At first glance, the project seems typical of the many public/private real estate partnerships recently backed by the retirement system, widely known as CalPERS. The system, an investing giant that boasts more than $150 billion in total assets, provides most of the capital. A real estate adviser contributes financial expertise. A developer is brought on board to manage the project and, it is hoped, bring high returns to public pensioners.

In one respect, however, the Whitney Oaks project almost certainly is not a typical CalPERS real estate investment.

The partners in Whitney Oaks include a firm in which San Francisco Mayor Willie Brown has long held ownership. And two large entities involved in making the Whitney Oaks project profitable -- and, thereby, involved with Brown's personal financial fortunes -- have benefited greatly from official actions taken by Mayor Brown and his administration.

This intersection of Brown's private finances and public acts creates apparent conflicts of interest that can be summarized in a direct, if perhaps oversimplified, way:

1) Willie Brown benefits financially from a publicly funded real estate deal near Sacramento.

2) Those who help him make money near Sacramento reap the bounty of development decisions Brown and his subordinates make in San Francisco.

One potential conflict involves CalPERS itself. Since backing the Whitney Oaks project, CalPERS has benefited enormously from Willie Brown's official actions.

Almost immediately upon taking office, Mayor Brown began publicly supporting the Catellus Development Corp.'s long-stalled plans to build Mission Bay, a multibillion-dollar development in the China Basin area of San Francisco. Brown's advocacy was successful: Catellus has received city permission to press forward with the project.

Brown's support for Mission Bay benefited not just Catellus, but also CalPERS, which, according to public documents, owned more than 40 percent of Catellus at the time the Whitney Oaks project started. CalPERS subsequently was able to sell more than half its Catellus stake on extremely favorable terms -- terms made possible, at least in part, by the city's new attitude toward Mission Bay.

A second apparent conflict involves the Lennar Corp., of Miami, Fla.
A Lennar subsidiary is paying the owners of Whitney Oaks for the right to build one section of the Whitney Oaks development. Meanwhile, Lennar won a hotly contested competition and was selected as master developer for the former Hunters Point Naval Shipyard -- even though a consultant to the city Redevelopment Agency recommended another bidder get the award.

Whitney Oaks is located about 20 miles north of Sacramento, in southern Placer County, one of the state's fastest-growing contributions to urban sprawl. A mere whitecap on the tidal wave of development breaking on Sacramento's exurbs, Whitney Oaks is in many ways an unexceptional, midsized, retiree-friendly golf course development.

Its entrance is marked by stylish stone pylons embellished with distinguished deep-green signs emblazoned with a Whitney Oaks logo faintly reminiscent of a royal coat of arms. Beyond the pylons, what once was savanna and rolling woodland has been graded and laced with streets that describe a series of minicommunities, some with model homes ready for inspection. Inside one of those models, potential buyers can examine a wall-sized photograph showing that oak trees once carpeted the hills of the area. Outside the showroom, however, the developed vista is a moonscape, cleansed of vegetation except for the fringes of the golf course, where a few lonesome stands of blue oaks, valley oaks, and live oaks survive, and the corner of Old Oak Tree Street, where a handful of staked striplings shoot up in a tiny environmental preserve required by the state.

The Whitney Oaks development is split into distinct enclaves bearing high-toned, slightly WASPy names: Sterling Collection, Meritage, Springfield. Depending on the enclave and type of construction, homes will sell for anywhere from $120,000 to $500,000. The enclaves each appear to be connected to a different home builder.

For example, Renaissance Homes, a subsidiary of the Lennar Corp., is building four- to six-bedroom residences in one of the enclaves, named, for what seems an obvious reason, Renaissance Whitney Oaks. The homes are large, luxurious, and set on oddly tiny lots.

According to CalPERS documents, Whitney Oaks has about 1,800 single-family lots. The residences built on these lots will surround a golf course -- which has already been completed -- designed by professional golfer Johnny Miller. The development includes 340 acres designated for schools, parks, and other public uses.

CalPERS documents show that the retirement system is providing about 90 percent of the acquisition and development capital for the Whitney Oaks project. The remaining equity in the project comes from two sources. One involves the principals in a La Jolla-based firm called Newland Capital Advisors LLC.

