Photo by Mike Koozmin
This story was originally reported by Matt Smith for the independent, nonprofit Center for Investigative Reporting, the country's largest investigative reporting team. We present it here in partnership with CIR. For more information, visit cironline.org and follow @CIRonline on Twitter. The reporter can be reached at email@example.com.
Dressed in a black summer suit, white pocket square, and designer sunglasses, Willie Brown joined Mayor Ed Lee on June 26 in front of a wall-sized rendering of The Shipyards, a condominium community planned for the former Hunters Point Naval Shipyard.
The occasion was a groundbreaking ceremony for 88 of 1,400 planned housing units, the first tangible evidence of what has long been envisioned as a $10 billion mixed-use development.
Brown told assembled dignitaries about the $800 million light-rail extension he had championed while he was mayor to connect the future development to downtown, and the $1 billion in government money spent cleaning up radioactive and toxic waste to prepare the military base for development.
"This community will come alive," Brown said. "It will not be different than any other community in San Francisco except it will be newer, and probably better."
During his turn to speak, Lee emphasized help from political leaders in routing government funds to the project.
"I do want to make sure we recognize the historic efforts by so many people who for years and decades have put in a lot of hours, a lot of tears to get to this point," Lee said. "I want to thank Nancy Pelosi, Dianne Feinstein, Willie Brown, and Gavin Newsom."
Amid all the thank-yous and accolades, however, neither man mentioned the source of the private money that made the groundbreaking possible. Nor did they describe how government officials had spent the previous year helping position a little-known private firm to trade U.S. visa priority to foreigners who invest in one of the largest proposed public-private real estate developments in California history.
Behind the scenes, Lee had devoted staff time, lobbying resources, and political capital to ensure the financial success of the San Francisco Bay Area Regional Center. The center is a private company linked to Brown, who was credited with engineering Lee's 2011 appointment to complete Newsom's mayoral term after he was elected lieutenant governor, and with helping Lee retain the post.
This reporter found that Lee's support has included having city staff members and the city's contract lobbyist work in concert with Pelosi, the House minority leader, to urge the U.S. Department of Homeland Security to allow the firm to operate under the federal EB-5 visa program. Named for a section of the U.S. immigration code, the 23-year-old program gives green-card priority to people who invest at least $500,000 in designated U.S. enterprises.
The mayor's staff drew up letters, memos, and other material used in investment pitches and state permitting efforts by the firm. One of Lee's aides traveled to China to help the company market shares to investors.
As for Brown, his exact role in the investment firm is a bit of a puzzle. He denies knowledge of it, yet the company's brochures and website call him a "principal."
Ginny Fang, CEO of the San Francisco Bay Area Regional Center, says Brown is a minority partner. But when Fang wrote to Lee's deputies on July 4, 2012, making the case for lobbying the Homeland Security Department, she wrote that the center has three leaders: herself, Brown, and Steven Kay, secretary of the board for the Willie L. Brown Jr. Institute on Politics & Public Service (for which Brown serves as chairman and CEO).
Like other private investment firms, the San Francisco Bay Area Regional Center's core business is to sell private shares, collect fees, reap returns, and pass along risk. The company first gained government recognition under the U.S. investor visa program in 2009 under the name Golden State Renaissance Ventures, founded by former East Bay law firm manager Eric Chelini. It has stumbled with some proposed ventures, such as a biotech incubator in the Dogpatch neighborhood. But the company picked up speed in 2011 as city and federal officials backed an effort to use it to jumpstart development at Hunters Point.
It formed a partnership with Miami-based developer Lennar Corp. to act as a broker for foreigners, primarily Chinese, under the EB-5 visa program, according to company memos. Records show the regional center's managers are lining up $87 million in investments, and hope to eventually raise $300 million. The investments would be held by two separate corporations; in U.S. Securities and Exchange Commission filings, both name Kay as president. Meanwhile, company marketing materials emphasize Kay's role as president of the regional center, and as Brown's business partner and office mate.
"Mr. Kay shares office space with former Mayor Willie L. Brown since Mr. Brown's exit from public life in 2004, and together they share and represent clients in the city of San Francisco and throughout the state in a myriad of matters," according to one regional center brochure entitled "Company Brief."
"If I had to diagram this project, it would look like a family tree with lots of extra little problems," says Judy Nadler, senior fellow in government ethics at Santa Clara University. "Brown as chair and principal of this financial services firm stands to benefit financially, probably in a significant manner. So I'd say that the skeptic would look at this and say this pretty much looks like an inside deal."
Fang took issue with the term "inside deal," saying that support for her firm was no different than other civic enterprises. She did not answer questions about Brown's potential financial stake.
"The City supports, advocates, and funds a myriad of projects, nonprofits, and contractors across San Francisco, most of which have no relationship with Willie Brown," Fang says in an email. "Are each of those also 'inside deals?'"
This spring, the regional center hired the Shanghai firm Visas Consulting Group to host a series of seminars in Chinese cities. The pitch to foreign investors emphasized the firm's links to political figures such as Brown as evidence that the firm is a sound investment. At an April 14 seminar in Shanghai, prospective investors — Chinese citizens considering seeking green card priority through the U.S. investor visa program — received glossy brochures illustrated with photographs of Lee and Brown.