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.

It's a scene out of an activist's handbook.
Upstairs at the Tenderloin Housing Clinic (THC), early afternoon. A meeting of the ombudspersons -- tenants of SRO hotels who are paid $115 a month to monitor hotel conditions for the THC. The housing clinic's founder and executive director, Randy Shaw, is sitting at the head of the table, and from outside the windows it is possible to hear the shouts and brakes of the traffic passing through the Tenderloin on the pavement below.

The meeting of a dozen people is just getting under way, and everybody watches Shaw as he speaks. At the moment, he's not talking about hotel conditions at all. He's indicating a pile of ballot initiative signature forms in the middle of the table.

"Wayne brought in 27 signatures for the living wage measure," Shaw is saying, talking about the upcoming initiative that, if it qualifies for the ballot, will ask Californians to raise the minimum wage. "The mayor has just supported it strongly. With the volunteer effort it's hard to get the signatures -- when it's rainy, when it's stormy. We have until the middle of April."

We. In political activism, that's the crucial word. And make no mistake about it: This is activism, grass roots down so deep you can smell the new-mown hay. "It's an example of moving ahead with an agenda," Shaw will say later, describing a tactic he recommends in his book, The Activist's Handbook, which is being published by the University of California Press in June. "That's an example of a progressive constituency moving forward."

It's also an example of how Shaw is able to marshal people and resources paid for in part with public money to his own political ends -- and an insight into why, over the years, Shaw has been extraordinarily successful at moving his agenda forward through the sometimes labyrinthine realms of San Francisco politics.

Over the last decade and a half, Shaw has built the nonprofit Tenderloin Housing Clinic from a shoestring legal outfit into an efficient organization with annual revenues of more than $900,000. Using a combination of public and private financing, Shaw has built an empire and consolidated enough power to influence city boards and to sway voters at the ballot box. What started as a $50 good idea at Hastings law school has become a perpetual-motion legal machine, one that has placed Shaw at the center of homelessness issues in San Francisco. And along the way, Shaw has become one of the unelected power players in City Hall, parlaying his reputation as a savvy and effective left-wing activist into true political clout.

But if Shaw and his Tenderloin Housing Clinic have become essential to San Francisco's anti-poverty programs, not everyone is a fan. Some residents in the SRO hotels say he isn't doing enough to improve housing conditions there, despite the THC's sizable city contract. Attorneys who represent some of the hotel owners the THC sues complain that Shaw is using the resources and the political weight of his clinic to make money rather than to right wrongs. And twice in recent years, state computers in Sacramento have flagged the Tenderloin Housing Clinic's annual returns, noting "common errors and omissions" in the financial reports, according to documents on file at the California Department of Justice.

It is perhaps the nature of activists to be alternately revered and feared. And there is no question that Shaw and his Tenderloin Housing Clinic are effective. The long list of successful lawsuits alone attests to that. But effective to what end -- everyone's? Or Shaw's own?

In 1980, a group of first-year students at Hastings College of the Law had a bright idea. Disturbed by the loss of low-income housing in the Tenderloin due to Hastings' expansion, the students got together and incorporated as the Tenderloin Housing Clinic, intending to provide free assistance to Tenderloin residents.

"We were familiar with the problems Hastings had caused," attorney Guy Campisano, one of the original THC incorporators, explains. "We were very upset about it, and we wanted to do something in that community to help atone for the displacement."

The THC started with $50 and a basic premise: to help people help themselves. The first-year law students weren't lawyers yet, Campisano says, so they couldn't give legal advice, but they could and did -- with some training, he says, from the San Francisco Tenants' Union -- point people toward other resources that might help them defend themselves against evictions or get necessary repairs made.

"When we formed this group our idea was to make it self-perpetuating, getting new people involved in it," Campisano says. "We didn't view this as something we would do and stay with for a long period of time. We wanted to get a legacy going."

Eventually, Campisano and some other students moved on to other things. But Randy Shaw, one of the THC's original founders, stayed with it -- and lit it up.

By 1982, Shaw had started working full time for the clinic, on a $12,000 grant from the Berkeley Law Foundation, and in 1983, when he was 27, he won his first major public-interest lawsuit, one that challenged rules in residential hotels that banned daytime visitors. Since then, Shaw and other THC attorneys have gone to court on behalf of thousands of tenants, suing for, among other things, wrongful eviction, breach of habitability, and discrimination. The THC has taken on class-action cases, too -- suing on behalf of tenants charged an unlawful and unrefundable $100 "key deposit," for example, and on behalf of residents of a Tenderloin hotel who found their rooms too unsanitary and dangerous to live in. And the THC has litigated against city departments and contested laws passed by the Board of Supervisors, suing to force the building inspectors to hold prompt hearings on code violations, for example, and to bar the ability of landlords to pass through tax increases caused by bond measures to their tenants.

