What If Asked To Pay A Bribe?

The Real Estate Espresso Podcast

What If Asked To Pay A Bribe?

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What If Asked To Pay A Bribe?

Welcome to the Real Estate Espresso Podcast, your morning shot of what’s new in the world of real estate investing. I’m your host, Victor Menasce.

On today’s show, we’re taking a look at the dirty underbelly of municipal politics. It’s an open secret that some council members have, in some cases demanded, and in other cases accepted, financial compensation in exchange for political support. The running joke is that many city council members seem to have very nicely renovated kitchens and baths in their home more than the usual for the population at large.

Now, let me be clear, our firm has never engaged in this type of activity. And if asked, we would refuse. This past week, the U.S. Justice Department published news of a guilty plea from a Dallas, Texas developer. The developer in question was Sherman Roberts, 70 years of age, who previously helmed Citywide Community Development Corporation. He was indicted in December of 2020 and pleaded guilty this past week to conspiracy to commit bribery.

According to the court documents, Mr. Sherman bribed two city council members, Mayor Pro Tem Duane Caraway and City Council Member, Carolyn Davis to support loans and low-income housing tax credits for his apartment projects in return for several thousand dollars in cash plus a promise of future payments. After her city council tenure ended, council member Davis, lobbied for Mr. Roberts’ real estate projects, including Serenity Place, Runyon Springs, and Patriots Crossing.

She promoted Serenity Place to the City Housing Committee, demanded other developers also seeking real estate funding, withdraw their applications in order to increase Mr. Roberts chances of success, she recommended Serenity Place receive a 9% low income housing tax credit and voted to approve a $1.9 million city of Dallas loan. Mr. Roberts now faces up to five years in prison. He’s slated to be sentenced on March the 12th of next year.

Mayor Pro Tem Caraway pleaded guilty in 2019 to conspiracy, to commit on a services fraud and tax evasion. The mayor was sentenced to more than four years in federal prison. The same year, city council member Carolyn Davis pleaded guilty to conspiracy to commit bribery, but she passed away in a car crash before she could be sentenced.

In another case a scandal in New York City highlights the continuation of the problem there on September 23rd of this year, federal prosecutors indicted two former fire chiefs for taking bribes to speed up safety reviews. The indictment charges the pair were taking over $190,000 in bribes as part of a scheme they are alleged to have engaged in while running the department’s Bureau of Fire Prevention.

In another case last week, the Southern District of Mississippi charged Heinz County district attorney Jodi Owens at 43 years of age, the mayor of Jackson Mississippi, Mary Lumumba, and the former president current member of the Jackson city council, Aaron banks. All of Jackson, Mississippi with participating in a bribery scheme. The indictment alleges the Jackson’s mayor, the district attorney and the members of Jackson City Council conspired to accept bribes in exchange for official acts benefiting some real estate developers.

Back in September, U.S. prosecutors charged New York city mayor Eric Adams with bribery and fraud charges as part of a long-running scheme. This one was very highly publicized as part of what officials called an abuse of power. Adams is alleged to have accepted illegal gifts worth over a hundred thousand dollars from Turkish citizens and at least one government official.

In exchange, Turkish officials are believed to have sought favors from the mayor, including helping to skirt safety regulations to open a council at New York city. Specifically, the prosecutors claimed that the money Adams obtained from Turkey allowed him to qualify for a public financing scheme that provides eligible political candidates with funds to match donations from New York city residents. The prosecutors allege that mayor Adams used fake donors to hide the sources of the money. And at times, he created fake paper trails that suggested he paid for, or intended to pay for the gifts that he received.

So the dilemma is: when a politician asks you to take care of them, what do you do? You can be pretty sure your project will be voted down if you don’t play ball with them. At the same time, you know that paying a commission or whatever you want to call it to a politician is highly illegal. Do you amass the evidence if there is any, and then approach the police with the evidence?

You know the police department is also part of the city and ultimately the police department reports to the mayor. So if the mayor’s corrupt, chances are, the police department will protect the mayor. So then do you approach a different jurisdiction? Maybe you approach federal authorities. Sometimes a police force will decline to investigate if they deem it to be outside of their jurisdiction.

Now again, I’ve never personally been involved in a situation like this. Thankfully I’ve only been asked once to pay a bribe. In that case, it was a housing inspector with the Chicago housing authority. They asked if I was willing to pay a fee to expedite the follow-up inspection to clear a citation after they issued a citation improperly as a result of a false allegation from a tenant, I declined. The delay cost me about $2,000 in lost income.

I preferred to lose the $2,000 rather than pay a bribe. Now we tend to think of this type of activity doesn’t really happen and we can be blind to it until we experience the request firsthand. Prepare yourself for the possibility that you might be asked so that you have a well thought out response if and when that request occurs.

As you ponder this, have an awesome rest of your day. Go make some great things happen. We’ll talk to you again tomorrow.

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