Randy Shaw's Power Plays

Sixteen years ago, Randy Shaw started a housing clinic with $50 and a good idea: educating tenants. Now he's got more than $900,000 a year to spend -- and clout to match.

In public-interest law, the ability of the winning side to force the losers to pay up is an important tool -- allowing, as it does, those who might not otherwise be able to go to court to have their costs covered. Organizations from the American Civil Liberties Union (ACLU) to the Legal Services Corp. use court-awarded attorney's fees to fund their work. So does the Tenderloin Housing Clinic.

But unlike the ACLU or Legal Services, the THC also files suits on a contingency basis, which means that the plaintiffs in the suits share their monetary settlements or awards with the THC if the suit is successful. The ACLU doesn't do contingency-fee work on principle, Public Information Director Elaine Elinson says.

"The ACLU doesn't charge anybody for doing any legal work," she says. "We would never charge the person."

And Legal Services organizations, funded through the federal government, are barred by law from entering into contingency-fee arrangements.

The THC, on the other hand, uses the contingency-fee arrangement in its cases, even where it is also awarded attorney's fees.

For a peek at how the THC has handled at least one fee arrangement, consider the case that Roy Frye, a Tenderloin resident, brought in 1993 against the landlord of the building where he lived. The building, Frye said, was in terrible condition -- peeling paint, non-working elevators, roaches everywhere. The Tenderloin Housing Clinic handled the case, won a $516,246.67 judgment for Frye and his 14 co-plaintiffs, and was awarded $96,000 in attorney's fees by Judge Thomas Mellon, according to San Francisco Superior Court files.

Frye's perception is that the Tenderloin Housing Clinic handled the case for free, because he didn't pay any money up front. "We signed a contingency agreement on an individual basis," he says. "I believe it was 33 percent. It was the legal fees that the attorneys charge on handling a case like this, none of us putting up any money. I think it went up to about 40 percent if the case went to trial, which it did."

But while Frye is happy with the way the Tenderloin Housing Clinic handled his case, he is mistaken about one thing -- according to the rules of the California Bar Association, handling a case on a contingency basis is not the same thing as handling it for free.

On the forms that the THC files with the IRS, the clinic describes itself "as the city's chief provider of free legal services to tenants." And in fact, that's a large part of the THC's local reputation -- as a place where people have their housing problems solved for free. But by 1993, the Tender-loin Housing Clinic had stopped applying for one grant that required it to prove its main purpose was to provide free legal services.

The grant was from the California Bar Association's Legal Services Trust Fund program. In order to qualify for that money, the Tenderloin Housing Clinic "had to convince us that their primary services and function were providing free legal services," according to Bar Association staffer Judy Garlow, who directs the trust fund program. The THC did convince the Bar Association that it met that requirement, she says, but then the THC stopped applying for it. The reason? "The burden of trying to continue to establish that for us wasn't worth the amount of the grant," Garlow says. Shaw concurs:After weighing "the amount of money versus the amount of time spent preparing the statements for the trust fund," he says the THC decided not to continue to apply.

Now, it is entirely legal for the Tenderloin Housing Clinic to work on a contingency-fee basis, as long as the money is earned doing work in accordance with its stated charitable purpose. At the IRS, Public Information Officer Analisa Collins-Sears says federal 501(c)(3) guidelines regulating the activities of nonprofits don't prohibit work on a contingency-fee basis, but that "it depends on how everything is set up in the tax-exempt group."

And the IRS doesn't really monitor how the money earned from fees is put to work, Collins-Sears says, as long as the majority of the charitable organization's work continues to be in accord with its incorporated purpose. This has enabled Shaw, with his publicly funded staff and his clinic's tax-exempt status, to plow the revenues generated from legal work back into his clinic for bankrolling his political work -- like supporting ballot initiatives, as Shaw states in his new book.

"I had learned in 1991 that 501(c)(3) nonprofit organizations are permitted to spend money on ballot initiatives, and I could not think of a better use of Clinic funds than to spend them on an initiative that would lower rents," he writes. "The Tenderloin Housing Clinic generates unrestricted funds by representing tenants in lawsuits against landlords, so we had the money to spend." The THC has paid for pollsters and campaign advertising in initiatives, according to his book.

And in politics, perhaps even more than elsewhere, money to spend means one thing: clout.

Andrew Zacks is an attorney in private practice who has faced the Tenderloin Housing Clinic in court frequently. Zacks' clients are hotel owners, who in San Francisco are not a politically endearing lot. Zacks and Shaw have often battled over the San Francisco Hotel Conversion Ordinance, which prohibits hotel owners from renting residential rooms to tourists. It's a law that the THC essentially wrote.

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@SFCitizen Three stories in five months, one of which was a double quote. Plus one linkbait. Not seeing why you needed to pull us in.


@ScottLucas86 He runs the largest corrupt non-profit in the 415- that's not a story in itself? Your quote factory functions as part of SFGov


@SFCitizen I like your work. I'd tell if I thought you were right. But I think you and I disagree on whether quoting = supporting.

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