After 10 years of fighting for tenants in court, the THC branched out. In 1989, Shaw proposed a program -- paid for by the city but run through the THC -- that would serve as a go-between for welfare recipients and hotel owners. Called the Modified Payments Program (MPP), it authorizes the THC to act as a tenant broker for residential hotel owners. "The landlord is guaranteed their rent payment, and folks who are very, very low-income are guaranteed housing," explains Maggie Donohue, program administrator for the Department of Social Services.

The MPP has become the Tenderloin Housing Clinic's biggest project. In six years, it has grown from $102,000 to $458,000, and now constitutes about half of the THC's annual expenditures. Shaw himself receives 43.5 percent of his annual $65,000 salary from the hotel program, and the clinic's legal staff is partially funded by a federal Community Development Block Grant, which pays $87,450 a year to the Tenderloin Housing Clinic.

In fact, Shaw says, "all the employees of the Tenderloin Housing Clinic, every employee, gets some kind of city money. They're all listed."

But while public funds make up a large portion of the THC's monies, the Tenderloin Housing Clinic has found another way to earn revenue: lawsuits.

Antoinetta Stadlman has lived in the Baldwin House hotel since 1991. By 1995, she was fed up with its condition. Clued in by a newspaper article to a law that allows neighbors to lodge nuisance claims against property owners who allow illegal or disturbing activities to continue unabated, Stadlman and 14 other tenants took Baldwin House owner Nick Patel to small-claims court and won $5,000 each, the maximum allowable under the law.

Patel appealed the decision to Superior Court. In Superior Court, unlike small-claims court, lawyers are more or less required. Stadlman called around. A private lawyer said he'd take the case -- for $25,000, or 30 percent of the overall settlement. Stadlman thought that was too expensive, so she asked the Tenderloin Housing Clinic for help.

"Randy said he'd do it," Stadlman says. But not for free.
Specifically, Stadlman says, Shaw offered her a contingency-fee arrangement: We handle the suit for you, and we get 25 percent of the settlement, up to $20,000. And Stadlman is grateful for that -- "They gave me a $5,000 break," she says, comparing the THC's contingency rate to the private lawyer's. But still, she decided to continue looking for a lawyer who would take the case for free.

Shaw says the fees were necessary because of the amount of work the case demanded. Generally, when a lawyer takes a case on a contingency basis, he must win the case (or win a settlement) in order to be paid. If the lawyer loses, then neither the lawyer nor the law firm gets any money.

It might come as a surprise that a nonprofit legal organization, with lawyers paid for partly with public funds, can earn money for its work. But under federal tax laws and the rules regulating charitable trusts in the state of California, there are no prohibitions on the amounts or kinds of fees that nonprofit organizations, including law firms, can charge to their clients, as long as the organization is doing the charitable work it was incorporated to do. In fact, there's no law that says a nonprofit can't make money.

And going to court on behalf of low-income people has been lucrative indeed for the Tenderloin Housing Clinic.

A window on the financial workings of the Tenderloin Housing Clinic is provided by the annual documents that the clinic and every other tax-exempt nonprofit charity or educational foundation must file with the Internal Revenue Service. The document is called a Form 990. It is a public record, and must be made available for inspection to any member of the public who asks to see it. Shaw, when first asked for the documents, is reluctant to provide them, snapping, "Go get everything from the city," into the telephone. "I'm not going to do your work for you," he says, but relents when it is pointed out to him that federal law requires that the 990s be made available on request. The THC's 990s are also, however, on file at the California Department of Justice, which is where the SF Weekly obtained them.

The 990s show that from 1985 to 1990, the Tenderloin Housing Clinic revenues grew exponentially -- almost all through lawsuit money. In 1985, which is the first year for which the THC's 990s are available at the Department of Justice in Sacramento, the organization received $66,000 in government grants and $18,000 in "program service revenue," which included "court awards, statutory fees, etc." according the 1985 filing. By 1989, business at the Tenderloin Housing Clinic had boomed -- 990 forms for that year show $126,179 in government grants and $495,678 in "Program service revenue -- proceeds form [sic] litigation; Attorney Fees."

