Conflict of Interest Looms Over SDC Property Sale

A former Social Development Commission board member is positioned to gain financially from the sale of two of the troubled agency’s buildings that are on the market, raising questions about a potential conflict of interest.

In September, SD Properties Inc., the tax-exempt corporation that owns SDC’s buildings, listed two SDC properties on North Avenue for sale at a combined price of $3.2 million. Kimberly Njoroge, a real estate agent with Ogden & Company Inc., is advertised as the listing agent.

Although Njoroge previously held positions as a board member of SDC and SD Properties, SDC officials are uncertain about the agency’s conflict-of-interest policy for board members.

When contacted by NNS, Njoroge referred requests for comment to SDC attorney William Sulton and Vincent Bobot, SDC’s interim CEO and an elected commissioner as well as the only current SD Properties board member.

Extent of financial benefit unclear

It’s unclear to what extent Njoroge is financially benefiting because SD Properties declined to share the listing contract or disclose the rate of commission, though Sulton and Bobot said the fees Njoroge will collect are at a discounted rate.

“What I’m most concerned about is that we get the benefit of the bargain and then we get somebody that’s going to stay in the business to help people out of poverty in Milwaukee,” Bobot said. “So whether she gets the money or somebody else gets the money, that’s not my primary concern.”

Sulton and Bobot both said the situation does not present an actual conflict of interest because Njoroge’s term as a board member of SDC and SD Properties ended in June.

“I don’t think it’s a violation because she wasn’t on the board at the time,” Sulton said.

The SDC is an anti-poverty agency created by governments but functions outside of them. State, county and city statutes define the organization as an intergovernmental commission, with each government appointing board representatives. No government claims broader oversight authority.

Njoroge told SDC leadership in March that she would not seek reelection for her District 3 seat on the SDC Board of Commissioners, according to an email provided by SDC.

However, Njoroge continued to attend SDC board meetings and be counted in roll call as a commissioner after June, including being listed in minutes from an August meeting.

Wyman Winston, a former director of the Wisconsin Housing and Economic Development Authority, or WHEDA, said he does not understand how SD Properties could retain a former board member for the sale.

“That is unusual for nonprofits,” Winston said. “I’m not saying it doesn’t occur, but I’m saying it is not considered in any way to be the best practice.”

Differences between SDC and SD Properties

The Social Development Commission was established in 1963 by Wisconsin law to be an intergovernmental commission that fights poverty in Milwaukee County. The agency closed to the public and laid off its employees in late April.

As a 501(c)(25) title-holding company, SD Properties acquires properties consistent with the SDC’s mission and leases space to SDC and other anti-poverty organizations.

Unlike SDC, SD Properties is not considered subject to open meetings and records law, which is why it is not publicly disclosing the listing contract, its bylaws or conflict-of-interest policy.

What is required of SDC in dealing with a possible conflict of interest?

SDC is required to have a conflict-of-interest policy for employees and board members, according to its bylaws.

Sulton said he expects SDC has a conflict-of-interest policy for board members, but that he is unable to provide it because SDC does not have access to all of its files.

SDC lost access to such records after its technology services provider, Caspian Technologies, cut off the agency’s access to its website, emails and other electronic data.

Nonprofits like SD Properties are supposed to circulate conflict-of-interest policies annually and disclose any potential conflicts, according to Mary Beth Collins, executive director of the Center for Community and Nonprofit Studies at the University of Wisconsin-Madison.

“And if a conflict actually comes up, then their person is supposed to disclose it, and they are to recuse themselves from the decision-making around that issue,” Collins said.

State law requires real estate agents to disclose who they are working for and any conflicts to anyone they are working with on a property sale, according to Scott Bush, vice president of operations for the Greater Milwaukee Association of Realtors.

“I don’t see how it wouldn’t be OK as long as their disclosures were being made,” Bush said. “Unless it violates their own rules, and it could.”

How was the decision made to list the properties?

Because SDC failed to pay rent to SD Properties for its leased spaces for several months, SD Properties could not keep up with payments for mortgages on both North Avenue properties, Sulton said.

“This was really about SD Properties trying to resolve outstanding mortgage debt, trying to avoid foreclosure and other things that it didn’t want,” Sulton said.

SD Properties board voted to sell the properties and list them with Njoroge and Ogden & Company, according to Sulton.

Bobot said SDC officials listed the properties, a responsibility that would normally be relegated to him as a representative of SD Properties.

“I wasn’t too involved in who they selected, but when they told me this was a good idea to select her and her firm with the thing and what it would sell for, it made sense to me,” Bobot said.

Njoroge was not on the properties board at the time and could not vote, Sulton said.

“Was she literally in the room? Yeah, I think so,” Sulton said.

Going forward, the SD Properties board will approve any property sales, Bobot said, not the SDC board

Real estate commission discounted

Collins said the conflict of interest would depend on Njoroge’s involvement in SD Properties’ decision to hire her and how much the commission is discounted.

“I could see that being a very plausible scenario where you’re in an emergency, you have someone who understands the situation, they’re going to get off the board so that they can change roles,” she said.

Sulton said Njoroge’s commission is under 6% and discounted to what he and Bobot believe is a favorable rate on the market.

There is not a standard rate of commission for commercial property transactions, according to Tom Larson, president and CEO of the Wisconsin Realtors Association.

Bobot said it wouldn’t be unusual for the commission to be lowered further during sale negotiations.

Meredith Melland is the neighborhoods reporter for the Milwaukee Neighborhood News Service and a corps member of Report for America, a national service program that places journalists in local newsrooms to report on under-covered issues and communities. Report for America plays no role in editorial decisions in the NNS newsroom.

Could former board member’s role in sale of SDC buildings pose a conflict of interest? was originally published by the Milwaukee Neighborhood News Service.

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