Conflict of Interest Looms Over SDC Property Sale
The Social Development Commission’s (SDC) decision to sell its main office at 1730 W. North Ave. has been met with concerns over a potential conflict of interest. The properties are being sold through Kimberly Njoroge, a Realtor who previously served as a board member for both SDC and its title-holding company, SD Properties. This arrangement has raised eyebrows as Njoroge is set to earn a commission from the sale.
Despite objections, officials from SDC argue that no actual conflict exists. Attorney William Sulton and Vincent Bobot, SDC’s interim CEO and acting board member of SD Properties, assert that Njoroge is no longer an active board member. Her tenure concluded in June, which, they believe, absolves any conflict of interest concerns.
Background on SDC and Its Challenges
SDC, founded in 1963, was instituted to combat poverty within Milwaukee County. Structured as an intergovernmental commission, it operates under statutes from state, county, and city governments. However, these governments do not exercise overarching oversight. The agency faced considerable challenges, leading to public closure and staff layoffs in April.
SD Properties, a 501(c)(25) title-holding entity, works in tandem with the SDC mission by acquiring and leasing properties to SDC and similar organizations. Its status exempts it from open meeting and record laws, thereby withholding disclosure of the listing contract, internal bylaws, or conflict-of-interest policies.
Observation of Potential Conflict
While the SDC is required by its bylaws to maintain a conflict-of-interest policy for board members and employees, interruptions in technology access – instigated by service provider Caspian Technologies – have hindered SDC’s access to key electronic records, emails, and information, further complicating transparency in current proceedings.
Nonprofits, like SD Properties, typically circulate conflict-of-interest guidelines annually. If a potential or actual conflict arises, involved parties are expected to disclose it and recuse themselves from pertinent decisions, as explained by Mary Beth Collins from the University of Wisconsin-Madison. Questions arise regarding Njoroge’s involvement or benefits from the sale of properties.
Justifications Provided by SDC
According to Scott Bush from the Greater Milwaukee Association of Realtors, legal obligations mandate real estate agents to disclose any conflicts. Both Sulton and Bobot reason that Njoroge’s commission is charged at a reduced rate deemed favorable under prevailing market conditions, hence aligning with regulations.
Despite SDC’s failure to remit lease payments to SD Properties for several months—a failure that jeopardized mortgage payments on North Avenue properties—SD Properties aimed to alleviate mounting debts and avert foreclosure, thus the decision to sell.
Bobot further mentioned that while he typically oversees such property sales, officials utilized their discretion in appointing Njoroge and found her rates acceptable. Nonetheless, Njoroge was not part of the board at the time of listing and had no voting rights.
Looking Forward
Moving forward, any property sales will be sanctioned by the SD Properties board rather than the SDC board, highlighting an adjustment in procedural responsibilities. Collins voiced that any conflict scrutiny would lean on Njoroge’s selection participation and whether substantial discounts were offered.
Commercial property transactions lack a standardized commission rate, explained Tom Larson from the Wisconsin Realtors Association, noting flexibility in negotiations that might further reduce the commission rate.
The scrutiny revolving around the sale of these properties underscores a broader contemplation of ethical practices and governance within nonprofit operations, emphasizing a need for comprehensive clarity and accountability in managing potential conflict situations.
