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SAN FRANCISCO Housing agency to challenge appointment of Agnos Attorney doubts HUD will release funds to ex-mayor

Heather Knight, Chronicle Staff Writer
Thursday, March 22, 2007

The San Francisco Housing Authority will challenge a judge's decision to place the troubled agency into receivership under former Mayor Art Agnos, the authority's director said Wednesday.

"This is far from a done deal," Gregg Fortner said after Superior Court Judge Kevin McCarthy appointed Agnos to lead the Housing Authority. "There will be future legal proceedings."

In appointing Agnos as receiver, McCarthy directed him to ensure that the Housing Authority makes good on $15 million in legal judgments against the agency that have gone unpaid for years.

Agnos said he plans to set up shop in the Housing Authority's Tenderloin headquarters on Turk Street and hire his own attorneys and accountants. He said he would probably leave Fortner in place to deal with the agency's day-to-day affairs.

The Housing Authority -- which operates 6,400 public housing units around the city and serves 35,000 tenants -- owes the judgments because of three cases stemming from the late 1990s.

"The polar ice cap has melted faster than these people have moved," Tom Brandi, a lawyer for the plaintiffs, said of Fortner and other Housing Authority officials.

In 1997, a fire engulfed a Hunters Point public housing unit, killing a grandmother and five children. The agency was found to be negligent for not having installed a smoke detector or having fixed a faulty heater. Relatives of the victims were awarded $12 million. The authority paid $4 million, but the judgment has grown again to $12 million because of interest and attorneys' fees.

In 1998, a painter at a public housing development sued the agency, saying she had been sexually harassed by a foreman and retaliated against after she reported it. A judgment for her stands at $2.5 million.

In 1999, an administrative assistant at another development sued the authority, saying she had been sexually harassed by her supervisor. A judgment for her now stands at $650,000.

The U.S. Department of Housing and Urban Development funds the Housing Authority and has prohibited Fortner from using federal money to pay the judgments. Eric Dewalt, an attorney for the Housing Authority, argued in court Wednesday that HUD won't grant Agnos permission to pay the judgments either.

"I just don't see how approving a receiver will resolve this," he said. "Nobody in San Francisco can force the federal government to release funds to pay the judgments."

"I'm not so sure about that," McCarthy countered. "The last time I checked, the speaker of the House is from San Francisco."

McCarthy said he would sign an order outlining the details of Agnos' new job. The former mayor is expected to be paid $400 an hour and be given total control of the Housing Authority. The money to pay him and his staff would come out of the agency's budget.

Agnos' appointment was briefly delayed while the judge sent a court staffer to round up someone from Mayor Gavin Newsom's office to explain the mayor's proposal for paying the judgments.

Matthew Franklin, director of the Mayor's Office of Housing, eventually showed up to describe the mayor's plan, which involves buying a piece of land on Candlestick Point from the Housing Authority and backing a bond that would be issued by the agency.

Franklin and Dewalt said McCarthy should wait for HUD's response before appointing a receiver and direct all sides into mediation. McCarthy said that has been tried before, unsuccessfully, and appointed Agnos. The judge said the city could continue pushing its plan with Agnos on board.

Franklin and Agnos, who worked together at HUD years ago, talked in the hall after the hearing and said they would work together.

Agnos, mayor from 1988 to 1992, has been critical of Newsom and is rumored to be considering a run for mayor in November. He said he wouldn't let politics get in the way of his new job.

"I'm a professional. He's a professional," Agnos said of Newsom. "This is an issue that's important to the people of San Francisco, and we can work together."

E-mail Heather Knight at hknight@sfchronicle.com.

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