West Oakland Councilmember Involved in House-Flipping Scheme 

Public records show that city Councilmember Lynette Gibson McElhaney, who represents a district impacted by gentrification, used her social justice nonprofit to finance for-profit house-flipping deals in Oakland.

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According to Richard Castro, the Senior Relationship Manager at NeighborWorks America who oversaw Richmond Neighborhood Housing Services, Gibson McElhaney voluntarily ended her organization's affiliation with NeighborWorks America network. Castro said he had no knowledge of Richmond Neighborhood Housing Services' recent problems, and declined to comment on details.

"These organizations, by the way, are standalone entities," said Castro about Richmond Neighborhood Housing Services' relationship with NeighborWorks. "We provide training and resources to organizations, as well as funding for certain types of capital development, but that's the extent of our relationship."

Castro said NeighborWorks conducts audits of member organizations, providing a score of one to four, with one being "vulnerable" and poorly run and four being exemplary. For its last audit under NeighborWorks' supervision, Richmond Neighborhood Housing Services scored a two: "stable." NeighborWorks America's media relations office did not respond to repeated requests for more information about Richmond Neighborhood Housing Services.

But even though Richmond Neighborhood Housing Services left the NeighborWorks America network two years ago, Gibson McElhaney's organization was using the network's name and logo on its website until last month. NeighborWorks America recently sent Gibson McElhaney a letter requesting that her organization remove the NeighborWorks America logo. In other words, Richmond Neighborhood Housing Services had stated on its website for approximately two years that it was part of the federally funded NeighborWorks American network, and implied that it was overseen by the network's strict financial and managerial controls, when it was not.

Regarding the use of the NeighborWorks America logo and name, Reynolds stated that it was an oversight related to the overhaul of Richmond Neighborhood Housing Services' website. "The overhaul of the NHS East Bay website did not happen as quickly as we expected. However, there was no intent to mislead anyone and no funding requests have been made under the premise of being affiliated with NeighborWorks."

Public records and information about Gibson McElhaney's personal finances, and the dealings of her nonprofit housing assistance corporation, are limited. But the facts that are available paint a picture of personal financial stress for Gibson McElhaney, and serious financial problems for Richmond Neighborhood Housing Services since the late 2000s, followed by multiple unusual business deals.

When Gibson McElhaney was elected to the Oakland city council in late 2012, the San Francisco Chronicle reported that she had substantial federal and state tax liens, including a 2006 IRS lien of $17,184 for unpaid back taxes recorded against her in Alameda County. "We experienced a lot of economic stress in our marriage," Gibson McElhaney told the Chronicle at the time. She added that she believed she could pay back the taxes and extinguish the liens before taking office in 2013.

However, our research found that as of late November, Gibson McElhaney appeared to still have not paid her old income taxes from 2006, because the IRS had not lifted her $17,000 federal tax lien. In addition, records show that Gibson McElhaney's husband, Clarence McElhaney, has also been hit with thousands of dollars of state tax liens, including a $14,252 lien recorded in 2009, a $5,438 lien recorded in 2011, and a $1,653 lien recorded in 2012, according to Alameda County records. In 2010, in Contra Costa County, the federal government recorded a lien against Gibson McElhaney for $133,823 for unpaid income taxes in 2008 and 2009. We found no record that these back taxes have been repaid either. Finally, in January of 2014, the City of Oakland put a $262 lien on Clarence McElhaney and Lynette Gibson McElhaney's Oakland home for an unpaid trash bill.

According to Gibson McElhaney, her tax situation is close to being resolved. "As I continue my efforts to serve and support my community I've made it a priority to get my own house in order," she said. "One of my key 2014 personal goals was to complete my delinquent tax filings. In October I turned over all of my documentation to my CPA who has initiated negotiations and is expected to file all of the returns with the state and the IRS by the end of the month. I am happy to put this painful and expensive chapter behind me."

Gibson McElhaney said she has made approximately $40,000 in payments to the IRS via payroll deductions so far to clear up the unpaid taxes.

Records show that Gibson McElhaney's nonprofit also has experienced financial turmoil. In 2005 and 2006, Richmond Neighborhood Housing Services was flush with cash, running annual surpluses of approximately a half-million dollars. But the financial crisis and recession took a toll. The organization's revenues — which come from mortgage payments its borrowers make, along with state and federal grants — dropped, and the organization ran deficits, losing $98,000 in 2008, and another $65,000 in 2009.

But even though her organization was losing money, Gibson McElhaney and her board members more than doubled her executive salary in 2008, raising it from $80,000 to $193,000. In 2009, Gibson McElhaney was paid $134,000. All told, Richmond Neighborhood Housing Services lost $313,000 between 2008 and 2012, the most recent year for which tax records for the organization are available. Over the same period, McElhaney was paid $587,000.

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