations to create call and processing centers to handle the case volume derived from the newly implemented federal Affordable Health Care Act.
On April 18, 2017, the board of supervisors approved and authorized the release of a request for proposals, which is essentially a solicitation of bids, for the lease of approximately 37,700 square feet of office space for transitional assistance department offices in the San Bernardino area. On April 21, 2017, the real estate services department issued that request for proposals, and three proposals were received; two for new build-to-suit facilities and one to keep the transitional assistance operation intact at 2050 North Massachusetts. The site proposed by Schneider Real Estate Associates, Inc. for a new build-to-suit effort on property located on the northwest corner of 27th Street and Little Mountain Drive was deemed most suitable, according to Thompson and Ramos. On October 18, 2017, the county’s transitional assistance and human services departments approved a floor plan for the new build-to-suit facility.
The real estate services department negotiated a 10-year lease with two five-year options to extend the term of the lease. The initial rent, including turn-key tenant improvements, is $106,820 per month or $2.80 per square foot per month/full service gross, with annual increases of two percent. The county does not have the right to terminate for convenience during the initial 10-year term, but if the term is extended, the county will have the right to terminate with 90-days’ notice.
During negotiations of the new 10-year lease, Schneider Real Estate Associates, Inc., which is under contract to purchase the premises, advised it had formed a new California limited liability company called 27th Street TAD, LLC, and assigned its rights in the purchase contract to 27th Street TAD, LLC. Accordingly, the county’s real estate services department negotiated the lease with this new entity, contingent on 27th Street TAD, LLC acquiring legal title to the premises.
A principal in 27th Street TAD, LLC is Scott Beard.
In 1997, the FBI descended upon San Bernardino and undertook intensified scrutiny of a number of issues relating to its top ranking officials both elected and appointed as well as business executives with contractual relationships to San Bernardino County. Ultimately, county treasurer Thomas O’Donnell, former county administrator Harry Mays, then-county administrator James Hlawek, and county investment officer Sol Levin in 1998 were charged with involvement in a bribery scheme along with North Carolina-based financial consultant Richard Tisdale, county consultant/contractor Ronald Canham, former Norcal Waste Systems vice president Kenneth J. Walsh. In 2001, supervisor Jerry Eaves, Colton Mayor Karl Gaytan, and Colton councilmembers Abe Beltran, Donald Sanders and James Grimsby, along with billboard mogul William “Shep” McCook, real estate broker Allan Steward and Suncrest Homes general manager Michael Berg were likewise indicted. In the meantime, the San Bernardino County District Attorney’s Office took up an investigation into Eaves, Hlawek, Mays, McCook and Steward. Ultimately, O’Donnell, Mays, Hlawek, Levin, Tisdale, Canham, Walsh, Eaves, Gaytan, Beltran, Sanders, Grimsby, Steward and Berg would be convicted or enter guilty pleas. McCook was acquitted when he went to trial.
One of the issues relating to FBI/U.S. Attorney’s Office’s action was that payoffs – i.e., bribes – had been channeled to various county officials by entities doing business with the county. Among the issues the San Bernardino County District Attorney’s Office and the U.S. Attorney focused upon was the county’s 15-year, $26 million lease of the former Kmart building in Rialto owned by SHL Associates Ltd., a partnership involving Scott Beard, former county chief administrative officer Harry Mays and Lance Goodwin of New York. That lease was approved in a controversial 3-2 vote on June 23, 1997, with then-supervisors Jerry Eaves, Jon Mikels and Kathy Davis prevailing. The building was converted for use by the county’s behavioral services department. The deal was promoted by then-county chief administrative officer, James Hlawek, who had been Harry Mays protégé and successor as the county’s senior staff member. Eaves, Mays and Hlawek were indicted by a federal grand jury in connection with bribery and kickback schemes pertaining to several county contracting arrangements. Mays and Hlawek were convicted on federal charges. Eaves eluded being convicted on federal charges after similar charges were filed against him in state court, and U.S. District Judge Manuel Real ruled that Eaves could be tried for the same crime in only one venue. In his confession to FBI agents and federal prosecutors, Hlawek said that during a meeting with Mays, Eaves and Beard, Mays provided him with a briefcase stuffed with about $60,000 in cash as a payoff for securing the county K-Mart building lease with SHL.
Beard was a longtime Eaves supporter. The San Bernardino County District Attorney’s Office was angling to indict Hlawek, Mays, Eaves and Beard on charges relating to the K-Mart building deal, but was persuaded to back off because of concerns that a state prosecution of the matter might complicate or clash with the ongoing federal prosecution.
Ultimately, Beard was not charged in the matter, but all of the others pleaded guilty. As a consequence of his plea arrangement, Eaves was forced to resign as supervisor and end his 25-year political career. The debacle resulted in Beard, who had been a major player in supporting politicians at the local level and winning lucrative government contracts for leases of his properties, assuming a much lower profile than he had previously. It was not until 2013 that Beard resurfaced in any substantial public way, when he spearheaded a blanket recall attempt against all of the city council members and the mayor in the City of San Bernardino.
