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Former Gallaher employees at Santa Rosa apartment complex say they were pushed to take part in housing fraud schemes

Two former employees at an apartment complex owned and run by Sonoma County developer Bill Gallaher’s companies say they were directed to participate in fraud alleged in a June 2019 whistleblower lawsuit that recently settled for $500,000.

They also state they were never contacted by any of the three government agencies — county and state — that investigated the case, which was settled last month.

In written statements signed under penalty of perjury, the former employees said they were willing and able to testify in court to their experiences at Vineyard Creek Apartments near Charles M. Schulz-Sonoma County Airport. The two women drafted the declarations at the request of the whistleblower’s attorney.

Officials with Sonoma County, the California Attorney General’s Office and the California Department of Insurance have said their agencies investigated the claims but ultimately chose not to intervene in the case. The two state agencies have declined to discuss their decision, while county officials have said they found insufficient evidence to justify intervention.

It’s not clear whether investigators from any of the three agencies were aware of the declarations. Officials from all three organizations declined to answer that question when asked by The Press Democrat.

“If they had conducted an investigation, they would have found things,” former Vineyard Creek assistant property manager Jen Negoesco told The Press Democrat.

In her declaration Negoesco alleged she was directed to place tenants in low-income housing at the property even though they did not qualify — one of the allegations contained in the whistleblower lawsuit.

“If they called me, I could take them in there and pull files from people that I specifically remember, but nobody called me,” Negoesco said.

The case has raised questions about how closely government agencies enforced compliance with low-income housing requirements tied to $35 million in tax exempt bonds, and zoning and permitting concessions secured by Gallaher to build the 232-unit complex, which opened in 2006.

The now-settled lawsuit alleged that lax enforcement by officials allowed for wrongdoing at the property. In an interview, Negoesco echoed that assertion.

“There shouldn't be a low-income program that isn't strictly monitored,” Negoesco said. “And it wasn't strictly monitored. Yeah, we had all their (tenants’) paperwork. But if nobody's ever going through that paperwork and checking it, then what does it even matter?”

After a weekslong Press Democrat investigation into the settlement, the county’s top housing official said he was reviewing the county’s oversight of Vineyard Creek.

The newly revealed declarations from Negoesco and Dani Robinson, a former leasing agent at the property, raise fresh questions about how government agencies treated the whistleblower’s claims. The Press Democrat interviewed the two former employees after publishing last month’s investigation.

Mariah Clark, the former employee who brought the whistleblower suit, reached the $500,000 settlement with five companies she said were operated by the Gallaher family, The Press Democrat reported Aug. 21. The suit alleged violations of California insurance and labor law as well as affordable housing fraud.

The lawyers who represented the Gallaher companies in the lawsuit did not respond to multiple emails seeking comment. Emails and voicemails left with the Gallaher companies also went unanswered, including voicemails left with members of the Gallaher family. Bill Gallaher’s daughter and business partner, Molly Flater, who according to the suit oversaw operations at Vineyard Creek, did not respond to voicemails, a text message and emails seeking comment. A leasing consultant at one of Gallaher’s properties said she would forward a message to “higher ups” with the company, but no one responded. An attempt to reach Gallaher at his Santa Rosa home was also unsuccessful.

In a closed-session meeting on Aug. 17, Sonoma County attorneys told the Board of Supervisors there wasn’t sufficient evidence to pursue a lawsuit, the four supervisors present in the briefing have told The Press Democrat.

Officials have declined to discuss what evidence they reviewed before deciding not to join the case. The attorney general’s office maintained that stance this week in response to questions from The Press Democrat about Negoesco and Robinson’s declarations. “To protect its integrity, we cannot comment on a potential or ongoing investigation,” a spokesperson for the attorney general wrote in an email.

A county official also said he could not comment on the investigation.

“An investigation was done at the direction of County Counsel, and as I understand it, those details are attorney-client privileged,” David Kiff, interim director of the Sonoma County Community Development Commission, the county’s top housing agency, said in an email.

Ultimately, the suit was dismissed with the consent of the three state and local agencies, according to court documents. Officials with those agencies, however, have said they agreed to the dismissal on the condition they could open new legal action on any of the allegations. There’s no indication they intend to do so.

Gallaher, a Sonoma County native, has developed retirement and assisted living facilities across California and Nevada. Actively involved in regional politics, he also is founder and chairman of Santa Rosa-based Poppy Bank.

