Lloyd Kelley's Dream House

Dozens of times over the past few years, Wiley Smartt has been asked the same question. He might be taking out the trash or washing his car in front of his Woodland Heights home, when a passerby would stop, point at the old brick house next door and ask:

"What's the deal with that property?"
Smartt would answer that the two-story building at the corner of Norhill and 7 1/2 had long been vacant and open to Mother Nature and drug-dealing riffraff, who had once set it on fire. The eyesore was tied up in bankruptcy proceedings, he'd say, and the local civic association was trying to get the city to tear it down.

So it went one pleasant late-winter day in early 1994, when Lloyd Kelley and his wife, Theresa, stopped to chat with Smartt while riding by on their bicycles.

"Why, you're Kelley the cop," Smartt said, referring to Kelley's old job with the Houston Police Department. Actually, by that time he was Kelley the councilman, having been elected to an at-large post only a few months earlier. Smartt recited what he knew about the run-down property. And after exchanging a few pleasantries with the handsome young couple, he watched them pedal away.

Wiley Smartt didn't get that close to Lloyd Kelley again until the morning of December 12, at a hearing conducted by the city's Ethics Committee. This time, Kelley, who was elected city controller last month, wasn't with his wife or on a bicycle. He was with his lawyers, who were on an angry rampage, accusing almost everyone involved -- including Smartt and his Woodland Heights neighbors -- of a "political vendetta" for suggesting Kelley had used the power of his office to halt the demolition of the house at Norhill and 7 1/2 .

The hearing grew out of a complaint filed against Kelley last June by Jan Hirst, vice president of the Woodland Heights Civic Association, which has been fighting for almost three years to have the dilapidated structure torn down. The civic association thought it had succeeded in March 1994, when the city's Building and Standards Commission ruled that the house should be demolished.

That has yet to happen, and Hirst thinks she knows why.
"What this is really about now is what Lloyd Kelley has been able to do with the system," she says. "I don't think the Ethics Committee is going to enable anyone to tear down this building. But his involvement in this wasn't right, and we felt people needed to know."

Trouble is, the extent of Kelley's involvement is extremely difficult to discern. For much of the last year and a half, since he and his wife laid eyes on their dream house, Kelley has said he's had no ownership interest in the property, but rather was representing a friend who wanted it. But at the initial hearing on Hirst's complaint on October 30, it was learned that the councilman, who was in the midst of a campaign to replace George Greanias as city controller, had claimed ownership of the property on the financial disclosure statement he's required to file with the city secretary's office.

Then, at the December 12 hearing, an attorney for Solomon Ventures, a real estate development firm that is one of Kelley's law clients, produced an affidavit that said the company actually owned the house. The confusion mounted when a Kelley aide said the controller-elect had signed an earnest money contract with Solomon Ventures, and is currently trying to weave through a tangle of legal obstacles to get clear title to buy the house. If and when he succeeds, someone -- either Kelley or Solomon Ventures -- will also have to pay some $20,000 in back taxes owed to the city, the county and the Houston school district.

Kelley, who is usually willing to talk about almost anything -- and rarely measures his words in doing so -- uncharacteristically refused a request by the Press to answer the questions raised in Hirst's complaint. Probably a wise move; a couple of months ago, Kelley told a radio audience that Hirst and her civic club were a "bunch of whiners."

Alan Blakemore, a campaign consultant who is overseeing Kelley's transition from councilman to controller, agrees with that assessment.

"Prior to September, Lloyd had no financial interest in the house," Blakemore says. "You can make this as Machiavellian as you want. But the basic problem the lady has is that she wants it torn down. It's a nuisance to her."

Blakemore acknowledges that Kelley has in fact wanted to own the house since he first laid eyes on it. But the consultant insists there's a huge difference between Kelley's actually owning the property and the fact that he hasn't quite completed the transaction, and that's the difference between a legitimate ethics complaint and Hirst's, which Blakemore dismisses as "ridiculous."

That kind of logic may have something to do with the fact that among the new controller's first orders of business will be an appearance before the Ethics Committee on January 8, a week after he's sworn in.

Among the questions Kelley will be called upon to answer are:
* Why did he repeatedly deny an interest in the property, even after Woodland Heights residents saw Kelley, his wife and his part-time Council aide, Bill Stephens, doing minor repair work on the house?

* Did Kelley use his influence to delay a demolition order issued by the Building and Standards Commission in March 1994 until he could secure the earnest money contract on the house?

* Did Kelley attempt to receive free services from BFI, a city contractor whose City Hall public relations liaison, Don Fitch, apparently set up the firm's account to haul trash and materials away from the house while Kelley worked on it?

* And what of Kelley's relationship with Solomon Ventures? He started out as the firm's attorney, but now appears poised to buy a piece of real estate that Solomon's trustee wrestled out of bankruptcy court for a mere $250.

Not long after Wiley Smartt encountered the cycling Kelley and his wife, the councilman showed up at a March 23, 1994, Building and Standards Commission hearing. Woodlands Heights residents testified to the condition of the house at Norhill and 7 1/2, and a city building official recommended that it be demolished.

According to Jan Hirst, Kelley then stood up and said he was representing a "contractor buddy" who wanted to buy the building and renovate it, possibly for use as an "old folks home." Kelley, who had championed the recent passage of an ordinance that offers tax breaks for the renovation of historic properties, also said the house might be of historic value and asked that demolition be delayed until his friend could buy it.

Despite the councilman's comments, the commission ordered that the owners secure permits to begin rebuilding or demolish the property within 30 days. And in May 1994, according to city records, a "demolition hold" was placed on the property -- meaning that the only permit that could be issued was for demolition.

