HOUSING AUTHORITY OF THE COUNTY OF SAN JOAQUIN
REASON FOR INVESTIGATION:
An anonymous letter was received in June 2003 by the San Joaquin County Civil Grand Jury (Grand Jury). Additional recipients of the letter included The Record newspaper and the Housing Authority's Board of Commissioners. Several allegations of misconduct by the executive director included: hiring practices, retaliation against employees, creating positions without board approval and misuse of Housing Authority funds.
After a preliminary investigation, the Grand Jury voted to undertake an investigation not only into the allegations contained in the anonymous letter, but also into the operation of the organization itself, including the Board of Commissioners, the Executive Director, Antonio Pizano, and the Executive Staff consisting of the Chief Operating Officer, Director of Human Resources, Director of Finances, Vice President for Assisted Housing and Vice President for Properties and Facilities Management.
Since our investigation began, the Executive Director, Chief Operating Officer, Director for Human Resources and Vice President for Property and Facilities Management have resigned and the Director of Finance has retired. The former Vice President for Assisted Housing is the lone remaining member of the executive staff and has been appointed acting Executive Director by the Board of Commissioners during their search for a replacement.
METHOD OF INVESTIGATION AND ANALYSIS:
The Organization and Purpose
Housing Authorities were created by the California Legislature in 1938 for the purpose of providing low cost housing for low income residents of cities or counties in which they are located. The Housing Authority of the County of San Joaquin was established in 1942 by resolution by the San Joaquin County Board of Supervisors. It is a public corporation organized pursuant to the California Health and Safety Code by the Community Development Commission of San Joaquin County. The Community Development Commission of San Joaquin County consists of the five members of the Board of Supervisors, who have delegated their duties to a separate Board of Commissioners to govern the Housing Authority of San Joaquin County.
The California Health and Safety Code provides that should the Community Development Commission delegate its duties to a separate Board of Commissioners, two additional board members shall be appointed consisting of two tenants of the Housing Authority including at least one over 62 years of age. The Board of Commissioners of San Joaquin County consists of seven members appointed by the San Joaquin County Board of Supervisors.
According to the 2002 Annual Report, the Housing Authority had assets of more than $67 million consisting of real estate, cash and investments with an operating profit of more than $800,000. One of the major sources of funding is from the Department of Housing & Urban Development which provides funding for the Section 8 rent subsidy program which the Housing Authority administers in San Joaquin County.
The Housing Authority employs more than 90 employees in a variety of administrative, skilled and unskilled positions. Some of the employees are represented by unions which were not a part of this investigation.
Board of Commissioners
The seven members of the Board of Commissioners are appointed by the San Joaquin County Board of Supervisors, typically one from each supervisorial district, who serve four-year terms and two tenant members who serve two-year terms.
The Board of Commissioners consists of Alan Biedermann, Chairperson; Nancy Perez, Vice Chairperson; Audrey Jordan, Keith Land, Peggy Metzger, Joan Thorp and Shelly Wilson.
Alan Biedermann, the Chairperson, is a supervisor for the Department of Environmental Health of San Joaquin County.
Keith Land is a banker employed by Farmers and Merchants Bank in Lodi and is also a member of the Lodi City Council.
Audrey Jordan is employed by the San Joaquin County Office of Education as an educator.
Peggy Metzger and Joan Thorpe are Housing Authority tenant members.
Shelly Wilson is a real estate agent and a past Chairperson of the commission.
Nancy Perez, Vice Chairperson, is a past tenant of the Housing Authority and is employed by San Joaquin County WorkNet.
During the Grand Jury investigation, all sitting members of the Board of Commissioners appeared before the Grand Jury pursuant to subpoena and testified on a variety of subjects including their duties and responsibilities as well as the issues alleged in the complaint received by the Grand Jury that gave rise to this investigation.
The Grand Jury asked all the members of the board about the housing authority's business organization structure. Each member that appeared before the Grand Jury was asked the question "What type of business organization was the Housing Authority?" None of the members knew that the Housing Authority was a public corporation. One thought it was a federal agency, a few thought it was a state agency and others did not have any idea what it was. They all thought it was a "non-profit."
It was the opinion of the Grand Jury that knowledge of the organizational structure of the housing authority is central to understanding the duties and responsibilities of the members of the board set forth in Corporations Code §7231, which says in part that: "A director shall perform the duties of a director, as a member of any committee of the board upon which the director may serve, in good faith, in a manner such director believes to be in the best interests of the corporation and with such care, including reasonable inquiry, as an ordinarily prudent person in a like position would use under similar circumstances." The Grand jury feels that the members of the board take satisfaction that they play a part in helping to provide low-cost housing and shelter opportunities for the county's less fortunate citizens.