The final major player in Whitney Oaks is a partnership of two lawyers that held about 4 percent of the project -- until the lawyers, CalPERS, and Newland quietly cut yet another partnership into that 4 percent piece of the deal. This secondary investor in Whitney Oaks is named Live Oak Associates III.

And Live Oak III is where Willie Brown comes in.
According to financial disclosures on file with the state and city governments, Willie Brown has acquired interests in three Live Oak Associates partnerships since 1984. These limited partnerships -- known as Live Oak Associates, Live Oak Associates II, and Live Oak Associates III -- are headed by two attorneys, William A. Falik and Jonathan A. Cohen, who also have organized other firms in which Brown has invested.

Brown is a limited partner in the Live Oak groups, meaning that he is an investor, not an active manager of the ventures. The mayor's most recent public disclosure values his interest in each of the three partnerships at somewhere between $10,000 and $100,000. It is unclear whether those values represent initial investment, or that investment plus appreciation and reinvestment of profits over the years.

Brown apparently has made relatively few public statements about his Live Oak investments, and the financial disclosures he is required to file as a public official have reported only small amounts of income from them. Attempts to contact Brown through his press office Monday were unsuccessful.

(Falik says that Brown has invested with him since 1982. Although acquainted with the mayor, Falik says, he generally talks to Brown's longtime aide, Eleanor Johns, about the mayor's Live Oak investments -- which, Falik believes, are too minor to constitute conflicts of interest. "I feel it's not fair if I was prohibited from having the CalPERS investment," Falik says, "just because a certain limited partner has a less than 1 percent interest in the partnership.")

A survey of California land records shows that the three Live Oak partnerships have invested, at times in combination with major developers, in thousands of acres of land across the state. And two of the Live Oak partnerships appear to have been quite successful.

According to a "status report" to Live Oak investors obtained recently by the Weekly, the original Live Oak Associates partnership, founded in 1984 and sometimes known as Live Oak I, had a "total return" of 685 percent by July 1995. Public and private documents suggest this partnership has invested primarily in Sacramento-area real estate.

Live Oak Associates II also appears to have met with success since its creation in 1985, mostly through investments around Sacramento (among them a partnership with Tad Taube and Joseph Benvenuti, two of the area's most influential developers, in 1,600 acres of land in southern Placer County). Live Oak II also owns a portion of a strip mall in Los Angeles valued at more than $5 million.

Live Oak III was formed in 1991, and since then has invested in several properties in Northern California.

Its most ambitious venture was an attempt, in cooperation with other developers, to turn thousands of acres of rice fields in southern Sutter County into a series of planned communities with a projected population of 100,000. After years of bitter political and legal battles, that venture foundered. The leaders of Live Oak III looked around for opportunities to recoup their Sutter County losses.

They looked around, and found Whitney Oaks.
The so-called "Newtown" development in southern Sutter County was first proposed in 1989. Large landowners in the area wanted approval to turn low-lying rice land into planned residential communities on a massive scale. Live Oak III and Ahmanson Residential Development Inc., a firm controlled by real estate magnate Howard Ahmanson, were major players in the attempt to develop southern Sutter County, eventually buying or otherwise controlling thousands of acres of open fields, largely through a partnership known as Sutter Bay Associates. (An odd political note: In Sutter Bay Associates, Ahmanson, a noted right-wing advocate who has taken anti-reproductive choice, anti-gay rights, anti-gun control and pro-"traditional family values" stands, was technically partnered with Willie Brown, an owner of Live Oak Associates III and a stalwart of California's old-guard Democratic left.)

In 1992, the Sutter County Board of Supervisors approved a series of agreements with the prospective Newtown developers, but the approvals created enormous political turmoil, much of it based on environmental concern. The next year, an election changed the makeup of the previously pro-development board. The new board rescinded the approvals. Lawsuits were filed, but the Newtown proposal died, and subsequent attempts to gain approval for large-scale development in the area have also failed.

The failure of Sutter Bay had a profound effect on Sutter Bay Associates and Live Oak III. A spokesperson with Washington Mutual Inc., a current owner of Ahmanson's Sutter Bay interests, says the firm lost millions on the Sutter Bay venture. According to recent interviews with limited partners, Live Oak III also suffered significant losses that apparently continue to impact investors.

Many limited partners say that the Live Oak general partners, Cohen and Falik, began to branch out, seeking other real estate projects that might help recoup some of the losses their investors incurred at Sutter Bay.

