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Shell's Management Criticized : 4 Quit Legal Foundation Citing Business Tactics

March 03, 1985|ALAN CITRON | Times Staff Writer

Four officers of the Southern California Legal Foundation, including one of its founders, have resigned, citing "questionable business practices" of the pro-landlord organization.

But David Shell, director of the foundation, which has filed nearly 100 lawsuits against the Santa Monica Rent Control Board, said they quit because they disagreed with plans to expand into non-rent control areas.

"We disagreed with the way the foundation's business affairs were being managed," said James Baker, a former president of the Greater Los Angeles Apartment Assn. "Until November, the board was responsible for management. Since November, business management was effectively being handled by David."

Declining Comment

"We basically were relieved to be out," added K. B. Huff, one of the organization's founders and a former board chairman. "Since Shell took over the budget . . . things haven't been going too well."

The resignations of directors Huff, Baker and real estate dealer Wesley Wellman followed the December departure of Karyn Jackson, Huff's daughter and the foundation's treasurer. The four have refused to publicly discuss the specifics of the disagreement. Three of them said, however, that they were concerned about the way the nonprofit foundation's $140,000 annual budget was being managed.

Shell said he would not comment on foundation financial matters. But Pat Stitzenberger, the new treasurer, said that Shell has no independent authority over the budget.

"David has never been the person who manages the money," Stitzenberger said. "Generally where the money is spent, it's spent on operations . . . things like court fees. We don't have parties. We're not junketing. We're not doing anything like that. Is the money being spent appropriately? Absolutely yes."

Huff, Baker and Wellman left the board in late January, but news of their departure did not surface until last week.

People familiar with the board said the dispute began late last year, after the 38-year-old Shell lost a bitter campaign to unseat Assemblyman Tom Hayden (D-Santa Monica).

Money Running Short

Shell reportedly failed to seek full board approval before moving the foundation headquarters from a cramped apartment building garage to a fashionable Wilshire Boulevard storefront. Sources who asked not to be identified also said he allegedly made decisions about cases and committed foundation resources without consulting the group's legal review board, as the bylaws require.

Both sides acknowledge that money was running short by December. Shell contends that donations fell off because the foundation's fund-raisers were preoccupied with the November elections. But Huff maintains that the foundation's "drastic" financial condition resulted from bad business practices.

Huff said that his daughter quit in December because the foundation was no longer being run in a "good, businesslike" manner.

"She had guided us financially and kept us out of problems ever since we started," Huff said. "She was dissatisfied with the direction of the board. She's a businesswomen."

Jackson was traveling abroad and could not be reached for comment.

But Wellman agreed that Jackson and the former board members "had one opinion of how the business of the foundation should be run that was basically different than how the other directors felt the business should be run."

The disagreement came to a head in late January, when Huff, Baker and Wellman presented a 10-point plan for restructuring the foundation. According to Huff, the majority of the nine-member board rejected the plan and "fired" the trio that suggested it. "David had the votes and eliminated us from the board," Huff said. But Clo Hoover, a former Santa Monica mayor who became chairwoman after Huff's departure, claimed that the three resigned voluntarily.

"They wanted to run things themselves," Hoover said. "We asked them if they would be willing to stay on, and they said no."

The departure of Huff, Baker and Wellman came as a surprise to people who had watched the Southern California Legal Foundation battle the city's rent control board--sometimes successfully--for more than two years.

Huff and other property owners formed the foundation in 1982, hiring Shell away from Sacramento's Pacific Legal Foundation, a conservative public-interest firm.

Filed Suits

Working out of a 21st Street garage owned by Huff, Shell filed a slew of lawsuits against Santa Monica's Rent Control Board and ultimately won a handful of lower-court decisions (some were subsequently overturned) that reduced the board's authority.

Apartment owners who had been frustrated by previous efforts to punch holes in Santa Monica's stringent rent control law came to regard the confident and charismatic Shell as something of a white knight, and the foundation reportedly paid him $70,000 a year. And when the Republican attorney decided to challenge Hayden in last year's elections, landlords were among his biggest backers.

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