Selective Ethics

Lloyd Kelley skates on a conflict-of-interest complaint, leaving plenty of unanswered questions in his wake

Eleven months ago, when he could still be depended upon to voice an independent thought, Lloyd Kelley dismissed the city's Ethics Committee as a colossal waste of time and money.

"If they are that ineffective," the then-councilman remarked to the Press, "I'm not going to spend a dime on them. Selective ethics is worse than no ethics at all."

Funny how a man who once offered his opinion in the interest of a solution can so easily become part of the problem.

In keeping with what we already know about Lloyd Kelley -- that he's aprincipled, overtly ambitious and politically vindictive -- the mutation has been anything but subtle.

His transformation started shortly after Kelley offered the above assessment of the Ethics Committee. It was completed when, a week after being sworn in as city controller on January 2, Kelley appeared before the very same committee to answer charges that he used his influence while on Council to block the demolition of a dilapidated Woodland Heights house that he and his wife now plan to make their home.

When the two-day hearing was over, Kelley had been cleared of any wrongdoing. But as one observer commented, a "web of mystery" remains, and the hearing, which resulted from a complaint lodged by an irate Woodlands Heights homeowner, raised as many questions as it answered.

Let's begin with how it is that Kelley slipped the net that snared Bill Stephens, his friend and former Council aide who was recently appointed a deputy to the new controller.

In November 1994, Stephens began requesting and receiving extensions to the demolition order from the city's Neighborhood Protection office. Stephens, who at the time shared law office space with Kelley while earning $20 an hour as Kelley's part-time Council aide, told the committee that he did so on behalf of a legal client, Solomon Ventures. He testified that the firm hired him to help extract the two-story brick house from the bankrupt estate of crooked real estate wheeler-dealer and jailhouse suicide J.R. McConnell.

Stephens' part in the Woodland Heights affair was a no-brainer for the committee, which found that the Kelley aide had violated the provision of the city's Ethics Code that prohibits salaried city employees from representing outside interests before city agencies. In the final report it will issue on the hearing, the basically powerless committee could recommend anything from a reprimand of Stephens to (but highly unlikely) termination of his city employment.

But what of Kelley? He was also employed as an attorney for Solomon Ventures, ostensibly to clear up some 40 liens that blocked clear title to the Woodland Heights property. But in testifying to the committee last week, Kelley admitted that his real estate expertise was limited to a "special interest" in law school and a clerkship in the real estate section at Vinson & Elkins. In other words, Solomon Ventures hired someone with almost no pertinent experience to work on the McConnell estate, one of the most dauntingly complex bankruptcy cases in Harris County history. Someone who happened to be an at-large city councilman, that is.

Though it's unclear why or even when Kelley began work for Solomon Ventures, he did not restrict his efforts to the courthouse. In March 1994, he appeared at a city Building and Standards Commission hearing and, on someone's behalf, tried to discourage demolition of the Woodland Heights property.

"I've gotten calls ... from people who are interested in buying it, and they can't," Kelley told the building commission. "I guess you're ready to proceed with demolition, and I don't know how that fits in, but I know that there are people who are interested in purchasing the property to do something with it. To me, that is preferable to simply demolishing it. How long it's going to take, I don't know. I know they're not prepared today."

Apparently, committee members saw no connection between Kelley's attempt to dissuade one city agency from ordering the demolition and Stephens' later efforts to get another to delay it. That's odd, for several reasons.

First, Stephens' violation of the Ethics Code successfully held off the wrecking ball to save a house that Lloyd Kelley is now in the process of buying, with plans to renovate and move into it with his wife. But Kelley testified last week that he would have never signed the contract to buy the house unless he could get clear title. That title would be useless, had Stephens not received the extensions; without them, the building would have been demolished.

Second, curiously enough, Kelley dodged any discussion last week of his fee arrangement with Solomon Ventures. When the new controller was asked by the committee if he billed the company for his services, Ron Cohen, Solomon Ventures' legal counsel, objected. "That's none of the committee's business," he snapped. It was never revealed how Kelley was compensated for his services. Stephens, however, admitted that his fees would come from any profit Solomon Ventures made on the sale of the property.

Finally, the January 8-9 hearing would have been unnecessary if the original building commission order had followed its normal course to demolition. According to the commission's published rules, there are only two ways to amend a demolition order: a district court ruling or an appeal to the commission filed by the city. Building owners or interested parties must request one hearing or the other within 30 days of the original order. Neither was ever sought.

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