In his unpaid role as a commissioner
of the Housing Authority of Bexar County, Carlos Madrid Jr.
portrays himself as an honest steward of public funds and
unstinting advocate for the poor.
Having grown up dirt poor on the West Side, Madrid says his
motivation for spending years on the board was to provide the
kind of good housing he believes can shape children into
But Madrid has submitted his resignation letter, and it
provides no hint that he gained much more from his board work.
For the past several years, he has received thousands of dollars
in contract work from a Dallas-based affordable housing
developer that had business before the board. The developer
found in Madrid an unwavering advocate.
Interviews and a San Antonio Express-News examination of
housing authority records show Madrid's construction design
company, MCMG Inc., did contract work for Southwest Housing
Development Co. before the housing agency and Southwest entered
into partnerships to build two multimillion-dollar apartment
By signing public agencies on as partners in its building
projects, Southwest Housing can qualify for millions in
government tax breaks that can boost profits.
Madrid's private company soon was performing work on both of the
apartment complexes while he routinely made decisions about them
as a board member entrusted to act only on behalf of taxpayers.
He says his loyalty to county taxpayers
never was undermined by any obligation he may have felt toward
Southwest and that he did nothing wrong.
Madrid's private financial deals shed light on some business
practices of Southwest, the largest developer of affordable
housing in San Antonio and Texas, at a time when the company
plans to aggressively expand its partnerships with other public
Southwest Housing labors under an ongoing FBI investigation
that has focused, in part, on its private relationships with
Dallas city leaders and their associates. The company has
repeatedly denied wrongdoing.
At stake as the company contracts with agencies to build new
area apartment projects is whether public servants overseeing
the deals will make decisions in the best interests of taxpayers
or in the interests of themselves and Southwest Housing. That's
a temptation that the state's conflict of interest laws were
designed to suppress.
Rudy Rodriguez, chairman of the Bexar County Housing
Authority, has ordered a full audit of the county's partnerships
with Southwest Housing.
"We're going to run everyone through the sausage grinder
before we figure out whom we do business with in the future," he
said. "I just think that everything we do from here on out has
to pass the smell test in every which way so that we run an
effective and fiscally responsible housing authority. Whatever
needs to be done is going to be done."
In a brief interview last week, Southwest Housing's
president, Brian Potashnik, said his company plans to continue
to meet demand for decent affordable housing in San Antonio in
partnership with local agencies, despite the FBI investigation
of its conduct in Dallas and new questions raised here.
"We're continuing to do what we do best. Lenders and
investors, who obviously do considerable due diligence, are not
running from us," he said. "Believe me, we'd love for it to be
over; don't get me wrong. We're very confident that hopefully it
will be over."
He referred specific questions about Southwest's business
ties to Madrid to a Washington, D.C., public relations firm,
which e-mailed a brief statement asserting that its
relationships were properly disclosed. It continued, in part:
"These projects were approved completely on their merits and
serve as a tremendous asset to the underserved communities of
Free work, at first
The two government-subsidized apartment projects that are the
subject of the new audit represented the county housing agency's
first foray into tax credit housing partnerships with a private
The now-completed projects are the $14.3 million Rosemont at
Miller's Pond in the 6200 block of Old Pearsall Road and the
$25.4 million Rosemont at Palo Alto in the 10000 block of Texas
Southwest representatives first formally approached the
county housing agency about the Miller's Pond project, then
known as Heatherwilde Estates, in January 2002 and pitched the
Palo Alto partnership to the board in December 2002, meeting
minutes show. Southwest needed the county's presence in the
deals to qualify for state-administered tax breaks worth more
than $17 million, according to applications on file with the
state housing authority.
Madrid acknowledged in an interview that his construction
design company, MCMG, began doing contract work for Southwest,
assessing and coordinating construction progress and analyzing
site work "in 2001 or 2002" on projects in Brownsville,
Harlingen and Laredo. He said some of the firm's work on the
Palo Alto project in San Antonio started before Southwest and
the housing board were partners.
By January 2003, the board had signed on and was pushing
forward with both Miller's Pond and Palo Alto as a partner
eligible for small portions of the developer fees, some revenue
and eventual ownership.