Whitney Oaks was one of those projects.
Cohen and Falik apparently began negotiating with CalPERS and Newland on Whitney Oaks early in 1995. In the summer of 1995, the Live Oak III limited partners voted to invest in Whitney Oaks, after being apprised by Cohen and Falik that CalPERS was the major money player in the project, many limited partners and partnership documents say. Then-Assembly Speaker Willie Brown was one of these limited partners.

In the end, a complex partnership was formed among CalPERS, the principals of Newland Capital Advisors LLC, and Falik and Cohen. This group agreed to pay $17.5 million for a 1,075-acre plot of land in Rocklin, a small city northeast of Sacramento. The purchase was consummated in November 1995.

The public/private partnership formed to develop Whitney Oaks is, indeed, complex. Willie Brown's ownership stake is buried deep within that complexity. And CalPERS has withheld some key documents relating to the project, claiming their release would injure the retirement system's competitive position in the real estate industry.

Early this week, Bryan Bailey, the CalPERS project manager for Whitney Oaks, said that he did not know Willie Brown was an investor in the project until SF Weekly began questioning it. "We do not drill down that far," he said. A representative of Newland also said she was unaware of Brown's affiliation with Whitney Oaks.

As if its ownership structure did not provide enough complexity, the owners of Whitney Oaks have also hired a developer for the project. CalPERS documents obtained by SF Weekly are inconsistent in identifying the developer. Sometimes, the developer is listed as Live Oak Associates. In other documents, the developer is identified as Live Oak Enterprises, a business established by Falik and Cohen.

Brown is a partner in Live Oak Associates, but there is no indication he holds a stake in Live Oak Enterprises (although it does provide management services to Live Oak III).

CalPERS has declined to release documents showing how much the developer of Whitney Oaks is eligible to earn. After initially agreeing that Live Oak Associates was the developer, CalPERS and Newland staff later insisted that Live Oak Enterprises had been hired as the developer. CalPERS and Newland gave multiple, conflicting, nonconclusive explanations for CalPERS's repeated listing of Live Oak Associates as the Whitney Oaks project developer.

The developer question aside, an investigation by SF Weekly shows that Live Oak Associates III -- a partnership in which Willie Brown has long been an investor -- clearly holds ownership in the CalPERS-backed venture that is developing Whitney Oaks. More than 10 limited partners in Live Oak III spoke to the Weekly in detail about the partnership's investment with CalPERS, and correspondence Cohen and Falik have sent to Live Oak investors describes the Whitney Oaks investment in extremely precise terms.

The bottom line: A partnership between CalPERS and Newland owns 96 percent of the Whitney Oaks project. The other 4 percent is owned by a partnership between Cohen and Falik, the two general partners of the Live Oak Associates partnerships.

And Live Oak Associates III owns a little less than 1 percent of the project.

According to a July 1995 Live Oak status report, Live Oak III partners had an opportunity to invest about $200,000, for a potential (but hardly guaranteed) return of $2.2 million -- or, approximately, 1,000 percent.

When CalPERS decided to bankroll the purchase of Whitney Oaks, Willie Brown was in his final year in the state Assembly, and at the end of a 14-year run as speaker. In fact, the purchase was consummated just a few weeks before Brown won the San Francisco mayoral runoff election against Frank Jordan in early December 1995.

While he was Assembly speaker, Brown "moonlighted" as a lawyer. His private law practice was large, lucrative, and controversial. He was repeatedly criticized for accepting large legal retainers from clients with significant interests in state legislation. Brown repeatedly responded by insisting his private legal work did not involve legislative or state agency matters.

Because San Francisco mayors are forbidden from employment outside government, Brown sold his law firm before taking office. During the mayoral campaign, however, Brown's legal clients became an issue; many news reports questioned whether Brown might be tempted to favor former clients if or when he became mayor. Particularly, Brown's relationship with the Catellus Development Corp. came under fire.

According to the San Francisco Examiner's Lance Williams, then-Speaker Brown took in nearly $400,000 in legal fees from Catellus from 1982 to 1994. And it was clear Brown would have to deal with Catellus and its long-stalled Mission Bay project, somehow, if he became mayor.

Brown responded to the criticism in a variety of ways, at times suggesting he would refrain from mayoral action that would affect former clients, out of concern about the appearance of conflict of interest. At other times, he indicated he would recuse himself only when the law required it. But once elected, Brown demolished any notion he would abstain from matters relating to Catellus by fiercely advocating for a new plan for Mission Bay.

