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The Vice Hotel 

One of the largest city-funded Care Not Cash hotels was allegedly run as a home for extortion, drug dealing, and other vices

Wednesday, Oct 10 2007
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The biceps of 53-year-old ex-boxing coach Emmett Marcel Oliver bulge to the size of cantaloupes as he demonstrates his punching technique against a locked fire escape door he says should be open. Bam!

Oliver says he's a former drug dealer, that he counts among his friends dangerous gang members, and that he's lost people close to him to violence. He frets out loud about how he doesn't want to be in that world. Oliver tells me he's a veteran prison inmate, and his day-to-day life is often interrupted by incidents that cause him to fear that he may go back in.

Oliver, usually a warm, charismatic man, is angry. And he's raging at the building. "Look at this," he says, holding up a garbage can lid to reveal black scum underneath. "It hasn't been cleaned up in years."

He then points out a window to show me how the foundation of the building next door is crumbling: "That gives the mice a place to go," he says.

Oliver speaks for many people who are disturbed by this building. Some of the complaints are more serious than garbage pail scum.

The place where these people live and struggle to stay clean is the drugs-and-violence-infested 248-room Mission Hotel at 520 South Van Ness. It is the largest of 15 city-taxpayer-subsidized "single-room-occupancy" hotels leased and managed by the Tenderloin Housing Clinic (THC), a nonprofit organization dedicated to providing services to the indigent.

It's also one of the largest of the city-funded hotels that became the vehicles for Care Not Cash, the signature antihomelessness program that helped propel Mayor Gavin Newsom to office in 2003.

Until recently, the hotel was run by a clinic employee as a haven for criminal activities, according to tenants, THC workers, and city employees familiar with the situation.

During the three years the hotel was operated by THC employee Carlos Enrique Mendoza Hernandez, it was allegedly home base for systematic, management-run rackets that may as well have been specifically designed to suck people like Oliver back into a life of drugs, violence, menace, and despair.

According to allegations from Tenderloin Housing Clinic employees, city employees and leaders of charities that aid San Francisco's poor, the neatly coiffed, 6-foot-tall, 330-pound Mendoza turned the building into an enterprise for his own profit.

During an hour-long conversation in a bar, Mendoza strenuously denied these allegations. We had agreed to meet at The Connection on Mission Street last week. There, a man met me at the door and told me the meeting place had been changed because, Mendoza said, police had been spotted in the area and he didn't want any "drama." During our eventual conversation at The Annex on Mission, Mendoza said he was an exemplary employee during his five years working first as a desk clerk and later as a manager of the Mission Hotel. He said he was one of THC director Randy Shaw's favored employees, and that Shaw had directly intervened to have Mendoza promoted.

THC attorneys, however, alleged in August court filings that Mendoza is a gang member — which he denies — and that he conducted an ongoing campaign of criminal activity at the hotel. In these filings, THC attorney Raquel Fox requested restraining orders to protect 17 employees against alleged threats of violence from Mendoza.

Yet Mendoza says the agency did not serve him with court papers or otherwise contact him about these allegations. His sister, Gloria Hernandez, claims to still work for THC. She says she learned of the requests for restraining orders on a San Francisco blog that reported on the filings. "My brother didn't do what they said he did," she said. "It bothers me that they can insinuate stuff about him when they didn't have true facts."

However, THC officials aren't the only ones describing criminal activity at the Mission Hotel. Nor are they alone in alleging that Mendoza may have been involved in it.

In addition to THC's own court filings, current and former Mission Hotel tenants and THC employees who worked alongside Mendoza indicate the hotel may have been a base for extortion. People familiar with the situation say activities in the building also included loan sharking, extracting payments from drug dealers in exchange for protection from police, and skimming city-subsidized rent money.

Mendoza denies all the allegations, and says the sort of skimming he's accused of — which involves reporting rooms as vacant, then renting them out off the books — would not have been possible without his superiors' consent. "There's no way I could have done that. Whenever a tenant moves out, they have to let the housing department know," Mendoza says, referring to the THC division that oversees the management of city-subsidized hotels for the poor.

As of last week, Mendoza's name did not appear on San Francisco Police Department arrest logs at the Hall of Justice. A police spokesperson did not respond to requests for an update as to whether an incident report exists about Mendoza's alleged activities at the Mission Hotel. I have not received a response to requests for an interview with THC's Randy Shaw.

When I attempted to ask questions of the city department that should oversee where the money is going, I was simply told to speak to Shaw.

Taken together, the accusations point to the possibility that San Francisco taxpayers have been subsidizing the management of what amounted to a vice hotel.

Mendoza "is dangerous and a reputed gang member of the Norteños," and "employees and tenants at Mission Hotel are fearful of violence," according to Aug. 23 court filings in which a THC attorney requested restraining orders against Mendoza to protect 17 housing clinic employees. "THC discovered defendant had been involved in criminal activity, including extortion, assaults, and threats of violence toward THC's employees and Mission Hotel tenants. The conduct is ongoing," staff attorney Fox wrote in the filings.

