Peter Kilgallen, a registered nurse living near the Panhandle, is far from the only San Francisco tenant hit with a rent increase from an operating and maintenance expense loophole by the city’s largest landlord, Veritas Investments.
After a year of fighting the roughly $200 increase, he and half a dozen rent-controlled neighbors at 430 Baker St. were ultimately denied a petition by the Rent Board in April, and immediately charged a year’s worth of increases. But one of the three crucial votes that swung the outcome in Veritas’ favor was David Wasserman, a Rent Board commissioner who legally represents landlords for a living and whose firm’s name appears on Veritas’ legal paperwork.
Though Wasserman makes a clear financial distinction between his firm and the one run by Daniel Stern — who regularly represents Veritas and subsidiary Greentree Property Management — the two are friends and share an office under the firm name Wasserman-Stern. The two do not share profits and have different business licenses, Wasserman says.
Kilgallen wasn’t aware of Wasserman’s association with his landlord until weeks after the Rent Board’s decision, and was immediately angered. He agrees with the fairness of having a landlord’s perspective in the appeals process, but balks at having the same person overseeing his rent having a connection to someone who decides if that rent is fair.
“For me, it’s a little upsetting and a little unethical that this person is sitting on the board and doesn’t recuse himself,” Kilgallen says of Wasserman’s link to Veritas. “It’s called conflict-of-interest. It’s a black-and-white issue.”
For the uninitiated: The Rent Board consists of two landlords, two tenants, and one neutral party vote in a quasi-courtroom battle that involves petitions and appeals of rent increases, repairs, and other landlord-tenant disputes. Another five commissioners with the same designations serve as alternates, filing in when the voting commissioner is unable to serve for a variety of reasons — including recusals.
Recusals aren’t terribly common. Or at least, they weren’t until recently. Out of more than 200 agendized appeals in 2017 and 2018, Rent Board staff counted 15 recusals from landlord commissioners, seven from tenant commissioners, and one from the neutral commissioner.
Since Mayor London Breed elevated Wasserman — who served as an alternate starting in 2015 — to voting landlord commissioner at the Nov. 13, 2018 meeting, there have been 14 recusals. All but four have come from Wasserman, who told SF Weekly he could not recall his exact reasons for recusing himself, as they are undocumented in meeting notes.
However, he says his policy is to recuse himself from matters that Stern handles, even if it doesn’t involve one of his clients, to avoid even the appearance of a conflict of interest.
“I have not and never have represented Veritas or Greentree as an attorney,” Wasserman says. “I have never received compensation from Veritas or Greentree, and if that ever changed, I would most certainly recuse myself from consideration of Veritas or Greentree matters pending before the Rent Board.”
Deepa Varma, executive director of the San Francisco Tenants Union, doesn’t trust that Wasserman has no conflict of interest — whether it’s Veritas or other corporate actors he may represent using loopholes, the motivation is the same.
“All of these actors have a vested interest in the appeals cases being decided at the Rent Board right now,” Varma says.
Wasserman acknowledges knowing the basics of the company’s dealings through his associations with the Coalition for Better Housing and the San Francisco Apartment Association but says he has no business dealings with them. But with or without past cases, Brad Hirn, lead community organizer with the Housing Rights Committee of San Francisco, agrees that it’s fundamentally unfair for Wasserman to have a say in Veritas appeals.
“It sticks out, certainly to me, as a conflict of interest,” says Hirn. “Whether the ethics rules consider it a conflict of interest is a different question.”
But the rules are fairly clear. Rent Board procedures bar members from the participation, consideration, or decision of any case that involves personal or equity interest; interest as a landlord, tenant, or manager; or relation by blood, marriage, or adoption to a landlord or tenant involved in a case.
Further, a new city law that took effect in January requires all members of a city board or commission to notify the Ethics Commission within 15 days of recusing themselves over a financial conflict of interest. However, Rent Board commissioners were not notified until the April 9 meeting, so the Ethics Commission has received just one form filed by Wasserman regarding 140 Landers St. (The tenant sought to dispute a Costa-Hawkins rental increase of $1,000.)
Wasserman cited in the filing that the landlord respondent was a former client as reason to recuse himself. The tenant — who requested anonymity pending possible appeal of the case — was glad that Wasserman recused himself but found it odd that he remained physically nearby and could have influenced the ultimate decision to approve the increase. Wasserman says he typically goes to the back room for commissioners and checks emails on his phone.
Wasserman isn’t the only landlord commissioner accused of a conflict of interest. Neveo Mosser, head of property-management firm Mosser Companies, was a target of tenants and their advocates for alleged failing to maintain properties and forcing out rent-controlled tenants. The real estate mogul termed out in September 2018.
But those gripes, Hirn says, centered on Mosser being the landlord himself. This gives the Housing Rights Committee all the more reason to consider a rent board that is elected by the people.
“Wasserman is a landlord, but his occupation has a stake in this client whose petitions are being appealed,” Hirn says. “There’s a financial connection that seems problematic.”
When someone feels a necessary recusal didn’t occur, they may file a confidential complaint with the Ethics Commission, which determines probable cause before proceeding to a full investigation. Decisions found to be tainted by a conflict of interest can be undone under state law.
“If an official fails to recuse, the Ethics Commission can impose penalties on the official,” says Patrick Ford, senior policy analyst for the Ethics Commission. “If an official approves a government contract in which he or she has a financial interest, the contract can be voided. Also, a court can stop a government action that was taken because of a conflict of interest.”
Wasserman’s potential conflicts of interest come as the Rent Board is at a critical juncture, tenant advocates say. Supervisor Sandra Lee Fewer’s legislation put an end to the increased operating and maintenance expenses new building owners frequently invoke when passing on debts and property taxes.
Several cases, including Kilgallen’s 430 Baker St. home, have been in limbo leading up to the legislation’s approval in May. That the Rent Board’s decision to grant the increase could set precedent for other tenants was a significant factor in the Board of Supervisors’ uncommon intervention into Mayor London Breed’s appointment of a voting tenant commissioner.
Reese Isbell, who has faced personal challenges as a renter but who has little to no dedicated tenant-advocacy experience, was unable to persuade the Board’s neutral vote to rule against the increases. Isbell withdrew his appointment in April mere days after a committee hearing at which dozens of tenant advocates expressed discomfort with his inexperience, and Breed instead appointed him as an alternate tenant commissioner.
Whether the case of 430 Baker St. is further appealed, Kilgallen is concerned for his neighbors and tenants citywide who were already struggling financially and have to reach into empty pockets. That $200, or seven percent, may sound low but his building has seniors with fixed incomes, disabled residents, teachers, and single parents.
“If this continues, this spells trouble for other tenants,” Killgallen says about the lack of recusals. “Some people can afford a few hundred dollars’ increase. For other people, that can destroy and throw them into bankruptcy.”