Capitol Alert

FPPC warns Sen. Tony Mendoza over real estate transaction

Sen. Tony Mendoza, D-Artesia, shown in February 2010 when he was an assemblyman.
Sen. Tony Mendoza, D-Artesia, shown in February 2010 when he was an assemblyman.

A bad real estate investment during Sacramento’s housing boom and bust of the last decade is coming back to haunt Sen. Tony Mendoza, with the state’s political ethics watchdog sending him a warning letter for under-reporting debt he unloaded in a complicated real estate transaction that began five years ago when he was an assemblyman.

Mendoza, a Democrat from Artesia, bought a house in Sacramento for $462,900 in 2006, according to the letter from the Fair Political Practices Commission. Three years later, Mendoza “began having trouble making the mortgage payments,” the FPPC letter says. So he and his accountant, Cecy Groom, worked out a plan for her and a few other people to pay off his mortgage and take over ownership of the house, the letter says.

When the deal was complete in 2012, the FPPC letter says, the home was worth about $255,000 – yet the outstanding balance on the mortgage was more than $418,000.

“Given the amount of debt (the buyers) agreed to assume to acquire the property, they paid significantly more for the property than its appraised value,” the FPPC letter says.

“While this could be a basis to conclude that Mr. Mendoza received more than full consideration for the property, the FPPC did not find sufficient evidence to conclude that the sale was anything other than a legitimate ‘arms-length deal’ between the parties.”

However, the letter says, Mendoza should have reported the assumed debt as income on his statements of economic interest. And while he did report some income from the buyers on his Form 700s in 2010 and 2012, the letter says, he didn’t report the full amount, which was about $448,000 for the down payment and the debt assumption.

“While Mr. Mendoza under-reported the amount of income he received from the sale of the property, he did disclose the sale and the identity of the purchasers. This significantly reduces the harm caused by the violation because it provides the public with significant, although not complete, information about the transaction.”

In a statement, Mendoza said, “I am pleased that the FPPC has closed its case against me after a thorough investigation. I have always complied with the spirit and letter of the law and will continue to do so as required of all public officials.”

Call Laurel Rosenhall, Bee Capitol Bureau, (916) 321-1083. Follow her on Twitter @LaurelRosenhall.