The Board of Commissioners, to their credit, undertook a confidential investigation into the performance of the Executive Director, Antonio Pizano, upon their receipt of a copy of the anonymous letter that the Grand Jury received. A copy of the result of that inquiry was subpoenaed by this Grand Jury and has yet to be delivered.
Testimony from most of the members of the board were generally consistent that they were surprised by the allegations of improprieties taken by the Executive Director. The testimony clearly indicated that the board's investigation had found that some of those allegations were credible and had elected not to renew or extend Mr. Pizano's employment contract which was scheduled to expire in May 2004. The board had consistently given outstanding annual reviews to the executive director and perceived no indications of any of the misconduct or improprieties outlined in the anonymous letter. They testified they were unaware of the low morale at the Housing Authority.
Although the Grand Jury felt that all members of the board took their role as directors seriously when the subject of affordable housing for the underprivileged arose, the board should have made a better effort to conduct adequate evaluations of their only employee, the executive director. It was felt that the committee responsible for his evaluation made little or no attempt to interview members of the executive staff to ascertain problem areas or weaknesses in the management team. It was only after the board received the anonymous letter that they commenced a serious investigation into the behavior and performance of their executive director.
Most board members admitted that they knew of no procedures other than a public board meeting that offered employees an opportunity to air grievances without fear of retaliation or intimidation. All agreed that a procedure is necessary to solve this dilemma.
The Grand Jury feels that the Board of Commissioners was remiss in being surprised at the allegations in the letter received that caused the confidential investigation. Some of the allegations occurred some years prior and it seems that some of those issues would have surfaced at one time or another.
Antonio Pizano was the executive director of the Housing Authority for most of the term of this Grand Jury's investigation and the subject of the anonymous letter. Mr. Pizano served in his capacity as executive director for more than eight years prior to tendering his resignation in January, 2004.
A graduate of the University of California Berkeley with undergraduate and graduate degrees in architecture, Mr. Pizano testified that he had worked in the field of housing for more than 28 years, including federal employment with the U.S. Department of Housing & Urban Development, Housing Authority of the County of Contra Costa, and the City of Benicia Housing Authority. He applied for and was selected by the Housing Authority's Board of Commissioners in 1995.
Allegations of misconduct by the executive director set forth in the anonymous letter included:
The Grand Jury found early in their investigation that even if some of the allegations contained in the letter were true and credible, not all were improper or illegal. Other allegations, if true, were indications of improper and seriously poor management practices. Evidence of widespread low morale within the organization is in and of itself an indication of ineffective and poor management, not only at the executive director level, but also at the lower management echelons. In the end, the executive director has the responsibility for the well-being and smooth-running of the organization below. Organizations fortunate to have good management generally are efficient and operate smoothly as a beneficiary of high morale. Abuse of sick leave and work-related injuries are generally lower when the workforce is content.
Credit Card Abuse
Allegations of abuse of credit card privileges by the executive director are serious as it involves a breach of trust pertaining to the use of Housing Authority funds for personal use. The executive director, as chief executive officer of the corporation, has a duty to act in the best interest of the corporation. In the absence of authority delegated by the Board of Commissioners, an expenditure of corporate funds for personal use is a breach of that duty. The Grand Jury was unable to find any documentation authorizing any such practice by the executive director.
The Grand Jury heard credible testimony from several witnesses of instances where the executive director took cash advances from his Housing Authority credit card without supplying documentation of expenditures for Housing Authority business purposes. Corroborating credit card payment records supported the testimony.
When confronted by the Grand Jury, the former executive director, appearing as a witness, expressed his belief that he had done no wrong since he had ultimately repaid all instances of cash advances not supported by documentation for business purposes.
What disturbed the Grand Jury was the fact that such personal expenditures by the executive director were made on company credit cards for several years and was apparently tolerated within the organization as acceptable behavior. The Grand Jury feels that the executive director's actions with respect to these instances constituted a breach of his trust to the corporation. The Grand Jury was troubled that he failed to recognize that such instances of credit card abuse were, at the very least, improper. He appeared to be insensitive to even appearances of impropriety in this area.
Restructuring of the Housing Authority
The Grand Jury heard extensive testimony regarding the restructuring issue raised in the anonymous letter. Views of the results of the restructuring ranged from outstanding to ineffective.
Substantial criticism arose from the hiring of Mr. Richard Martinez, a personal friend of the Executive Director, as the primary consultant to the Housing Authority with a contract initially below the threshold of an amount needed for competitive bidding procedures. Ultimately, the consultant was contracted two more times with the resulting total amount of all three contracts well above the amount requiring competitive bidding or board approval.
