A member of the State Properties Commission resigned Thursday after The Atlanta Journal-Constitution discovered he signed a $1.4 million deal to lease office space to the state while serving on the panel.
No law or guideline prohibits such a deal. But a spokesman for Gov. Nathan Deal, who appointed Dr. Larry “Jeff” Payne to the commission in September, said it “does present the appearance of a conflict of interest.” The spokesman said the resignation was a “mutual decision” between Payne and the governor.
The Department of Revenue in January agreed to lease office space from Payne in Gainesville. The agreement would pay Payne $140,000 a year for 10 years. The AJC uncovered the lease through the state Open Records Act and asked questions this week.
The State Properties Commission finds office space for state agencies and negotiates with building owners. Payne, a former business partner of both the governor and Deal Chief of Staff Chris Riley, did not notify the commission staff who were negotiating the lease, the Department of Revenue or the governor that he owned the building.
According to records obtained by the AJC, commission staffers never realized they were negotiating on property owned by a member of their own governing board until the newspaper’s inquiry. The commission does not have to vote to approve leases so the relationship between Payne and the state never came before the commission.
Payne told the AJC the state approached his broker about the property weeks before he was appointed to the commission and that he did not use his position to steer the deal in his favor.
Payne said he did not alert the commission that it was his building because he did not want favorable treatment.
“I did not want anybody to think that I was influencing their decision,” Payne said.
Deal, who chairs the State Properties Commission, considered canceling the lease with Payne, but the state would then have to pay Payne a $229,000 early termination fee. So the lease remains in effect at the negotiated rate. The lease is year-to-year, but if the state does not renew each year it must pay Payne a cancellation fee that decreases each year of the lease.
Deal spokesman Brian Robinson said the lease was negotiated fairly and is a good deal for the state.
“Gov. Deal has given this situation a close review,” he said. “The record clearly shows that the state located this property and began negotiations on it before Dr. Payne was appointed to the Properties Commission and this transaction never at any time came before the board for a vote.”
Still, Robinson said, Deal believes “those appointed to a position of public trust are held to an even higher standard.”
“Because it is in the best interest of taxpayers to preserve the lease, the governor has agreed to accept Dr. Payne’s resignation from the State Properties Commission board,” Robinson said.
Payne was a founding member of HRPW Investments, a Gainesville partnership that owns an airplane. Riley was also a founding member and Deal’s private business, Gainesville Salvage & Disposal, is a co-owner of the plane through its subsidiary, North Georgia Aviation.
Riley is no longer a partner in HRPW although he continues to have access to the plane. Payne contributed $3,000 to Deal’s 2010 campaign for governor and Deal’s campaign paid to use HRPW’s aircraft extensively. That relationship is the subject of a state ethics complaint that accuses Deal of improperly paying for air travel during his bid for governor.
Robinson said the governor and his staff had no idea Payne was negotiating with the commission to provide about 9,000 square feet of office space in downtown Gainesville for the Department of Revenue’s new regional office. Records obtained by the AJC from the Properties Commission and the Department of Revenue give no indication that any one involved in the process realized they were negotiating with a gubernatorial appointee.
Payne said his real estate broker responded to a public request commission staff posted that they were looking for a site in Forsyth or Hall counties, a fact confirmed through e-mails between commission staff and the broker. The state’s leasing agent used public websites, such as LoopNet.com, to identify buildings that would suit the Department of Revenue’s needs. Payne’s office between Jesse Jewell Parkway and Broad Street in Gainesville was one of several considered.
Commission spokeswoman Katy Pando said neither of the two leasing agents who worked on the project “had any idea that the owner serves on the commission.”
“Our leasing specialists work very hard to find the best property, at the best price, for the state agencies,” Pando said. “The entity that owns the property is not part of this formula.”
According to records, the Revenue Department’s first choice was in Cumming but negotiations there fell through, so the leasing agents’ turned to Gainesville and, ultimately, Payne’s property.
“I think that it was handled in a very open manner as far as dealing with the professionals at the [commission’s] real estate division,” Payne said. “(His broker) submitted a proposal that was compared to other proposals that I don’t know any of the details of, and the real estate professionals selected this property.”
Properties commission members are not paid but receive travel expenses and a per diem for commission business.
They are required to file annual affidavits stating they have taken no action for personal benefit. According to the state ethics commission website, Payne has not filed that affidavit. Any state official who does business with the state also must report the transaction to the ethics commission. Payne has until Jan. 31, 2013 to file the report on the new lease.
Prior to 2011, all board and commission members were required to file annual reports that detail their personal finances and any payments their receive from the state. William Perry, executive director of Common Cause Georgia, said he and other government watchdog groups want those rules put back in place.
Beyond that, Perry said Payne’s deal “clearly is a conflict of interest and is something that should never have happened. Broader ethics reform should absolutely include a way tighten the rules and laws of the state so this kind of thing can’t happen again.”
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