W.L. Brown: A Public/Private Partnership

Many limited partners say that the Live Oak general partners, Cohen and Falik, began to branch out, seeking other real estate projects that might help recoup some of the losses their investors incurred at Sutter Bay.

Whitney Oaks was one of those projects.
Cohen and Falik apparently began negotiating with CalPERS and Newland on Whitney Oaks early in 1995. In the summer of 1995, the Live Oak III limited partners voted to invest in Whitney Oaks, after being apprised by Cohen and Falik that CalPERS was the major money player in the project, many limited partners and partnership documents say. Then-Assembly Speaker Willie Brown was one of these limited partners.

In the end, a complex partnership was formed among CalPERS, the principals of Newland Capital Advisors LLC, and Falik and Cohen. This group agreed to pay $17.5 million for a 1,075-acre plot of land in Rocklin, a small city northeast of Sacramento. The purchase was consummated in November 1995.

The public/private partnership formed to develop Whitney Oaks is, indeed, complex. Willie Brown's ownership stake is buried deep within that complexity. And CalPERS has withheld some key documents relating to the project, claiming their release would injure the retirement system's competitive position in the real estate industry.

Early this week, Bryan Bailey, the CalPERS project manager for Whitney Oaks, said that he did not know Willie Brown was an investor in the project until SF Weekly began questioning it. "We do not drill down that far," he said. A representative of Newland also said she was unaware of Brown's affiliation with Whitney Oaks.

As if its ownership structure did not provide enough complexity, the owners of Whitney Oaks have also hired a developer for the project. CalPERS documents obtained by SF Weekly are inconsistent in identifying the developer. Sometimes, the developer is listed as Live Oak Associates. In other documents, the developer is identified as Live Oak Enterprises, a business established by Falik and Cohen.

Brown is a partner in Live Oak Associates, but there is no indication he holds a stake in Live Oak Enterprises (although it does provide management services to Live Oak III).

CalPERS has declined to release documents showing how much the developer of Whitney Oaks is eligible to earn. After initially agreeing that Live Oak Associates was the developer, CalPERS and Newland staff later insisted that Live Oak Enterprises had been hired as the developer. CalPERS and Newland gave multiple, conflicting, nonconclusive explanations for CalPERS's repeated listing of Live Oak Associates as the Whitney Oaks project developer.

The developer question aside, an investigation by SF Weekly shows that Live Oak Associates III -- a partnership in which Willie Brown has long been an investor -- clearly holds ownership in the CalPERS-backed venture that is developing Whitney Oaks. More than 10 limited partners in Live Oak III spoke to the Weekly in detail about the partnership's investment with CalPERS, and correspondence Cohen and Falik have sent to Live Oak investors describes the Whitney Oaks investment in extremely precise terms.

The bottom line: A partnership between CalPERS and Newland owns 96 percent of the Whitney Oaks project. The other 4 percent is owned by a partnership between Cohen and Falik, the two general partners of the Live Oak Associates partnerships.

And Live Oak Associates III owns a little less than 1 percent of the project.

According to a July 1995 Live Oak status report, Live Oak III partners had an opportunity to invest about $200,000, for a potential (but hardly guaranteed) return of $2.2 million -- or, approximately, 1,000 percent.

When CalPERS decided to bankroll the purchase of Whitney Oaks, Willie Brown was in his final year in the state Assembly, and at the end of a 14-year run as speaker. In fact, the purchase was consummated just a few weeks before Brown won the San Francisco mayoral runoff election against Frank Jordan in early December 1995.

While he was Assembly speaker, Brown "moonlighted" as a lawyer. His private law practice was large, lucrative, and controversial. He was repeatedly criticized for accepting large legal retainers from clients with significant interests in state legislation. Brown repeatedly responded by insisting his private legal work did not involve legislative or state agency matters.

Because San Francisco mayors are forbidden from employment outside government, Brown sold his law firm before taking office. During the mayoral campaign, however, Brown's legal clients became an issue; many news reports questioned whether Brown might be tempted to favor former clients if or when he became mayor. Particularly, Brown's relationship with the Catellus Development Corp. came under fire.

According to the San Francisco Examiner's Lance Williams, then-Speaker Brown took in nearly $400,000 in legal fees from Catellus from 1982 to 1994. And it was clear Brown would have to deal with Catellus and its long-stalled Mission Bay project, somehow, if he became mayor.