Fueled with this explosion of lawsuit revenue, the Tenderloin Housing Clinic was sufficiently flush in 1990 to invest in a $163,500 option to purchase 126 Hyde St., where its offices are now located. In recent years, attorney's fees and court settlements have accounted for one-third of the THC's revenues, according to disclosures the THC makes to the IRS, to the San Francisco Department of Social Services, and to the Mayor's Office of Community Development.

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.

In 1979, San Francisco first looked around and noticed that residential hotel rooms were disappearing. Some 6,000 rooms had been taken off the market or demolished by landlords who saw better business opportunities than renting to the down and out. Concerned that this housing resource for low-income people was disappearing, the city passed an ordinance that barred hotel owners from converting residential rooms to tourist use. The new law slowed the shrinkage of the housing stock, but not hugely so: Over the next eight years, another 8,161 residential hotel rooms disappeared. In 1994, there were 13,951 occupied residential hotel rooms, 1,777 occupied tourist rooms in residential hotels, and 5,072 vacant rooms in San Francisco, according to housing inspector Rosemary Bosque.

In 1990, the Hotel Conversion Ordinance (HCO) was substantially amended. The new version of the law added something: It allowed nonprofits that have "the preservation or improvement of housing as a stated purpose in its articles of incorporation" to become parties to the action. This meant that people who didn't live in hotels but who wanted to sue hotel owners for violating the conversion ordinance could haul the landlords into court. The Tenderloin Housing Clinic was eligible to sue under the new ordinance. The THC also wrote the new law.

"They were working on the political side of things to get it written and adopted," says Department of Building Inspection Public Information Officer Peter Burns. "I know they were involved in it."

Or, as hotel lawyer Zacks puts it: "It was created by Randy for Randy."
"Oh sure, absolutely," Shaw says, when asked if the THC helped revise the HCO ordinance. The changes, he says, "preserved the central thrust but increased enforceability because never until then did nonprofits have the right to initiate civil litigation."

Shaw says the HCO is an essential piece of legislation. Look around, he argues -- San Francisco's residential hotel stock is the most plentiful in the nation, thanks to his enforcement of the conversion law.

"Correct me if I'm wrong, but I don't think any city has been as successful as we have in preserving our residential hotels," he says. "I don't think any city has been as successful as we have because we have this ordinance and because we've spent 15 years enforcing it."

But Zacks sees things differently. The HCO, as written, is a boon for the Tenderloin Housing Clinic, he says. Zacks says it allows Shaw to bring suit almost whenever he pleases, and to settle for as much money as he wants to, regardless of whether the hotel owners in question are operating in bad faith or not.

"We settle with him, and he comes back six months, a year later and sues again," Zacks says.

Since 1990, the Tenderloin Housing Clinic has been a plaintiff in over 20 lawsuits brought against hotel owners for violating the statute. A review of the court documents shows that some of the cases have been brought against the same group of hotel owners, which Shaw attributes to continued law violations and Zacks chalks up to THC harassment.

And going up against the Tenderloin Housing Clinic is difficult, Zacks says, since its lawyers are publicly funded and private law firms are not, despite what Zacks sees as similarities in the way they conduct business.

"We believe he's not really a nonprofit," Zacks says.
"Without the hotel ordinance, without zoning laws, we'd be in the same situation as New York City," Shaw responds, "where you have massive numbers of homeless adults who simply have no place to live."

Of course, what the Hotel Conversion Ordinance bans is illegal conversion of hotel rooms to tourist use from residential use. Legal conversion of the rooms is possible, and in fact, Giampaolo Boschetti, who owns 126 Hyde St., where the Tenderloin Housing Clinic's offices are, and with whom the THC entered into an option to buy the building, owns and runs a tourist hotel, the Hotel Verona, in the heart of the Tenderloin. The hotel was once a home for homeless and mentally ill adults, according to documents on file at the Department of Social Services (DSS) and the Department of Building Inspection.

The Hotel Verona is right around the corner from the Tenderloin Housing Clinic. When Boschetti bought it in mid-1986, he renamed it and opened its doors to tourists. Under previous owners, the hotel was called the Hotel Burbank, and a newspaper article contained in the hotel's file at the Department of Building Inspection says this: "Resident/patients of the Hotel Burbank, a mental health facility for San Francisco's homeless and disabled, are up in arms about their treatment." A 1985 inspection report notes the newspaper story and says its complaints are groundless as to the building conditions, but does not dispute the characterization of the Hotel Burbank as a facility for the homeless.

