W.L. Brown: A Public/Private Partnership

Catellus' hopes of developing Mission Bay had been bottled up for years. The city approved a development plan for the area in 1991, but Catellus found the plan so restrictive that it wasn't profitable to build. In 1995, the company walked away from the plan, and wrote off $84.8 million in losses.

But a reversal of fortunes followed quickly after Brown took office. Catellus gained approval of a new Mission Bay plan calling for construction of millions of square feet of office space and thousands of residential units. Approval came in October 1998 with the strong support of Brown, who actively and successfully campaigned for the University of California, San Francisco to locate a new biotech-oriented campus in Mission Bay. Some of the land for the new campus was, in fact, donated by the city.

Approval to move forward on Mission Bay removed a longtime thorn from Catellus' side. After 15 years of defeat at the hands of slow-growth activists, Catellus now had a centerpiece project -- involving hundreds of acres of prime San Francisco real estate -- ready for development.

As the fortunes of Catellus rose, so did the fortunes of the California Public Employees' Retirement System. The system had bought a huge chunk of Catellus stock in 1989, owning as much as 46 percent of the firm at one time. As a real estate recession took hold and then deepened in the early 1990s, however, the stock plummeted in value, drawing intense criticism of the investment.

Catellus' own annual reports indicate that the approval of Mission Bay -- an approval championed by Willie Brown -- improved the firm's financial position. Of course, other factors were also involved in the improvement in Catellus' fortunes, including other real estate investments in Illinois, Oregon, Colorado, and California.

Still, the trend is clear: When Brown took office, Catellus stock was hovering in the $6.50-per-share range. Early in December 1997, as Catellus' new plans for Mission Bay were sliding toward city approval, CalPERS sold nearly 19 million shares of its stake in Catellus at slightly more than $17 a share, reducing its percentage of ownership from more than 40 percent to about 18 percent. In effect, the retirement fund made some $200 million from the rise in stock prices between early 1996 and the time it sold its shares.

Somewhat paradoxically, it is this run of good fortune that helps create a two-step appearance of conflict of interest involving Willie Brown and the state retirement system:

1) Brown aids Mission Bay -- and Catellus, and, therefore, CalPERS -- in San Francisco, helping CalPERS recoup much of the paper loss it had suffered through its investment in Catellus.

2) CalPERS backs the Whitney Oaks venture and, consequently, aids Live Oak Associates III, which just happens to count San Francisco Mayor Willie Brown among its investors.

Next to Mission Bay and the Presidio, the Hunters Point Naval Shipyard is one of the most valuable pieces of soon-to-be-developed real estate in San Francisco. To be sure, sections of the former naval base have massive environmental problems. But the area also boasts some of the city's best bay views. The contract to develop the decommissioned shipyard, which is in the process of being returned to city ownership, is truly a one-of-a-kind opportunity.

The Lennar Corp. is the lead partner in a group that was recently awarded a San Francisco Redevelopment Agency contract to oversee the conversion of the shipyard to civilian use. The redevelopment contract became politically controversial in 1998 because some of Mayor Brown's close associates -- including Yber-lobbyist Billy Rutland, trucking contractor Charlie Walker (known sometimes as "The Mayor of Hunters Point"), and local Democratic Party insider Natalie Berg -- had been hired as consultants by the companies competing for the contract.

Struggling to avoid the appearance of favoritism, the Redevelopment Commission -- which is appointed by the mayor -- brought in the major accounting firm of KPMG LLC to review the qualifications of the three finalists. Then, at a public hearing last month, the commission rejected KPMG's recommendation, and, in a surprise vote, chose the Lennar-led group as master developer of the former shipyard.

All while Renaissance Homes, the Lennar subsidiary, was working away on its section of Whitney Oaks, in partnership with CalPERS, Newland, and the Willie Brown investment vehicle Live Oak Associates III.

Lennar officials did not return phone calls this week seeking comment on possible conflicts involving Whitney Oaks.

Throughout his political career, Willie Brown has been a lightning rod for ethics criticism. Much of this criticism has focused on the seemingly inherent conflict between his duties as one of the state's most powerful officeholders -- speaker of the Assembly -- and his work as a private attorney for some of the state's most prominent businesses. Time after time, critics have pointed at supposed conflicts; time after time, those conflicts have been vague, attenuated, incomplete.

While in the Legislature, Brown did indeed represent many clients who benefited from governmental action. But Brown never was shown to have represented a private client for the purpose of winning a state government approval over which Brown had official sway. He adamantly insisted his private law practice was perfectly ethical, and all but taunted critics with a personal style that included Porsche automobiles and Wilkes Bashford suits.