An inspection the following month found the building "vacant and open," a violation of the original order. Yet the building remained standing. It was around this time that Hirst began having difficulty getting answers from the city's Neighborhood Protection office, which administers the dangerous building and demolition process.

"Suddenly, my communication was cut off," Hirst says. "They wouldn't talk to me anymore."

In August 1994, Hirst and her neighbors obtained a letter written by Bill Stephens, the lawyer and aide in Kelley's Council office. Stephens had written the letter to a couple who had shown interest in the property, threatening them with a lawsuit if they attempted to obtain the title to the house.

"My client has engaged me for the last nine months to secure good title for this historic building," Stephens wrote. "... I need documentation as quickly as possible in order to appeal the city of Houston's order of demolition."

Stephens' client was Ray Pratts, who was negotiating the purchase of the property for Solomon Ventures Inc. Stephens told the Press that the house at Norhill and 7 1/2 was a "test case" for the real estate firm, which was trying to obtain the title to that and other property owned by the J.R. McConnell estate.

McConnell committed suicide in the mid-1980s, after his multimillion-dollar real estate empire crumbled. McConnell had taken out multiple mortgages on his properties, and when he filed for bankruptcy, his estate became a legal jungle of fraudulent titles and lawsuits among competing interests.

According to Stephens, he and Kelley were both working for Solomon Ventures on the McConnell properties. In September 1994, with Kelley and Stephens' help, Pratts bought the deed to the Norhill house for $250. Not long after that, Hirst learned that the Norhill house was no longer going to be demolished.

"That's when we knew somebody was trying to stop the demolition," says Hirst.

Hirst found out who last Thanksgiving, when Kelley, his wife and Stephens started showing up at the house on weekends, wearing tool belts and clearing away debris. Still, Hirst says, Kelley denied having an interest in the house. She says Stephens told the president of her civic association that the house was owned by "a public official who does not want publicity."

Hirst's suspicions deepened when, through an Open Records request, she learned that beginning in early December 1994 at least six extensions to the original demolition order were issued to the owner, who was listed as Ray Pratts. Meanwhile, the Kelleys and Stephens continued work on the house, albeit too slowly to suit the civic association.

"He kept telling us another 30 days, another 30 days and it will get done," Hirst says. "But they took the roof off and left it off for months."

Hirst kept pressing city officials to demolish the building or explain why they wouldn't, while trying to prove Kelley owned the building. She figured she got what she needed early last summer, after she became angry about two overflowing BFI dumpsters on the property.

Hirst called BFI, and a woman told her that the dumpsters were ordered by Kelley's law firm, Bradford & Kelley, Bill Stephens and Ray Pratts. She says the woman also told her that the account was set up by Don Fitch, who is BFI's City Council liaison, and that the fees for one of the dumpsters were billed back to the company.

"I said, 'Oh, wow, this is interesting,' " Hirst recalls.
But it wasn't as interesting as a phone call she received from Kelley shortly after she filed her ethics complaint. She says the councilman was agitated and tried to bully her with the threat of a lawsuit. And again, she says, Kelley told her he was merely helping a friend who wanted the property.

The plot thickened yet again at the first ethics hearing on October 30, a week before the election. Kelley did not attend, nor was an attorney there to represent him. And when Hirst laid out the details of her complaint for the committee, it seemed as if her case was indeed pretty thin. But that was before Allan Van Fleet, the committee's new chairman, noted that Kelley had listed himself as owning 100 percent of the house at Norhill and 7 1/2 on the financial disclosure statement he filed earlier that month with the city secretary's office.

While Kelley, his aides and his attorneys insist there is a simple explanation for the convoluted chain of events that has led to the ethics hearings, the controller-elect continues to muddy the waters. He certainly did himself no favors at the December 12 hearing. With the councilman seated nearby, his lead attorney, Jeff Wray of Fulbright & Jaworski, copped an attitude with Van Fleet, a Vinson & Elkins lawyer.

The two spent most of the morning sparring, though the meeting was merely a pre-hearing to determine when both sides could present their cases. Wray became incensed when Van Fleet denied Kelley the chance to offer a statement in his own defense. When Van Fleet explained that the agenda didn't include testimony, Wray responded by railing about the committee's "Star Chamber-like" proceedings and an "obvious political vendetta" being carried out against Lloyd Kelley.

Alan Blakemore, Kelley's campaign consultant, says Van Fleet -- from his scheduling of the first hearing a week before the election to his joust with Wray on December 12 -- is showboating.

"He has set this whole thing up for maximum negative exposure for Lloyd," maintained Blakemore, who couldn't really offer much of an explanation on what Van Fleet might have against Kelley, who was elected controller with the fundraising help of one of Van Fleet's colleagues at V&E, Joe B. Allen.

Perhaps there is nothing to Hirst's case, but if that's so, Kelley certainly seems to have gone out of his way to make the ethics proceedings more interesting than they need to be. For his part, Van Fleet is clearly frustrated with Kelley and his attorneys.

"I can get along with anybody, but Mr. Wray shows up accusing me of running a 'Star Chamber' and attacking my committee," he says. "The committee has not experienced anything like that before."

Meanwhile, a member of Kelley's staff suggests that the controller-elect may ask Van Fleet to resign as chair of the committee. If that happens, neither Lloyd Kelley nor Jan Hirst will see the end of the dispute over the house at Norhill and 7 1/2 anytime soon, which could make for some interesting block parties in the Woodland Heights.

"I guess he'll end up making it a nice home and he'll live in it," Hirst says. "But it's not right what's happened.


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