In an interview just days before Brown's mayoral inauguration, the Examiner quoted the mayor-elect as saying that building Mission Bay would be one of his top priorities, and that he'd be calling Catellus the day after he was sworn in as mayor. Brown also suggested the development could move more quickly with encouragement from Catellus' largest shareholder -- CalPERS, which then owned more than 40 percent of Catellus.

"I'll place a call to the people who actually own Mission Bay," Brown was quoted as saying. "We're not talking about a profit-seeking organization, we're talking about an entity under public control that simply must protect the beneficiaries' investment. That's a different agenda."

Catellus' hopes of developing Mission Bay had been bottled up for years. The city approved a development plan for the area in 1991, but Catellus found the plan so restrictive that it wasn't profitable to build. In 1995, the company walked away from the plan, and wrote off $84.8 million in losses.

But a reversal of fortunes followed quickly after Brown took office. Catellus gained approval of a new Mission Bay plan calling for construction of millions of square feet of office space and thousands of residential units. Approval came in October 1998 with the strong support of Brown, who actively and successfully campaigned for the University of California, San Francisco to locate a new biotech-oriented campus in Mission Bay. Some of the land for the new campus was, in fact, donated by the city.

Approval to move forward on Mission Bay removed a longtime thorn from Catellus' side. After 15 years of defeat at the hands of slow-growth activists, Catellus now had a centerpiece project -- involving hundreds of acres of prime San Francisco real estate -- ready for development.

As the fortunes of Catellus rose, so did the fortunes of the California Public Employees' Retirement System. The system had bought a huge chunk of Catellus stock in 1989, owning as much as 46 percent of the firm at one time. As a real estate recession took hold and then deepened in the early 1990s, however, the stock plummeted in value, drawing intense criticism of the investment.

Catellus' own annual reports indicate that the approval of Mission Bay -- an approval championed by Willie Brown -- improved the firm's financial position. Of course, other factors were also involved in the improvement in Catellus' fortunes, including other real estate investments in Illinois, Oregon, Colorado, and California.

Still, the trend is clear: When Brown took office, Catellus stock was hovering in the $6.50-per-share range. Early in December 1997, as Catellus' new plans for Mission Bay were sliding toward city approval, CalPERS sold nearly 19 million shares of its stake in Catellus at slightly more than $17 a share, reducing its percentage of ownership from more than 40 percent to about 18 percent. In effect, the retirement fund made some $200 million from the rise in stock prices between early 1996 and the time it sold its shares.

Somewhat paradoxically, it is this run of good fortune that helps create a two-step appearance of conflict of interest involving Willie Brown and the state retirement system:

1) Brown aids Mission Bay -- and Catellus, and, therefore, CalPERS -- in San Francisco, helping CalPERS recoup much of the paper loss it had suffered through its investment in Catellus.

2) CalPERS backs the Whitney Oaks venture and, consequently, aids Live Oak Associates III, which just happens to count San Francisco Mayor Willie Brown among its investors.

Next to Mission Bay and the Presidio, the Hunters Point Naval Shipyard is one of the most valuable pieces of soon-to-be-developed real estate in San Francisco. To be sure, sections of the former naval base have massive environmental problems. But the area also boasts some of the city's best bay views. The contract to develop the decommissioned shipyard, which is in the process of being returned to city ownership, is truly a one-of-a-kind opportunity.

The Lennar Corp. is the lead partner in a group that was recently awarded a San Francisco Redevelopment Agency contract to oversee the conversion of the shipyard to civilian use. The redevelopment contract became politically controversial in 1998 because some of Mayor Brown's close associates -- including Yber-lobbyist Billy Rutland, trucking contractor Charlie Walker (known sometimes as "The Mayor of Hunters Point"), and local Democratic Party insider Natalie Berg -- had been hired as consultants by the companies competing for the contract.

Struggling to avoid the appearance of favoritism, the Redevelopment Commission -- which is appointed by the mayor -- brought in the major accounting firm of KPMG LLC to review the qualifications of the three finalists. Then, at a public hearing last month, the commission rejected KPMG's recommendation, and, in a surprise vote, chose the Lennar-led group as master developer of the former shipyard.

