Well-placed partners raise conflict of interest concerns

Several people have asked me for more information about my story in this week's Pacific Business News, which is only available to PBN subscribers.

The story focuses on a business partnership formed by Joe Blanco, a director of St. Francis Medical Center and former high tech "czar" during Gov. Ben Cayetano's administration. The partnership's role as representative of a mainland developer seeking a contract with another St. Francis affiliate became public due to a falling out between the partners and a resulting civil lawsuit which provides a fascinating behind-the-scenes look conflict of interest issues in the nonprofit world.

For those without access to PBN, I've tried to quickly retell the story with a focus on another of the partners. University of Hawaii folks might find this telling especially interesting.
When Maryland-based developer Unidev LLC decided to enter the Hawaii housing market in mid-2004, they quickly teamed up with a local partnership pulled together by Joe Blanco, a realtor and developer who served as high tech "czar" and special assistant to the governor during the administration of Gov. Ben Cayetano.

Blanco approached several others "to engage in a business with him in helping Defendant Unidev further its business opportunities in the State of Hawaii," according to a lawsuit filed by Blanco and co-plaintiffs after the partnership soured. In June 2004, though, the partners agreed to the deal "and thereby formed a de facto partnership".

The partners, who initially expected to be Unidev's exclusive representative in the islands, were Blanco, his wife, Theresa, businessman John Farias, Jr., and lobbyists Red Morris and John Radcliffe, principals in Capitol Consultants, one of the state's leading lobbying firms.

Unidev is known as a developer of affordable workforce housing for universities and governments, and has done a number of projects on the mainland. This was their first foray into Hawaii.

Blanco and his partners were strategically placed to assist Unidev in landing its initial development deal. The St. Francis Healthcare System was seeking help with its planned Franciscan Vistas senior housing project in Ewa. Farias was the outgoing board chairman of St. Francis Medical Center in Liliha, the largest St. Francis affiliate, and a longtime St. Francis insider, while Blanco had just been appointed to the medical center board of directors.

Unidev was also very interested in landing University of Hawaii projects, from the West Oahu campus to dorms on various campuses. Blanco and Farias are both former members of the UH Board of Regents, where Blanco was a controversial pick for chairman while he was a special assistant to Cayetano. Radcliffe is the associate director and lobbyist for the UH Professional Assembly, the faculty union.

Blanco, Farias, and St. Francis all maintain there was no actual conflict of interest and no divided loyalties in their dealings, even though the two board members were promised a percentage of the total contract value if Unidev, through their representation, was selected by St. Francis to develop the Ewa project.

But Unidev worried about the conflict of interest issue and reportedly asked Blanco to obtain a written waiver from St. Francis, which he did in August 2005, nearly a year after Unidev was selected to develop the Franciscan Vistas project.

Jeff Minter, who now heads Hawaii operations for Unidev, said the company was also “aware of a potential conflict of interest for Radcliffe.”

Minter and another Unidev officer made their first trip to Hawaii in July 2004 to meet with St. Francis officials and check out other business opportunities. Blanco and Radcliffe escorted them around Oahu to look at several possible development projects, including the site of the University of Hawaii's proposed West Oahu campus, according to the subsequent lawsuit.

During the same trip, Morris, Radcliffe and Blanco took Minter to dinner to discuss the West Oahu project further.

Records show Radcliffe and Morris, through their firm, Capitol Consultants, were registered as lobbyists for Unidev during 2005, as well as members of Blanco’s partnership. At the same time, the UH Board of Regents was in the process of selecting a developer for the West Oahu campus.

Unidev was one of the four finalists that submitted proposals to the BOR. In August 2005, just days prior to the regents' meeting where the selection was to be made, UHPA executive director J.N. Musto published a column in the Sunday Star-Bulletin praising Unidev's proposal and appearing to throw the union's support behind it.

Neither Radcliffe nor Musto responded to repeated messages and requests for comment.

UHPA president Mary Tiles said she was not aware that Radcliffe had business ties to Unidev when the union was backing the company’s West Oahu plan.

Tiles said she did not meet with Unidev officials to discuss their West Oahu proposal, but “J.N. (Musto) and John (Radcliffe) did.”

Reports filed with the State Ethics Commission show Radcliffe, in addition to being a top union leader and lobbyist, was a registered lobbyist for Unidev until September 7, 2005, just two weeks after the Board of Regents' selection of a West Oahu developer. Radcliffe was also in a position to profit personally through the Blanco partnership if the regents had chosen Unidev proposal.

Minter said Capitol Consultants has continued lobbying for the firm, including pushing several measures during the 2006 legislative session.

Radcliffe’s extensive representation of private clients has arisen as an issue before, but the UHPA board has consistently backed his right to represent private clients in addition to his union duties.

-Ian Lind