WEST JORDAN — Under intense public scrutiny after a past of questionable land deals, exorbitant bonuses and a scathing audit, Utah Transit Authority officials in 2016 were combing through business dealings for any potential conflicts of interest with past or current board members.
That's when they discovered House Speaker Greg Hughes' company, Urban Chase Property Management, was listed as a partner in a project called Oquirrh Flats — an apartment complex that had been proposed to be built near the Jordan Valley TRAX station in West Jordan.
The issue: Hughes served as chairman of UTA's board of trustees in 2010, when UTA had first executed agreements making the transit-oriented development at the Jordan Valley TRAX station possible.
That means Hughes, in the 2016 partnership with development company GBR Capital, could have potentially been able to profit off an affordable housing development that was made possible by UTA dealings that occurred when Hughes was UTA's board chairman.
So UTA officials in 2016, worried about any real or perceived conflicts of interests, urged developers to find a different partner, according to newly uncovered UTA documents the Deseret News obtained through a public records request. The documents include a series of letters written in late 2016 and mid-2017 expressing concerns about the potential conflict of interest with Hughes.
Greg Hartley, Hughes' chief of staff, says Hughes and the developers he partnered with at the time insist that no conflict of interest occurred. He says Hughes withdrew from the project out of an abundance of caution as soon as he learned that it was related to a UTA transit-oriented development. Hartley said he did not withdraw because of any conflict of interest, but because he didn't want to be involved with UTA.
Ultimately, Oquirrh Flats never happened.
But UTA's letters and the timing of Hughes' withdrawal raise the question of whether Hughes would have remained involved had UTA not sounded the alarm, and whether he would have profited off a project made possible by his time on UTA's board.
The letters surfaced after Hughes came under scrutiny for other conflict of interest issues, which led the speaker to remove himself from his self-appointed seat on the controversial Utah Inland Port Authority board. Hughes stepped down from the board after it came to light that several of his apartment properties disqualified him from serving on the board because they fall within the authority's 5-mile restrictive boundary.
Hughes will preside over the Utah House today during a special session to address changes to the law overseeing the port authority, including conflict of interest language.
Hughes declined to discuss the UTA issue with the Deseret News because, according to UTA officials, the matter is part of an ongoing federal investigation that UTA is cooperating with.
UTA officials raised concerns of a possible conflict of interest not once, but twice, after obtaining information more than six months after their first warning indicating that Hughes may have still been involved. But Hartley and GBR Capital developers all say Hughes withdrew immediately after UTA officials' first raised red flags.
"He withdrew because, upon learning of UTA's involvement, he did not want to be involved with them, and he did not want the project to be politicized, which seemed possible given the letter from UTA," Hartley said.
GBR Capital then moved to drop Hughes' company, Urban Chase. It then identified Gary Nordhoff as its new partner, according to GBR Capital emails. Nordhoff is Hughes' business partner and co-owns Urban Chase with Hughes.
Here's the timeline of events, according to interviews with Hartley, GBR Capital, and the UTA letters:
Red flag raised
In October 2016, after first discovering Hughes' involvement in the West Jordan development, then-UTA CEO Jerry Benson and then-UTA attorney Jayme Blakesley wrote their first letter to GBR Capital developers.
“UTA believes that Greg Hughes’ proposed participation in this project, even if it is just as an investor, appears to be a conflict of interest,” Benson and Blakesley wrote, asking the developers to confirm whether Hughes or a company in which he holds an ownership interest in is a partner in the project.
“And if that is the case, help us to understand why this is not a conflict of interest and a very real concern for all parties involved.”
Nearly two months later, December of 2016, Benson and Blakesley wrote a follow-up letter referencing a conversation with the developers and thanking them for "taking steps to remedy the issue."
But about six months later in May 2017 — after receiving assurances that Hughes had withdrawn from the project — UTA officials obtained information that caused them to worry that wasn't the end of it.
“Yesterday, I received information indicating 1) Mr. Hughes remains involved in the proposed transaction, 2) he has met with the West Jordan city manager to advocate for Oquirrh Flats, LLC, and 3) Speaker Greg Hughes is listed as part of the 'Oquirrh Flats Partnership' in a presentation you intend to deliver to the West Jordan City Council next week," Blakesley wrote.
“This new information appears to contradict your earlier commitment to proceed without Mr. Hughes’ involvement,” Blakesley wrote. “Please help me understand why Mr. Hughes’ involvement is not a conflict of interest and a very real concern for all parties involved.”
