Gallaher companies to pay $500,000 to settle claim from whistleblower who alleged affordable housing fraud
Companies owned by Sonoma County developer Bill Gallaher have agreed to a $500,000 settlement in response to a whistleblower lawsuit with a former employee who claimed she was fired after uncovering extensive affordable housing fraud at an apartment complex Gallaher developed, The Press Democrat has learned.
While the fraud claims are being dismissed, the case raises questions about how closely state and county government agencies have monitored the complex’s compliance with low-income housing requirements tied to tax incentives.
The June 2019 whistleblower suit filed in Sonoma County Superior Court involves Gallaher’s Vineyard Creek Apartments, a 232-unit complex with 47 units of affordable housing in an unincorporated area just north of Santa Rosa.
The complex, near Charles M. Schulz-Sonoma County Airport, was approved by the Sonoma County Board of Supervisors, and its construction was largely financed with $35 million in tax-exempt bonds. It opened in 2006.
As part of a 2004 agreement with Sonoma County Board of Supervisors, the developer was required to rent 20% of its units to low-income residents. That agreement was signed by Gallaher.
However, in the whistleblower lawsuit, former property manager Mariah Clark, accused Vineyard Creek of leasing rent-restricted apartments to family and friends of the Gallahers even though they made too much money to qualify.
She also alleged the companies overcharged low-income residents for rent while at the same time gouging government agencies over rental subsidies, among other claims.
Neither Clark nor her attorney, Bryan Schwartz of Oakland, would comment on the settlement, which includes a confidentiality clause, according to county officials.
The lawsuit, reviewed by The Press Democrat, names five companies — Vineyard Creek LP, Gallaher Homes LLC, Oakmont Senior Living, OSL of Vineyard Creek LLC and Concepts for Seniors LLC — as defendants. The companies played a role in Vineyard Creek operations and are run by the Gallaher family, according to the complaint.
The 26-page complaint identifies Gallaher’s daughter and business partner, Molly Flater, as chief operating officer for Vineyard Creek.
In court filings, attorneys for the Gallaher-controlled companies denied all the allegations.
Under the terms of the proposed settlement, the Gallaher companies have agreed to pay $500,000 to Clark, according to two individuals familiar with the agreement who confirmed the amount to The Press Democrat.
As of Friday afternoon, the terms have not been formally accepted by the court.
If accepted, the $500,000 settlement applies only to Clark’s claims of retaliation and other alleged California labor code violations, which would be dismissed.
State and county government agencies have agreed to the dismissal of the more serious fraud allegations provided they can be reinvestigated in the future, officials said.
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.
Gallaher’s attorneys did not respond to numerous voicemails and emails requesting comment or an interview over the past week.
He did not respond to an email and voicemails left with Gallaher Homes on Thursday. During a Friday visit to the office, a receptionist told Press Democrat reporters the messages had been delivered to him.
Molly Flater did not respond to voicemails, emails and a text message seeking comment.
In recent years, Gallaher has become an increasingly influential and polarizing figure in local politics. He and his family have spent widely to influence Sonoma County elections.
Most recently, he has single-handedly bankrolled an effort to recall Sonoma County District Attorney Jill Ravitch. He has contributed more than $1.6 million to the effort, according to the latest public filings.
The suit was kept under seal for more than a year to allow state and local agencies time to investigate Clark’s claims and potentially become a part of the case.
Those agencies, the Sonoma County Community Development Commission, the California Department of Insurance and the state Attorney General’s Office, coordinated their investigations, and twice — once after citing delays caused by the COVID-19 pandemic — received court approval to extend the seal over the documents.
They ultimately did not join the lawsuit.
Officials from the three agencies have declined to discuss what evidence Clark had to support her claims. “We are unable to comment on internal deliberations or potential or ongoing investigations,” the AG’s press office said in an email.