He and his daughter Molly Flater have spent millions of dollars to influence county politics.

Gallaher today is single-handedly bankrolling an effort to recall Sonoma County District Attorney Jill Ravitch. Gallaher has contributed more than $1.7 million to that effort, according to the latest campaign finance filings.

Opponents of the recall campaign have called on the supervisors to open an investigation into Vineyard Creek. In interviews last week, several supervisors said they didn’t see reason to do so, given the information they had been presented.

“If the campaign or anyone else has additional evidence that we’re not aware of, that’s certainly something that the board can consider,” board Chair Lynda Hopkins said at the time.

In early fall 2018, when Clark’s lawsuit was still being kept confidential under a court seal, Robinson, a former Vineyard Creek leasing consultant, and Negoesco each signed declarations at the request of Clark’s lawyers.

Negoesco and Robinson made their declarations under penalty of perjury, according to copies provided to The Press Democrat. Those declarations do not appear in public court filings.

In an email, Clark’s lawyers declined to speak about the two potential witnesses and their declarations.

“We can't talk to you about the case,” Oakland-based attorney Bryan Schwartz wrote in an email to reporters. County officials previously told The Press Democrat that Clark’s settlement includes a confidentiality agreement.

Negoesco worked at the property from August 2014 until early April 2018, according to her declaration. Robinson worked there from October 2015 until a few weeks after Negoesco quit. Both are 25 years old today.

Robinson and Negoesco said they were young and inexperienced in property management and were offered hardly any training in fair housing practices. When they did receive training toward the end of their employment, they were alarmed that many of the practices at Vineyard Creek may have been unlawful, they told The Press Democrat.

In interviews, Negoesco and Robinson described Clark, who started working at Vineyard Creek in February 2018, as a meticulous and experienced property manager.

She “was there to do the right thing,” Robinson said. Clark quickly grew concerned about practices at the facility, Robinson and Negoesco said.

In their declarations, the women detailed many of the same allegedly fraudulent housing practices that Clark described in her 26-page whistleblower complaint.

One of the alleged practices involved assigning some of Vineyard Creek’s 47 affordable units to tenants referred by the Gallaher family even though those renters made too much money to be considered low income, according to the complaint.

Negoesco, who was in charge of the low-income program at the property, said in her declaration that Flater on several occasions directed her “to qualify (Flater’s) proposed tenant” and “make it appear as though s/he qualified for low income housing.”

As Clark claimed in her complaint, Negoesco and Robinson said some Vineyard Creek tenants also received “special and preferential treatment,” including lower rental rates, because they had a relationship with the Gallahers.

In their written statements, all three women raised concerns the practice was discriminatory and potentially unlawful.

Clark separately alleged the Gallaher companies kept separate wait lists to prioritize applicants with federal housing vouchers “because they generated greater revenue” than other low-income tenants, according to her complaint. In their declarations, Negoesco and Robinson echoed that allegation.

In addition to the allegations of affordable housing fraud, Negoesco and Clark claimed in their written statements that after the 2017 North Bay wildfires, Vineyard Creek “bundled” tenants’ rent, PG&E and cable bills in an effort to overbill private insurers who covered fire survivors’ rent.

In separate interviews, Negoesco and Robinson said the fires were a tipping point for them. They said that as thousands of Santa Rosa residents who lost homes in the historic disaster scrambled for housing, the Gallahers offered vacant, market rate, apartments first to friends. Meanwhile, the waiting list ballooned, Robinson said.

At the time, “we had people coming in pouring their hearts out that they lost everything. And we know we have vacancies but we're being told to hold those for these rich people,” Negoesco said.

Robinson’s family home was one of the more than 5,300 that burned in Sonoma County, she said, and she secured a Vineyard Creek apartment for her parents at market rate.

Around February 2018, Clark received a “VIP list” from a supervisor. In their declarations, Robinson and Negoesco said Clark shared the list with them. Tenants on the list were to receive special treatment, such as smaller rent increases and quicker responses to maintenance requests, Robinson said. Employees were also directed to ignore lease violations by “VIP” tenants, she said, such as allowing additional roommates who weren’t on the lease or using too much space in communal garages.

The list included friends, family and people the three women believed had business connections with the Gallahers or their companies, Clark said in her complaint and Negoesco and Robinson said in interviews.