“As a taxpayer-funded organization, UTA must proceed with an abundance of caution on this project,” Blakesley wrote in the same letter. “UTA has a fiduciary duty to the public and must behave openly, transparently, and without even the perception of a conflict of interest.”
Blakesley also referenced the ongoing federal investigation of UTA in his letter. Two of the issues noted in a nonprosecution agreement reached with federal officials include “improper handling and disclosure of property acquisition and disposition, including inadequate oversight of transit-oriented development projects” and “non-compliance with ethical standards, resulting in benefits to UTA employees and/or board members,” Blakesley wrote.
Hughes denies conflict
Hartley emailed a prepared statement explaining when and why Hughes withdrew.
“Urban Chase was approached by GBR to consult and provide experience in low-income housing tax credit projects,” Hartley wrote. “Subsequently, when he became aware that there were questions about his involvement, out of an abundance of caution, Speaker Hughes withdrew from the proposal.”
In a follow-up interview, Hartley said no conflict of interest ever happened, and Hughes withdrew from the project as soon as he learned it was related to a UTA transit-oriented development — the first time UTA officials raised concerns in October 2016 and well before their second letter in May 2017.
Hartley said Hughes declined to speak with the Deseret News because his attorney advised against commenting due to UTA’s comment that the issue is a subject of a federal investigation. Hartley also noted Hughes has never been contacted by any federal investigators about the GBR Capital project.
Additionally, Hartley pointed out it's impossible to know whether Hughes would have remained with the project with or without UTA officials' warning.
"That likely would have happened whether these letters came or not, once he learned of UTA's involvement," Hartley said.
Hartley noted Hughes "never profited" from a (transit-oriented development) and that "out of an abundance of caution" Hughes has "run various (other) real estate deals by UTA" to check for any potential conflicts of interest.
"It was a UTA, GBR project," Hartley said. "Once (the speaker) found out UTA was involved, he told GBR to remove him from the project. It's as simple as that."
'We feel terrible'
The developer Hughes previously partnered with, Michael Batt of GBR Capital, also insists neither he nor Hughes had any clue of any potential conflict of interest issues with the West Jordan project, so he says no fault falls on Hughes.
Hughes’ company, Urban Chase, was initially only brought on as a consultant from a recommendation by Utah Housing Corporation for the affordable housing tax credit project, and the speaker agreed to partner without even knowing what parcels were being eyed for development, Batt said.
Ultimately, the 96-unit apartment building in West Jordan was never built. Amid difficulties with West Jordan officials, GBR Capital’s purchase contract expired and UTA withdrew from the project.
“We feel terrible that it would even be perceived that Speaker Hughes did anything wrong here,” Batt said. “We reached out to him, and he had no knowledge of this site until we were under contract, and even then we were unaware that UTA was involved until they sent us a letter.”
Batt and Hartley said after GBR Capital received the second warning, Hughes had already withdrawn from the project. Batt said Hughes' name was inadvertently included on the PowerPoint presentation as an old draft.
Batt noted that version of the PowerPoint ultimately wasn't used in the presentation to the West Jordan City Council. He also said Hughes had met with then-West Jordan City Manager Mark Palesh about a separate issue, and in that meeting wasn't "advocating" for Oquirrh Hills as UTA officials alleged in the letter. He said they generally discussed affordable housing tax credit projects from a policy perspective. Hartley said the same.
Palesh, who retired as city manager in July last year, said he remembers the 2017 meeting with Hughes. He said the speaker "briefed" him on the difference between affordable housing tax credit projects and section 8 housing, and that Hughes did not "advocate" for the GBR Capital project.
Palesh also said Hughes noted in the conversation that "he wasn't involved in the project at all."
"He brought that up two or three times," Palesh said, adding that Hughes told him, "I'm no longer involved in it in any matter, shape or form."
Hughes replaced
Batt sent a thread of emails to the Deseret News showing GBR Capital had asked Utah Housing Corporation to remove Hughes as its partner in February.
A Feb. 15, 2017, email from Claudia O'Grady, Utah Housing Corporation's vice president of multifamily finance, told GBR Capital it would "allow the change of the partner" from Urban Chase Property Management to Urban Chase's co-owner, Nordhoff.
Nordhoff told the Deseret News that if Oquirrh Flats had materialized and he had profited as a partner, none of the revenue would have gone to Hughes, his partner, because their business dealings are separate.