But even if it was housing the homeless as "resident/patients," the Burbank was never officially designated as a residential hotel. According to city files, when the time came for hotel rooms to be labeled residential or tourist, the Burbank was designated a residential hotel, but it successfully appealed that decision in an administrative hearing and won tourist hotel status in 1982. This, despite the fact that the Burbank listed three apartments in addition to 62 guest rooms on city registers for years. When Boschetti bought it, he was able to open it as a tourist operation, even if the year before it was housing the homeless.

Boschetti won't comment about his connection with the Tenderloin Housing Clinic. "I am the owner of the building that they are in. I think there is kind of a conflict of interest here," he says. "I, you know, I have someone here in my office right now. Can I call you back?"

And though Shaw has battled tourist hotel conversion since the beginning of his career, he won't comment on Boschetti, although he takes time out to praise the hotel owner as a good landlord.

The rewriting of the Hotel Conversion Ordinance to suit the Tenderloin Housing Clinic's agenda isn't the only example of Shaw's political clout. Over the years, he has come to rank with S.F.'s pre-eminent unelected powerhouses -- pushing through ballot initiatives, lobbying with THC funds, organizing hotel residents around political causes, and even substantially reorganizing part of city government in the way that he thought best.

It was within the first year of founding the Tenderloin Housing Clinic as a student volunteer, back in 1980, that Shaw first launched himself into political activism, helping the North of Market Planning Coalition to organize against a proposal to build luxury hotels in the Tenderloin.

Since then, Shaw has used the combined weight of the clinic's courtroom activities and his organizing capabilities to shape city law. The THC bankrolled and pushed successful local ballot measures: The first, which tightened rent control laws, was on the ballot as Proposition H in 1992; the second, Proposition G, created a brand-new city department, the Department of Building Inspection, and passed in 1994.

"I am a big believer in nonprofit advocacy organizations' spending money on ballot measures," Shaw writes in The Activist's Handbook. "With funding so precious," he continues, later on the same page, "nonprofit social change advocacy organizations should participate in and be counted upon to help fund initiative campaigns seeking to benefit their constituencies. Staff of nonprofit advocacy groups often tell me that spending money directly on ballot measures is too 'controversial' or 'political.' Unfortunately, an organization that fears controversy or politics is not likely to achieve social change."

Prop. G was bitterly contested on both sides.
In 1994, it was Prop. G that removed the old Bureau of Building Inspection from under the Department of Public Works and created it as its own separate entity. Prop. G gave the new Department of Building Inspection the power to set policy and to act as a board of appeals for building permits. Written into the initiative was the provision that two of the new commission members be a residential builder and a representative of a nonprofit housing developer.

The two dominant forces backing the proposition were an unlikely pair -- Shaw and a man named Joe O'Donoghue, the head of the Residential Builders Association. "They're on the side of God and the angels," Shaw says.

The Prop. G campaign, built on an unlikely alliance, spawned unlikely opposition -- the San Francisco League of Neighborhoods lined up with the Chamber of Commerce against it. And it was the most controversial item on the ballot that year. The fight over Prop. G spilled past the election season, when a member of the newly created Building Inspection Commission, longtime THC employee Jamie Sanbonmatsu, used his new office to request a city investigation of one of the most vocal Prop. G opponents, Timothy Gillespie.

"My objection to Prop. G was that it appeared to be a proposition that was manufactured by a coalition of special interests," says Gillespie, who heads the Public Access Project.

Gillespie raised questions about the financing of Prop. G, which was bankrolled by the Residential Builders Association and the Tenderloin Housing Clinic. After he wrote on Public Access Project letterhead requesting city documents, Sanbonmatsu, on Building Inspection Commission letterhead, asked the city attorney to investigate Gillespie for a "failure to comply with lobbyist registration laws."

"In recent days, he has been going through the Tenderloin Housing Clinic contracts at the Department of Social Services," Sanbonmatsu complained in his letter.

The city attorney looked into the matter and said Gillespie wasn't a lobbyist.

In a letter to the Building Inspection Commission president, Gillespie called Sanbonmatsu's letter "an odious attempt to silence my criticisms of the commission."

In addition to supporting ballot initiatives, Shaw has also thrown his weight behind Mayor Willie Brown. In his office at the Tenderloin Housing Clinic, campaign posters for Brown litter the floor. During the election in 1995, Shaw's picture appeared in a campaign flier endorsing Brown. The flier, titled "Willie Brown's Bill of Tenant Rights," gave Brown rave reviews, and Shaw was identified as "executive director, Tenderloin Housing Clinic." Since the articles of incorporation of the Tenderloin Housing Clinic expressly prohibit the organization from involvement in any political campaign on behalf of any candidate, and since federal nonprofits are barred by law from participating in campaigns, some people took note after the election.