Today, Beard acknowledged that Hlawek had made statements implicating him in a bribery arrangement relating to the K-Mart building, but insisted there was no substance to the allegations. “Twenty years ago, that was his claim,” Beard told the Sentinel this morning. “That was never proven at all as it related to my deal That was never substantiated by anybody other than Mr. Hlawek. I was heavily investigated by both federal and local authorities, by the FBI, by the San Bernardino County District Attorney and, frankly, the California Attorney General. I was cleared of any wrongdoing. I was never charged with a single thing. I was never indicted. I was never nothing. It was not true. If it was true and he had received money, based on that, trust me, the county would not have a lease on that building.”
Beard indicated the county was still leasing the K-Mart building from his company. He said that what had occurred two decades ago had no relevance to the current situation.
“You are calling me about something that happened 18 or 20 years ago, simply because I was the winning bidder on an RFP from the county,” Beard said. “I am the one guy among all those people who didn’t go to jail. I don’t know why I would be penalized today. I do not have any involvement with Mr. Mays. We have remained casual friends over the past twenty years. All those guys are 80 years old and have had zero to do with the county for 20 years. I am not in the public arena. I am a private developer who responded to a request for proposals. I received and was the winning bidder. I am not sure how that puts me in the public arena. I am not sure what the issue would be. I do not mind you scrutinizing the contract, but that you single me out is irritating. To make an allegation that I’m somehow tied to those guys after twenty years is just a little bit offensive to me, personally.”
Beard said the county is far more exacting now about keeping graft out of the equation when it comes to leasing contracts than it was in the past.
“This was done through an RFP process that was completely open and above board,” Beard said. “The county, to its credit, now insists on RFPs because of what happened. We have to sign, under the penalty of perjury that no county officials are involved in our company. I am at a loss to see what the issue is here.”
There is a lack of clarity as to the degree to which current county officials remain cognizant of Beard’s connection to the Hlawek/Mays/Eaves scandal, and that the issue at its heart pertained to the provision of a substantial bribe to a high ranking county official to induce him to engineer a long term lease on property to be occupied by a county department.
Thompson, who has been in place as the head of the county’s real estate services since 2014 but was employed in Orange County previous to that, was not available for comment.
The actual 91-page contract document between the county and 27th Street TAD, LLC contains a section titled, “Former County Officials” on page 25 under which it is specified that “Landlord agrees to provide or has already provided information on former county administrative officials, as defined below, who are employed by or represent [the] landlord. The information provided includes a list of former county administrative officials who terminated county employment within the last five years and who are now officers, principals, partners, associates or members of the business.”
The disclosure document for former public officials contained within the contract document as “Exhibit C” on page 76, states “None.”
The contract was reviewed by the office of county counsel, the county’s stable of in-house attorneys. Deputy county counsel Agnes Cheng was assigned to review the contract and signed off on it. The Sentinel contacted Cheng on Wednesday January 3, in an effort to get from her an explanation as to the county’s willingness to enter into a building lease contract with 27th Street TAD, LLC and Beard, in the light of the circumstance involving Hlawek, Mays, Eaves, Beard and another of Beard’s companies. Cheng, however, said she did not know who Hlawek, Beard, Mays and Eaves were.
“I don’t know anything about any of those circumstances,” Cheng said. “I’m not familiar with those people you are talking about. I’m not sure I’m the right person to answer the questions you are asking.”
Cheng said she would forward the questions elsewhere to see if a response could be had.
Subsequently, the Sentinel was contacted by the county’s public spokesman, David Wert, who referenced the Exhibit C on page 76 of the contract. Wert said, “The property owner reported that there are no former county administrative officials involved in the lease.”
Further, Wert said, “There would be no reason for county counsel or real estate services to know or care about who Scott Beard is or for the county to ‘blackball’ him because it was never suggested he ever did anything wrong. There was [bribe] money from Mays to Hlawek on other matters, but Hlawek was inconsequential in terms of that lease. No one was ever charged with anything in connection with that lease, and it was never suggested Mr. Beard knew anything about what was going on between Mays and Hlawek. No one was ever charged with a crime in connection with the K-Mart building lease, and the county would have no basis for disqualifying Mr. Beard or entities with which he is associated from participating in competitive procurements or being awarded a contract. Doing so might in fact expose the county and taxpayers to legal action.”
As for the section of the contract asking for disclosure of the identities of county officials involved in 27th Street TAD, Wert said, “”That is standard contract language. The county requires all contractors to disclose whether any former county officials work for or represent them. 27th Street TAD, LLC did so by completing the form. Their answer was ‘none.’”