Commercial Real Estate’s Political Influence — Conscious Or Not — Takes The Spotlight Amid Series Of Criminal Investigations

The quest to develop real estate to meet the critical needs of communities is at the forefront of most city council charters, but a number of real estate investigations, arrests, and convictions have come with the Dallas City Hall and other cities in Texas have raised concerns about conflicts of interest and when the development and real estate communities have too much influence.

“We like to think our system isn’t corrupt, but the real estate industry has a huge impact on city government,” said Fred Lewis, an Austin government and ethics attorney who helped shape the Austin Lobbying Ordinance.

The commercial real estate industry and city governments work hand in hand on a regular basis, and CRE is often a major source of political contributions. Sometimes the players are even the same people – in DFW alone, Bisnow identified at least four cities, Frisco, Arlington, Celina and McKinney, where the mayor comes from the real estate or related engineering and planning industries.

Being a mayor with a background in real estate isn’t necessarily a problem in and of itself or illegal, but it can raise concerns about the mayor’s implicit bias toward CRE interests, and sometimes these conflicts of interest are legal.

A former Richardson Mayor and her partner who worked in land development were convicted in 2019 of some federal offenses related to the mayor’s exercise of power to make zone changes that helped the mayor’s partner develop the associated with the creation of hundreds of affordable means was homes.

In late 2020, authorities sued an affordable property developer in Dallas for allegedly bribing two former city council members. Three months earlier, another real estate developer pleaded guilty, according to the Justice Department, to bribing a member of the Dallas City Council.

In 2013, a Collin County mayor in the small suburb of Melissa was charged with participating in a bribery program in which the city annexed land to help a developer build a project, the DOJ reported at the time.

The office of Nate Paul, CEO of World Class Capital Group’s real estate investor, and the Austin home were raided by the FBI in 2019. Members of the Texas Attorney General’s Office accused Attorney General Ken Paxton of letting Paul use the AG’s office for personal gain. To date, Paul has not been charged or prosecuted, and has accused the FBI of misconduct while searching his property.

The home of Celina Mayor Sean Terry, who also works in real estate development, was raided by the FBI in 2020. No charges, arrests or charges have been made to date, and it is not known why the FBI raided Terry’s home. The DOJ declined to comment on why the FBI ambushed Paul or Terry.

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But it is not CRE-related city council cases that become federal indictments that concern Lewis the most. It’s the ethics cases that get no attention at all that keep him up at night.

Lewis said many cities have ethical guidelines and commissions to investigate violations, but these boards and commissions generally have no teeth and do nothing to prevent conflicts of interest. Lewis is a frequent critic of Austin, the councilor he watches the most.

“In Austin, the ethics review board is appointed by the council,” he said. “It’s completely useless and you never do anything useful.”

Bribery is the least of a councilor’s problem when it comes to keeping conflict at bay, Lewis said. The real risk is the kind of unconscious bias that arises when members of boards and councils have friendships with strong political contributors, many of whom are directly or indirectly related to commercial real estate, he said.

Harvard psychology professor Mahzarin R. Banaji, who deals with unconscious bias, said members of an industry might believe that they are consciously making fair decisions when in fact they are still being influenced by money or relationships in an industry.

“”[C]Conflicts of interest also occur well below the threshold of conscious awareness, “said Banaji.” Even when we believe that we will not be bought and sold, we may do so because of our less conscious preferences, beliefs, and identities that we call implicit conflicts of interest. In an ideal society, we would work to eliminate all corruption, including implicit conflicts of interest, that good decisions can and can make. But we are so far from that ideal that we shamelessly encourage explicit forms of corruption by legally allowing conflicts of interest and even facilitating their path to destructive influence. “

To ensure there are no community or county conflicts, Lewis advocates limiting the number of people from commercial real estate or related fields who serve on boards or commissions. He also wants to impose restrictions on campaign donors.

The city of Plano has taken a step in that direction, and the council passed an ordinance in 2020 forcing members to back off voting on matters related to donors who have offered members campaign contributions above $ 1,000.

Deputy Mayor Pro Tem Anthony Ricciardelli voted for the ordinance.

“Our opposition ordinance is about building public confidence in the government by avoiding even the appearance of undue influence,” Ricciardelli said.

“I don’t think anyone on Plano City Council would have or would change their vote if they had received a campaign entry, but we want to set a higher standard for ourselves and even avoid the appearance of undue influence.”

Lewis, who has delved into the subject of unreasonable influence, once challenged an architect chairing a planning committee in Austin who is reviewing building codes because his work in the industry may hamper his judgment. He said it is always surprising that fundamental conflicts of interest keep popping up in town halls without public or media backlash.

“If the press were more forceful, there would be more accountability,” he said. “There needs to be more stringent laws, more transparency and more enforcement, and more political accountability.”

When asked if mayors and councilors should be in the CRE industry, Lewis said further action should be taken to remove even the appearance of a conflict.

“This is an issue for the public to decide, but obviously they will be consciously or unconsciously biased towards their business,” he said. “They should really think about putting their country in a trust so that they have a blind trust and don’t benefit directly or indirectly from it.”