All while Renaissance Homes, the Lennar subsidiary, was working away on its section of Whitney Oaks, in partnership with CalPERS, Newland, and the Willie Brown investment vehicle Live Oak Associates III.

Lennar officials did not return phone calls this week seeking comment on possible conflicts involving Whitney Oaks.

Throughout his political career, Willie Brown has been a lightning rod for ethics criticism. Much of this criticism has focused on the seemingly inherent conflict between his duties as one of the state's most powerful officeholders -- speaker of the Assembly -- and his work as a private attorney for some of the state's most prominent businesses. Time after time, critics have pointed at supposed conflicts; time after time, those conflicts have been vague, attenuated, incomplete.

While in the Legislature, Brown did indeed represent many clients who benefited from governmental action. But Brown never was shown to have represented a private client for the purpose of winning a state government approval over which Brown had official sway. He adamantly insisted his private law practice was perfectly ethical, and all but taunted critics with a personal style that included Porsche automobiles and Wilkes Bashford suits.

As revealed to this point, the public record contains no direct evidence of a tie between Willie Brown's interest in Live Oak Associates III and his actions in favor of CalPERS or the Lennar Corp. Such evidence as does exist is circumstantial, and subject to varying interpretation. In other words, there is no transcript of a conspiratorial conversation between Willie Brown, CalPERS, and Lennar to scratch one another's wallets.

But the Whitney Oaks project raises serious ethics questions about Willie Brown -- questions that differ fundamentally from those raised in the past about his former law practice.

The Whitney Oaks questions do not involve a vague, indirect, incomplete connection between Brown's actions as private lawyer and public figure.

At Whitney Oaks, documents show definitively, Brown himself stands to profit privately from the financial backing of a public agency, CalPERS. And just as definitively, the public record shows that the mayor's official support of Mission Bay has profited CalPERS.

The appearance of tit for tat seems all but inescapable:
It is clear that CalPERS funded Whitney Oaks, and that Live Oak Associates III, which counts Willie Brown as a partner, is part of the project.

It is clear that Willie Brown's successful effort to restart Catellus' Mission Bay development was a factor that helped put millions -- perhaps tens or even hundreds of millions -- of extra dollars into CalPERS's coffers.

And it is clear that Whitney Oaks and the approval of a new Mission Bay plan have moved forward during roughly the same time period.

It is unclear, however, whether Whitney Oaks and Mission Bay -- and the roles of Willie Brown and CalPERS in each -- are connected by more than appearance and shared timing.

Likewise, the simultaneous involvement of the Lennar Corp. in Whitney Oaks and a major redevelopment project in San Francisco may be simple happenstance. Lennar is, after all, a huge real estate firm with wide-ranging interests.

Still, obtaining city approvals for major projects is always a primary concern of developers who hope to make money in San Francisco, and the projects in which CalPERS and Lennar have interests here are not small, or peripheral. They are major, and central to the development of the city.

State and local conflict-of-interest laws prohibit a public official from participating in public actions in which he has a private economic stake. One section of the state Government Code puts it this way: "No public official at any level of state or local government shall make, participate in making or in any way attempt to influence a governmental decision in which he knows or has reason to know he has a financial interest."

According to his own financial disclosure statements, Mayor Brown's investment in Live Oak Associates III is significant and enduring. Other limited partners in Live Oak III have been well aware of the partnership's investment with CalPERS in Whitney Oaks. As a longtime speaker of the Assembly, Brown is, or should be, familiar with the workings of the state retirement system. In fact, one member of the CalPERS Board of Administration is appointed jointly by the speaker of the state Assembly and the Senate Rules Committee.

Brown's interest in Whitney Oaks does not appear to be huge; he has disclosed a $10,000 to $100,000 ownership in Live Oak Associates III, but that partnership apparently owns less than 1 percent of Whitney Oaks. How much Live Oak III might profit from its 1 percent stake seems likely to vary, depending on the success of the development. Whether Willie Brown's interest in Whitney Oaks has been or will be large or direct enough to reach legal definitions of conflict of interest is certainly a debatable question.

Still, Brown's own public utterances show he knew that CalPERS was a major owner of the Catellus Development Corp., and had a major stake in the Mission Bay project. The available record shows that, at the very least, he ought to have known he was also involved in a private business deal with CalPERS, and in a prima facie conflict of interest.

David Pasztor edited and helped research this article.