Alleged lax enforcement

Sonoma County’s enforcement of who was staying in the “very low-income” (VLI) units was lax, Negoesco said in an interview. In the complaint, Clark wrote Negoesco told her the defendants “placed whomever they wanted in the 47 reserved (VLI) units, regardless of their income or qualifications because the VLI units were not monitored regularly.”

During her time running the low-income housing program at Vineyard Creek, Negoesco said she could only remember a handful of instances in which county officials asked for pay stubs, bank statements and other paperwork documenting tenant income levels.

Under the county’s 2004 affordable housing agreement with Vineyard Creek, officials have the authority to inspect the documents property managers used to verify tenant incomes. In response to a previous public records request from The Press Democrat, the county’s Community Development Commission was unable to provide any record of officials seeking those documents since the complex opened 15 years ago.

Kiff, the agency’s interim director, wrote he has since been reviewing the commission’s “interaction with Vineyard Creek.” He found email exchanges in 2014, 2015 and 2016 where officials made efforts to verify information the apartment complex was providing about its low income tenants, he said. In 2016, for instance, staff requested and reviewed files for six tenants, he said.

Kiff was still reviewing compliance for the years after 2016, he said, and had more work to do before he could say how many tenant files were reviewed since then.

The agency monitors around 200 developments with rent-restricted units and conducts on-site inspections of some each year, he said, and was examining its methods of enforcing compliance.

“Going forward,” Kiff wrote, “it is important for us to be at or above industry standards for compliance reviews.”

Both Robinson and Negoesco quit while Clark still worked at the property. They, like Clark, say they faced retaliation for raising concerns about practices they believed could be unlawful.

In Negoesco and Robinson’s case, they say in their declarations they suspected retaliation came in the form of increased rent. The two longtime friends had lived together in an apartment at the complex along with Negoesco’s now-fiance, who worked in maintenance.

The three paid a below-market rate of $800 a month, under an agreement with Flater, according to the two declarations. After they raised concerns about alleged violations of housing law, Flater increased the monthly rent to $2,250, their declarations state.

In her lawsuit, Clark claims she was wrongly fired after highlighting a variety of practices she believed could violate housing laws and the affordable housing agreement with the county. Both Negoesco and Robinson say they were driven to quit by the sudden and steep rent hike, along with an increasingly tense work environment.

Like Clark, Robinson and Negoesco described experiencing anxiety and poor mental health in their final months at work in the complex. Robinson’s Apple Watch began sending her alerts about her heart rate soaring to over 120 beats per minute as the 25-year-old sat at a desk doing paperwork, she said in an interview.

“OK, this is obviously affecting me more than I realized,” she said.

In her declaration, Negoesco quoted her letter of resignation. “I no longer feel this is a safe working environment,” it said.

After leaving Vineyard Creek, Robinson and Negoesco wanted to put their time at the complex behind them, they said. When they provided declarations to Clark’s attorney, they asked to join the lawsuit and were dissuaded from doing so. Neither of them have talked to Clark’s attorneys since 2018, they said.

Robinson and Negoesco said they came forward because they were worried the Gallahers would escape scrutiny for the allegations made about Vineyard Creek through a payment to Clark. Both women supported Clark’s lawsuit, they said, but did not want the case to end with her settlement.

“Even with this lawsuit, it's like if she accepts the $500,000, the charges are going to be dropped?” Robinson said. “How is that a win? To me, that's not a win.”

You can reach Staff Writers Andrew Graham at 707-526-8667 or andrew.graham@pressdemocrat.com and Ethan Varian at ethan.varian@pressdemocrat.com or 707-521-5412.

Andrew Graham

Business enterprise and investigations, The Press Democrat 

I dig into businesses, utility companies and nonprofits to learn how their actions, or inactions, impact the lives of North Bay residents. I’m looking to dive deep into public utilities, labor struggles and real estate deals. I try to approach my work with the journalism axioms of giving voice to the voiceless, comforting the afflicted and afflicting the comfortable in mind.

Ethan Varian

Housing and homelessness, The Press Democrat 

I've lived in California for most of my life, and it's hard for me to remember when the state hasn't been in a housing crisis. Here in Sonoma County, sharply rising housing costs and increasing homelessness are reshaping what was long considered the Bay Area’s “affordable” region. As The Press Democrat’s housing and homelessness reporter, I aim to cover how officials, advocates, developers and residents are reacting to and experiencing the ongoing crisis.

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