IRS spokeswoman Analisa Collins-Sears says indeed, the endorsement could be improper.

"If they use their title they're implying indirectly that the organization is supporting a candidate," she says. "You could possibly put your organization in jeopardy because the organization is definitely not supposed to do this."

Shaw says people knew it was just his personal endorsement: "It's very common."

But of course, lawsuits and political work aren't the only calling cards the Tenderloin Housing Clinic has. A large part of the clinic's public standing, and the thing that it is perhaps most widely known for, is its MPP contract.

The MPP was Shaw's idea -- a program administered by the Tenderloin Housing Clinic that serves as a go-between among the city, the owners of residential hotels, and the hotel residents. Under MPP, the THC negotiates a lower-than-market rental rate for residential hotel rooms with hotel owners. People sign up with the THC for the MPP, and their checks are sent to the THC office, which then pays their rent directly to the hotel owners. The poor get housing, the hotels get tenants, and the THC gets a cut of the action to cover administrative costs. But not every low-income person residing in the hotels under the MPP program believes it does much to improve his living conditions.

Shaw is known as an expert on homelessness and housing issues because of his involvement with conditions in residential hotels. In 1982, when the THC was still tiny, Shaw led a wintertime crusade to get more heat into the SROs. Philosophically, the MPP is descended from that activist tradition. The program accounts for almost half of the THC's expenditures and gives Shaw a platform to talk from on hotel issues.

The way the MPP works, the Tenderloin Housing Clinic can refuse to send welfare recipients to hotels that receive a "poor" rating from the Department of Public Health or the Department of Building Inspection. The idea is to force hotel owners and managers to keep their hotels in better condition or to risk losing a valuable source of income for their rooms.

Shaw says the MPP has vastly improved the quality of the hotels. "You should have seen the hotels in the '80s," he says.

But sometimes -- as in the case of the Baldwin House, for example, where Wayne Hobby and Antoinetta Stadlman live -- that isn't the case. As recently as 1994, the Baldwin House was a success story for the Tenderloin Housing Clinic, a hotel considered so safe and sound that the clinic's application for a federal housing grant showcased it. The Baldwin House had services for its tenants in the lobby, including job counseling and treatment programs, and, Stadlman says, "it was the best hotel the Tenderloin Housing Clinic had."

But then things went downhill, and the MPP and the THC were powerless to stop the slide. These days, Stadlman says, "sometimes when you go out there's blood smeared all over the hallways from knife fights." For the last year and a half, the Baldwin House has been off the MPP, but conditions haven't improved.

Shaw says it's not his fault -- that the Tenderloin Housing Clinic is doing what it can, but that there's a limit to what is possible.

Shaw says the MPP doesn't provide enough of a stick to prod hotel owners into improving hotel conditions: "Obviously not. ... That's why we needed the Department of Building Inspection, that's why we put Prop. G. on the ballot," he says. "That situation's being addressed."

But some of the people in the hotels want him to do more.
"Randy says if we get too hard on these hotels they're going to shut down and there's not going to be anyplace to put people," says Tom Mangold, who lives in the Columbia Hotel and works as an ombudsman for the THC. "I say bullshit, because we have to live in these conditions."

And longtime housing advocate Calvin Welch, a strong Shaw supporter, says that the complaints of people in the hotels do have some merit.

"The [complaints] involving the Tenderloin Housing Clinic, I, too, have heard those complaints and I am not going to tell you that they are baseless. I think there are some very legitimate concerns," Welch says. "I think the basic reason for this is the declining level of support. I mean, nonprofits can only exist through public funding."

The financial statements of the THC, however, seem to contradict Welch's statement -- the Tenderloin Housing Clinic, at least, does not exist only through public funding. Between 1990 and 1993, according to the financial information the Tenderloin Housing Clinic files with the IRS, government grants provided $1.9 million for the THC. During that same time period its lawsuit revenues totaled another $1.1 million.

But if the clinic has been assiduous in obtaining public funding and lawsuit revenues, it has not taken the same amount of care filling out its required reports, according to letters on file at the California Department of Justice.

In 1993 and in 1994, the THC received letters from the Attorney General's Office about "possible reporting errors" on its 990 forms and on the CT-2 forms nonprofits must file with the state.