Texas law forbids county housing officials from voting on or
even talking about projects in which they have a financial
interest and that fall within their area of oversight. It
requires public officials who do, under penalty of a
third-degree felony, to disclose such relationships in writing,
abstain from voting and recuse themselves from any discussion or
deliberation on those matters.
When the board was debating whether to approve the Miller's
Pond partnership, then known as Heatherwilde, in February 2002,
Madrid pushed for immediate approval despite lingering questions
among several fellow commissioners, including Nancy Busch.
During a lengthy discussion between the commissioners and
Southwest Housing representatives, Madrid said any questions
could be resolved later.
"I think that right now what we need to do is go ahead and
move forward, all decisions and questions, they are valid, very
very valid," he stated. "But that's part of the working for this
project. Right now, I think that the only concern is to vote on
Busch responded: "There is no way I can make a wise vote
unless I have all my questions answered. I have not determined
how I am going to vote because I still have a lot of questions.
I still need more information."
To which Madrid replied: "I got all my due diligence."
Then Busch asked Southwest's representatives a question that
took other commissioners by surprise.
"Do any of us have any affiliation with you or your
Southwest's representative at the time, Bill Fisher, replied:
"No, not that I am aware of."
"Why do you ask that question?" Madrid replied.
"I took an oath to the board, and I don't mind saying if
there is anything that we need to disclose or remove," Busch
"Yes, but I am involved in that question," Madrid said.
Madrid did not elaborate on what he meant by that, and the
matter was not resolved.
He would go on to vote for the Miller's Pond partnership with
Southwest and deliberate on it in his official capacity for
In December 2002, Southwest Housing again approached the
housing board with a proposal, this time to become a partner on
the Palo Alto project, which had contracted Madrid's company.
Madrid attended a closed board meeting at which commissioners
deliberated on legal questions related to the deal, then
abstained from the vote with no explanation.
Madrid said his company continued to do work for Southwest's
three South Texas projects, in Laredo, Brownsville and
Harlingen. The ethics rules allowed that work, he maintains,
because they were well outside his board's jurisdiction.
"I thought that doing work 350 miles south of San Antonio was
sufficient separation," Madrid said.
But he said he also never stopped working on the Palo Alto
project after the board became a partner in it. And, Madrid
said, he began doing extensive construction-related work on
He said he did all this work for free, as a board member
interested only in serving the public by ensuring that the
projects were built well.
Madrid said the free work went on for months, "well over 100
hours," and involved pre-construction tasks related to drainage,
coordinating services, site prep work and obtaining city
permits. He said he even paid for incidentals out of his own
pocket, including a $483 tab that Southwest Housing later
reimbursed. And he said he mainly answered to David Marquez, a
consultant hired by Southwest to represent its interests in San
One explanation Madrid gave for working on the two projects
and not billing Southwest is that he wanted to avoid any
accusations of ethics violations while doing a good deed for the
public as a board member.
"I wanted to make Bexar Housing Authority grow and grow and
grow," he said. "I wanted these projects to move. I was doing it
on behalf of the board. I didn't have to do it. I didn't have
the time, but I wanted the jobs built."
But then Madrid conceded that he harbored another motivation
for the unbilled work.
"I knew they were going to be building more projects in San
Antonio," Madrid said of Southwest Housing.
"I wanted to get inside the door and for them to depend on me
and give me some more work."
Though Madrid says he worked for free after his board entered
the partnerships, Southwest's internal books show otherwise. For
instance, Southwest's books for the two projects show the
company logged a $4,675 payment to MCMG on Aug. 31, 2004.
A December 2004 Southwest Housing vendor list includes MCMG
and names Carlos Madrid as the contact. It shows he earned
$11,019.76 for work on the Palo Alto project for that year.
Madrid offered a variety of possible explanations for the
At first, he indicated that he thought the bills might have
been submitted late for work done on Palo Alto before the board
became a partner with Southwest. Reminded that he said he'd
already collected for all bills submitted for that Palo Alto
work long before the 2004 payments, Madrid conceded the point
and acknowledged that he really had no answer.