The restructuring plan was adopted by the Board of Commissioners and was in the process of implementation when various resignations of the executive staff created vacancies resulting in an apparent delay of the plan.
The Grand Jury has no criticism of the proposed restructuring which was not a subject of our investigation. The restructuring was commenced by the executive director without the full support of the executive staff and without sufficient communication to the key members of the workforce to effect a successful restructuring process. Interviews of lower level supervisors revealed a cynicism toward the restructuring plan indicating deficient communication throughout the chain of management.
Hiring and Promotion Practices
The anonymous letter alleged that established promotion and hiring procedures were bypassed in some instances where the Executive Director wanted to hand pick personnel of his choosing without regard to their qualifications.
The Grand Jury heard substantial testimony that several persons were hired and others promoted outside of the normal hiring and promotion procedures, as outlined in the Housing Authority Personnel Manual. Review of the manual revealed that the hiring and promotion policies were set forth as guidelines and not mandatory. The executive director was delegated the power under his employment contract to hire and promote persons without regard to the guidelines set forth in the manual.
A workforce requires a predictable and fair personnel policy in order to maintain morale in the workplace and retain competent employees. Bypassing the hiring and promotion guidelines tends to detrimentally affect the entire workforce by lowering employee morale. Such decisions indicate that the management values favoritism over performance. The Grand Jury feels these instances constitute poor management practices which affect employee performance in the long term.
Management Style and Abuse of Power Allegations
The Grand Jury does not advocate one type of management style over another and recognizes that executives with various styles can be and are very successful. Much of the testimony heard by the Grand Jury centered around the management style of the Executive Director. Opinions put forth by witnesses regarding the management style of the Executive Director ranged from dictatorial to consensus oriented. Overall, the Executive Director's management style was characterized as inconsistent.
There were allegations that the Executive Director threatened retribution for various reasons in staff meetings. The Grand Jury could not corroborate any serious threats of substance to anyone and testimony indicated that such threats were characterized as mere talk.
Other allegations, including abuse of travel privileges for non-job-related training, travel expenses, approval of undocumented contributions to community-based organizations, were investigated with no conclusive, corroborating evidence.
The executive staff consisted of the Chief Operating Officer, Director of Assisted Housing, Director of Finance and Director of Human Resources. As detailed above, the entire executive staff has resigned with the exception of the Director of Assisted Housing who was appointed interim Executive Director while a search for a permanent replacement is conducted.
The Grand Jury received credible evidence that the Director of Human Resources wrote the anonymous letter with assistance from at least two other members of the executive staff and with the prior knowledge of at least one other member. The anonymous letter was dated May 29, 2003 and the Director of Human Resources's resignation was effective July 1, 2003.
The Grand Jury heard extensive testimony from members of the executive staff about a number of issues, including circumstances leading to such mutinous behavior by most of the key personnel of the authority. Testimony was heard corroborating many allegations outlined in the anonymous letter. Some allegations were discounted and others which may have been true were not violations of policy at all.
The Grand Jury heard considerable testimony that the behavior of the executive staff was dysfunctional and ineffective as a management team. As a result, morale of the workforce suffered thereby producing the side effects of higher than normal sick leave, inefficiency and lower productivity. As an example, the executive staff presided over a computer software fiasco which resulted in a loss to the Housing Authority of almost $700,000.00, when the software turned out to be unusable. This episode continues and is apparently in the early stages of litigation in an attempt to recover some of those resources.
Housing Authority Workforce
The Grand Jury made an unannounced visit to the Housing Authority for the purpose of observing the physical operation and random interviews of employees.
Random interviews of various employees were conducted by the Grand Jury informally and confidentially. The majority of those interviewed revealed a pattern of very low morale, indicating a disconnect between the various levels of management and the rank and file workforce. The primary areas of discontent were in communications, unfairness of promotions, fear of retribution, under staffing, lack of avenues for grievances and a general lack of appreciation by the senior management. Most felt that their management had little interest in their well-being.
Many employees felt that their union representation was generally ineffective and afforded them little protection. Alternatively, they had a reluctance to air grievances against their supervisors to the Board of Commissioners publicly for fear of retribution. Most who were interviewed seemed thankful that someone actually valued their opinions of the working conditions at the Housing Authority.
Pursuant to Section §933.05 of the Penal Code:
The San Joaquin County Board of Supervisors and the Board of Commissioners of San Joaquin Housing Authority shall report to the Presiding Judge of the San Joaquin Superior Court, in writing and within 90 days of publication of this report, with a response as follows:
As to each finding in the report a response indicating one of the following:
As to each recommendation, a response indicating one of the following: