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Real Estate Deals Pay Off for Insiders

In one case, a charity sold property earmarked for low-income housing to a group with which it had ties. The land was then flipped for a $1.1-million gain.

January 09, 2006|Miriam Pawel | Times Staff Writer

The financing was set and the plans were drawn, dotted yellow lines showing just where the morning and afternoon sun would shine on the 53 homes for lower-income families.

Almost a decade after the National Farm Workers Service Center had bought vacant land at a Fresno crossroads, the charity was ready to break ground on the affordable housing project called La Estancia.

Then the plans were abruptly scrapped.

Paul Chavez, president of the Service Center, decided the plot had appreciated so much it made more sense to sell. He did not have to look far for a willing buyer: Emilio Huerta, the Service Center's lawyer, worked in the office next door.

In May 2004, Huerta formed a private corporation called Landmark Residential. Three months later, Landmark bought the Fresno parcel from the Service Center for $1.8 million.

The day they closed the sale, Huerta and his partners had already agreed to sell the land for $2.9 million to a local developer, according to county records -- reaping a profit of $1.1 million.

The insider deal is one example of how leaders of the UFW and the groups they call the Farm Worker Movement have steered money to friends and relatives at the expense of the charities they serve.

Some other recent transactions illustrate their penchant for doing business with their friends:

* A UFW-related charity rented space last fall in a building owned by UFW Secretary/Treasurer Tanis Ybarra, who also sits on the charity's board. Ybarra said he leases the building, in Parlier near Fresno, to his son Arturo.

The charity's executive director, Nora Benavides, said she sent her staff to talk with Arturo Ybarra because he was well-connected in the area, and he offered to make space alongside his mother Martha's tax preparation business. Benavides said it is convenient for the community organizing group's clients: "We say, hey, listen, there's Martha here who's preparing taxes if you need it.... We don't push it, we just let people know it is available."

Benavides said she formalized the rental arrangement to avoid any conflicts of interest. The move was never discussed by the charity's board, which Tanis Ybarra said doesn't "micromanage" such decisions.

* The Service Center sold the UFW a Craftsman-style house in West Los Angeles that once housed dozens of boycott volunteers during the height of the union's organizing activity. The UFW allowed friends to live there rent free, then sold it in 2004 to a daughter of UFW co-founder Dolores Huerta for $200,000 -- about half the market price for comparable houses at the time, according to county records.

Huerta said that when she heard the UFW was going to sell the house, she asked to buy it because of its historic significance to the movement and her family. Because she had not taken a salary or received a pension during her years working for the UFW, the union gave her a break on the price, she and UFW President Arturo Rodriguez said.

Charities, exempt from paying taxes because they serve a public good, have a legal responsibility to obtain the best possible deal. They are required to disclose transactions with related groups or individuals and to be able to defend such decisions as cost-effective.

In the case of La Estancia, Paul Chavez said Landmark matched a competitor's bid and was ready to pay the full $1.8 million in cash. He said he was unaware that Landmark flipped the property at a significant profit.

"What you have is a deal in which the charity obviously was paid a million dollars less than what the property was worth," said Marcus Owens, an attorney who formerly headed the Internal Revenue Service division that oversees tax-exempt groups. "That's a lot of money."

The Players

Emilio Huerta and Paul Chavez have been friends since childhood, when they roamed the grounds around the building where they now work -- the compound in the Tehachapi Mountains where Paul's father, Cesar, and Emilio's mother, Dolores, built the United Farm Workers union.

Emilio, the fourth of 11 children, grew up in a series of surrogate homes as his mother negotiated contracts, organized strikes and lobbied in Sacramento and Washington. He dropped out of high school and went to work full time for the UFW.

At 17, Emilio worked as a graphic artist in the UFW print shop, alongside Paul, who worked as a printer. A few years later, Cesar Chavez tapped the two to attend a negotiation school set up to groom the next generation of union leaders. At the time, Huerta said he had no idea why he was chosen; later, he tied it to an ongoing battle over the departure of the UFW's legal staff. "Part of it was Cesar making a point: He could teach anyone to be a negotiator," Huerta said.

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