"No, because I'm not married to him," Nordhoff said, laughing. "I'm not his spouse. I have my own activities and do my own things, like he does his own things."
"What irritates me about this whole thing," Nordhoff added, is that even though years have passed since Hughes served on the UTA board, "I will tell you, we will never do a project that has to do with UTA for the rest of our lives" because of the "politics and perception" around UTA and its past controversy and sensitivity to Hughes and his position as speaker of the House.
And even if the Oquirrh Flats project had come to fruition and Hughes had still been a partner, Nordhoff said any profits from that project would have been nominal. "It was nothing," he said. "It was a tax credit project."
Jordan Valley TRAX
Had the Oquirrh Hills project materialized, it would have been a phase of the same controversial transit-oriented development project — the Jordan Valley TRAX station, near 3295 W. 8600 South — that a 2014 state audit lambasted UTA for awarding an unfair and overly generous contract to developer Jeff Vitek's company, Boulder Ventures Development Inc.
Part of the Jordan Valley station project has already been developed into what is now the Novi Apartments. GBR Capital developers had entered into a purchase contract to buy the parcel that would have been Oquirrh Flats from Vitek and UTA's holding company, Jordan Valley Holdings.
When the Deseret News requested an interview about the letters, UTA officials declined. “UTA is unable to provide an interview or comment on the matter you have inquired about as it is part of the ongoing federal investigation UTA is cooperating with,” UTA spokesman Carl Arky wrote in an email.
UTA signed the nonprosecution agreement in April last year, promising to cooperate with the ongoing criminal investigation.
So far, the only charges that have resulted from the federal investigation were for developer and former UTA board member Terry Diehl, focused on Diehl’s income from a land deal near the Draper FrontRunner station, as well as Diehl’s bankruptcy filings. But the case fell apart and was dismissed after prosecutors told a judge his decision precluding key evidence "gutted" their case.
Taking the ‘high road’
Blakesley — who left the agency in May after the Utah Legislature passed SB136, a massive transportation bill that restructured UTA — agreed to talk to the Deseret News about the letters.
“UTA was trying to take the high road on this and do the right thing,” said Blakesley, who now works at a new law firm. “It was important to UTA and UTA leadership that they be good stewards of public resources, and to do that, we needed to verify that public officials were not on two sides of the transaction.”
Blakesley said UTA’s “intent all along” was to ensure “no current or former UTA officials were involved in the transaction,” noting that when he was general counsel for the agency, UTA completed that review on all transit-oriented developments.
Blakesley said he didn't recall any follow-up from UTA's third May 2017 letter, other than the issue resolved itself when the purchase agreement for the property lapsed.
It's not the only time Hughes has been confronted with conflict of interest issues.
Most recently, Hughes — who will be leaving the Utah Legislature at the end of this year — removed himself from his self-appointed position to the controversial Utah Inland Port Authority board after reports that he owns properties within a 5-mile radius of the inland port. A law restricts board members from owning properties other than their residence within a 5-mile radius.
Hughes, before stepping down and appointing one of his right-hand legislators to take his place on the board, said he didn't know he had properties that would disqualify him from serving on the board until the day after the powerful Utah Inland Port Authority board was supposed to have its first formal meeting — a meeting where Hughes called for changes to SB234, a bill he championed, to make the law less "ambiguous."
Hughes cited that "ambiguity" as to why he didn't file a conflict of interest form for the port authority board, though he responded to reporters' questions about whether he could have conflict of interest by saying, "I could, sure." But Hughes also argued there was nothing "nefarious" about him owning apartments in the inland port jurisdiction because they wouldn't relate to inland port business, and he called the 5-mile restrictive boundary "unbelievably large."
More changes to that boundary could be proposed.
At the time Hughes' properties came tolight, a spokesman for Gov. Gary Herbert said the governor had no interest in changing SB234's conflict of interest language, saying it would be "inappropriate" and would "harm the public trust." But this week, announcing a compromise with Salt Lake City Council leaders on changes to SB234 and a special session for Wednesday, Herbert said the compromise includes changes to the conflict of interest language so that Councilman James Rogers — who also owns property (office rental space) within the 5-mile boundary — could serve on the board.
Asked if there may be any other changes to SB234's conflict of interest rules, specifically with regard to Hughes, Herbert said it's not likely, but didn't rule out future possible changes.
"That may be down the road," the governor added. "I personally think the 5-mile radius may be a bit too large."
That issue, the governor said, is "something that will be debated in the Legislature."