The letters are routine, generated when computer checks of the 990 and CT-2 forms flag something that seems unusual, says Larry Campbell, registrar of the Office of Charitable Trusts in the Department of Justice.

The computer check is "in no way an audit," Campbell emphasizes. But, he adds, the letters don't go out all that often. "Ten percent or less of all reports we receive are getting these," Campbell says. "This organization was in the top 10 percent of organizations seeming inconsistent."

Among the inconsistencies the Department of Justice computer spotted in the THC's financial returns: discrepancies in the amount of public funding reported on the 990s and CT-2s, a higher-than-normal rate of compensation for the THC as a whole, and an "unreliable" summary of securities activity, according to the documents.

In 1994, for example, the THC reported owning $82,000 in securities at the beginning of the year and $0 at the end of the year, but did not report if the securities were sold. A net return of $862 on the securities was reported, however. And it simply did not answer some of the questions -- which have boxes for "yes" and "no" -- on the form. According to Campbell, all lines on all forms are supposed to be filled out in order to provide an accurate picture of an organization's financial transactions and status. Kind of in the same way that the Hotel Conversion Ordinance requires hotels to keep logs of all rooms, with no omissions or late additions -- it's so you can tell who's renting to residents and who to tourists.

Reviewing the reports, Campbell says, "This looks like it's strangely prepared."

And are all those blanks ordinary? "That's kind of an unusual case," Campbell says.

As for salaries, the THC spends more than $500,000 a year on salaries. And even its own board has a question about one of the numbers on the financial forms -- about $50,000 in 1993 and 1994 for "fund raising."

At its meeting on Dec. 5, 1995, according to meeting minutes contained in the THC's file at the Mayor's Office of Community Development, the board was wanting "clarification" as to what, exactly, that expenditure was. The minutes state, "We will seek clarification of the meaning the terms [sic] 'fund raising' and 'memo' as used in the financial report."

Shaw, when asked, says the Tenderloin Housing Clinic doesn't do any fund-raising, but that putting money into a "fund raising" category on a financial return is a standard accounting practice. The IRS, however, disagrees -- "We would expect it to be used for what they're saying they're using it for," says Public Information Officer Collins-Sears. "You should be spending it on fund-raising if you list it."

In a way, what you think of the Tenderloin Housing Clinic -- and in San Francisco, many people have many opinions -- depends on what you think of the work the THC does.

There are those in San Francisco who applaud Randy Shaw.
"He is opinionated, he makes mistakes, but net-net, after it's all said and done, this city is a better place for the vast majority of its residents because of Randy Shaw," says Calvin Welch. "And I respect the hell out of him for it."

Indeed, around San Francisco, Shaw is something of a sacrament. Ask enough questions about him, and word filters back to the small, wood-floored office that is command central for the rolling tactical operations of the THC. Call someone to ask about the THC, and they instantly want to know "the angle" on the story: Is it good? Is it bad?

Randy Shaw has a phrase for what he does. He calls it "proactive agenda-setting." It's what The Activist's Handbook is all about -- taking the initiative, forcing the world around to one's own point of view. And over the last 15 years, that is exactly what the Tenderloin Housing Clinic has done: It has written laws, enforced them, created city agencies and social services programs, and provided revenue for itself while maintaining an activist stance.

But if Shaw has spent the better part of the last two decades peeling up society's floorboards and looking underneath, he rejects the same kind of scrutiny directed at himself or his housing clinic. When SF Weekly first called him for this story, he said he would not agree to be interviewed because "we've decided we can't trust the Weekly." Later he agreed to several interviews.

Trust, of course, is part of what activism is based on: You trust yourself against your enemies. Trust is sometimes predicated on fear. The premise behind the idea of a nonprofit is slightly different than trust; it's charity -- the notion that it is possible to work for a larger good. If scrutinizing the workings of the Tenderloin Housing Clinic seems unnecessary, given the work that the clinic has set itself toward doing, it isn't: Tax-exempt, funded in part with public money, the clinic is a public beneficiary, and scrutiny is part of the territory.

And as more and more social services are delivered through nonprofits rather than by the government, organizations like Shaw's are being pushed to the front lines of society. It's a system that allows someone who's smart about it to create his or her own kingdom. Even though sometimes, in kingdoms, what's important is simply what the king wants.

Research assistance provided by Liza Goodwin.

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4 comments
ScottLucas86
ScottLucas86

@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.

SFCitizen
SFCitizen

@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

ScottLucas86
ScottLucas86

@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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