"That I don't know. That I don't know," he said, trailing
off. "That I can't answer. I don't think I billed them any
But now Madrid says he has recently tried to get paid on all
the work for Southwest he did during those years after the board
joined with Southwest.
Last week, he said he called the county's law firm for an
opinion about whether he could finally bill Southwest Housing.
He said the lawyer at Gale, Sanchez & Wilson warned that "it
wouldn't look good. It just wouldn't look good."
Indignant about the legal advice, Madrid said he hadn't given
up the idea of collecting on the unpaid work. He said: "I've got
to get paid. This is my profession. I've got to bring milk and
cookies to the table."
A dispute has arisen over whether Madrid ever properly
disclosed his financial stake in Southwest Housing to the board.
He said he did disclose the relationship to the county's law
firm orally and in a handwritten note.
"Do you think I would be so stupid not to do those things?"
he asked. "I put it in writing. Absolutely!"
But Woody Wilson of the law firm denied that Madrid ever
mentioned the contract work in any communication. "Never
happened," Wilson said. "It's not true."
A records check shows that no conflict of interest disclosure
statement is on file for Madrid.
Southwest has clearly enjoyed consistent support from Madrid in
his public service role.
Meeting minutes show Madrid took an active role in
discussions, closed executive sessions and decisions regarding
the two projects ever since they were approved. He voted on
various legal transactions. He also used his position to benefit
Southwest in other less visible ways, according to fellow
Board Commissioner Robert Grau said he recalls that Madrid
opposed a move by new incoming commissioners early last year to
renegotiate additional concessions from Southwest. The effort to
improve the benefit to county taxpayers was successful, but Grau
said Madrid fought it behind the scenes. "He was always the most
outspoken," Grau said.
Madrid attended at least a half-dozen closed executive
sessions where discussions about various legal issues about
Miller's Pond and Palo Alto took place. In January 2004, Madrid
emerged from one closed board session about Miller's Pond and
voted in favor to "execute documents to close the transaction."
It's unclear what they were.
Carol Abitz, a neighborhood activist who led a group that
tried to kill the Miller's Pond project in 2003 at City Hall,
said she recalled that Madrid attended council and zoning
meetings as a board commissioner and spoke out in favor of the
project and of Southwest.
Told that Madrid had been earning money on Southwest
contracts recently, she said she was stunned.
"I think it's disgusting," Abitz said.
It remains unclear who initiated Madrid's business
relationship with Southwest, him or the company.
Madrid said he couldn't recall whether he or Southwest's
representative at the time, Bill Fisher, initiated the idea.
"I think it was a mutual kind of decision," Madrid said.
Fisher, who left Southwest Housing in early 2003, declined to
comment about why Southwest wanted to have Madrid as a
Fisher's successor as Southwest Housing's point man in San
Antonio from 2003 through about early 2005, David Marquez,
initially agreed to speak but said he'd call back after seeking
an attorney's advice. He did not call back and did not return
subsequent phone calls over three days.
Leaving, but defiant
Madrid submitted his resignation from the board earlier this
month ? to become effective when a replacement is found ? after
the Express-News requested records of the board's two
partnerships with Southwest Housing and commissioners ordered an
Madrid blames Busch and Grau for forcing his departure.
At one point, about a year ago, Bexar County First Assistant
District Attorney Cliff Herberg said board commissioners he
would not identify came to him with suspicions about Madrid's
Southwest Housing business relationship.
Herberg said that at about the time his office began to
investigate in late June of last year, news of FBI raids on
Southwest Housing's Dallas offices and at Dallas City Hall
broke, and he referred the matter to the bureau.
The FBI declined to comment.
Chairman Rodriguez, Grau and Busch said they did not know of
Madrid's contract work for Southwest Housing until informed by
the Express-News. During an emergency meeting called Tuesday,
the board accepted Madrid's resignation.
But Madrid does not accept their condemnation.
"I was very responsible for getting those projects built. We
have made people happy, and we have helped those areas with
housing," he said. "I've done a lot of work for that board, and,
unfortunately, I'm going out with a bad taste in my mouth."