San Francisco is close to settling a four-year legal wrangle that arose when a friend of Mayor Willie Brown used a $51,000 federal grant to buy a mosque for the Black Muslims, officials say.
Under terms of an agreement with the U.S. Department of Housing and Urban Development, the city would repay $475,000 to its community development block grant program, a pool of money that is provided by the federal government but doled out by the mayor's office.
The payment represents today's value of a former bank building on Third Street in Hunters Point that Charlie Walker, an ex-felon and political booster of Brown, bought -- improperly, HUD says -- with the federal funds he obtained from the mayor's office in 1999.
The grant was supposed to fund an economic development project. Instead, Walker, acting via a nonprofit he had set up, bought the bank building and transferred it to an affiliate of the Nation of Islam, according to city records. It has been used as a mosque and community center since then.
HUD says the unusual deal violated rules against using federal funds to support religion. For more than three years, HUD has pressured the city to pay back not just the amount of grant money that had been misused, but the present- day market value of the building as well, city records show.
While admitting that the transaction was fraught with problems, Brown's office resisted repaying the money.
In 2000, Brown's office argued in a letter to HUD that the Black Muslims' use of the building was consistent with President Bush's policy of allowing faith-based organizations to obtain federal funds for social programs.
Roger Sanders, who has since become director of the Mayor's Office of Community Development, said the city decided to settle the dispute with HUD after devising a way to repay the grant fund with no out-of-pocket cost.
In an interview, Sanders said the city this year had already budgeted $475, 000 in city funds to upgrade two city health clinics.
He said that after San Francisco repays the $475,000 into the federal grant program, it will treat the two health clinic projects as grant recipients and finance them that way.
"Hopefully, this will be the end of this unfortunate problem," he wrote in a recent letter outlining the proposal to HUD.
HUD has approved the idea, said Steven Sachs, who supervises HUD grant programs in California.
The deal must still be approved by the Board of Supervisors. Supervisor Aaron Peskin, whose Finance Committee will review it later in October, said he supports the settlement, assuming there is no cost to the city.
"All's well that ends well," Peskin said.
Sanders said the city has not decided whether to sue the Nation of Islam affiliate over its role in the transaction -- a course that HUD has urged over the years.
The affiliate, called the Center for Self Improvement, also owes the city $33,700 in unpaid property taxes on the Third Street building, according to city records.
The settlement would close the books on an unusual transaction involving Brown's friend Walker, known as the "mayor of Hunters Point."
Walker is a trucking contractor who served three years in prison in the 1980s for abusing the city's minority contracting program.
In 1997 -- with Brown's assistance, according to city records -- he founded the nonprofit Third Street Economic Development Corp. During Brown's first term, it sponsored gala parties honoring the mayor.
Also in 1997, Walker's nonprofit obtained a $100,000 federal grant via the mayor's office to help buy the Bayview Plaza shopping center on Third Street.
The purchase fell through, and two years later, Walker's nonprofit instead used $51,000 of the grant money to buy the former Wells Fargo Bank building on Third Street.
The bank was being used by another organization as a community center but was about to be auctioned off for failure to pay real estate taxes.
Shortly after it bought the building, and without telling the city, Walker's nonprofit resold the building to the Nation of Islam affiliate.
Soon after that, Walker's nonprofit was suspended from operation for failure to file tax returns, state records show. Walker's nonprofit also never obtained tax-exempt status from the IRS, according to federal records, even though it was supposed to provide the city proof of that before receiving federal funds.
In a phone interview, Walker accused HUD of harassing the Nation of Islam, which he said was providing important community services to the city's African American community. "What about this building is so interesting that the government wants to destroy the only thing in the Bayview that helps black people?" he said.
http://www.sfgate.com/cgi-bin/article.cgi?file=/chronicle/archive/2003/10/02/BA191835.DTL