I was told during interviews with former THC employees, hotel residents, and social service providers who placed tenants in the hotel that Mendoza might have personally rented rooms off the books. When THC workers took over the hotel from Mendoza this summer, these sources say, they discovered tenants living in rooms that had been listed as vacant.

Such allegations point toward a possible theft of city taxpayer subsidies, which should trigger an investigation by City Attorney Dennis Herrera. When I asked Herrera's office whether THC had requested such an investigation, a spokeswoman explained the department's policy of neither confirming nor denying the existence of ongoing investigations.

Again, Mendoza himself denies the allegations. He and Gloria Hernandez say that after Mendoza left, Shaw authorized a housing division "shake-up" that involved firing Mendoza's superiors as well as employees who worked alongside him. Others resigned in connection with an internal inquiry into Mendoza's management of the Mission Hotel. People with direct knowledge of this situation, as well as city and nonprofit employees who worked with people who were fired in the shakeup, also said in interviews that allegations about Mendoza's supposed mismanagement led to at least six people recently leaving the organization through firings and resignations. Because these were confidential internal personnel matters at a private nonprofit, I was unable to ascertain precisely how many employees were compelled to leave THC in connection with the Mission Hotel shakeup.

Sources say Mendoza was also involved in loan sharking, in which tenants borrowed money at 1,200 percent interest and lived under the threat of violence in the event of late payments. "If a tenant borrowed $100, on payday he would pay back $100 more," said a source who worked alongside Mendoza, one of three people contacted independently of each other who claimed knowledge of this activity.

Mendoza insists this accusation is outrageous. He said that rather than victimize hotel residents, he went to great lengths to help them, sometimes buying them meals at a nearby restaurant. Again, he says, he has not been contacted directly by THC officials about allegations of criminal activity at the hotel.

Drug dealing is a potential problem in any facility housing people who were previously living on the street. Mendoza says that he did not tolerate it at the hotel, and that he was one of few building managers to have evicted tenants for drug dealing — an assertion confirmed by court records.

Sources with knowledge of the situation at the hotel, however, said drug dealers there were divided among those Mendoza protected, and those he did not.

"Basically we [had] an early warning system," said one source, who claims to have dealt drugs and lent money in the hotel. "The police have to call management before they enter the building. They call Carlos first, and before they come, he contacts me. I know I have to flush it down the toilet."

Sources said the hotel was also used for prostitution. "They were having open acts of prostitution in the hallways in exchange for drugs," said one of several residents who described this problem. "I felt uncomfortable and unsafe."

Mendoza denies all of this.

At the very least, a City Attorney investigation is necessary to determine whether rent-money skimming actually went on at the Mission Hotel, and, if so, whether THC promptly and fully reported this alleged theft of taxpayer subsidies.

What is more, descriptions of violence, drug dealing, prostitution, and a general atmosphere of menace at the Mission Hotel suggests San Francisco has reneged on the Care Not Cash promise of giving homeless people safe housing as an alternative to the violent, drug-ridden streets.

The aforementioned allegations emerged over three weeks as I interviewed San Francisco social service providers who helped place people in THC-run hotels. I interviewed people who worked alongside Mendoza for THC. I spoke several times over the course of two weeks with a man who claims to have been a former loan shark and dealer who worked with Mendoza. I interviewed a crack cocaine user who says he bought rocks from a dealer Mendoza protected. And I interviewed several hotel residents who claim they knew of drug dealing, loan sharking, rent skimming, and extortion involving Mendoza. And I spoke with Mendoza.

All of the hotel residents and THC workers I interviewed, except Oliver — who claims to have seen a crack cocaine transaction in which Mendoza passed rocks to a reputed dealer within the hotel — requested that their names not be used in this article.

That's because they report an atmosphere of fear surrounding the hotel, and around THC. If their names were to appear in print, these Mission Hotel residents, dealers, users, and former THC employees said they feared possible violence from Mendoza or his associates.

Mendoza, for his part, said that they have nothing to fear and denies that he's been involved in threats of violence.

Meanwhile, social service workers and employees of nonprofit agencies are afraid that if they were to speak on the record, they could suffer repercussions from Shaw, who they believe wields considerable power in city political circles. They also believe that Shaw receives favorable treatment from the city agencies that oversee the $15 million in government grants and contract payments that fund THC's management of subsidized hotels.

This view seems to be supported by the fact that, despite several requests, I was unable to obtain interviews with Department of Human Services employees who supervise contracts with THC. Instead, an assistant to department director Trent Rhorer's assistant told me Rhorer said I should "talk to Randy" about the situation at the Mission Hotel.

Former employees were asked to sign confidentiality agreements with the implied promise that they would not speak out about the situation at the Mission Hotel, people with direct knowledge of the situation say.

In this spirit of secrecy, Shaw did not respond directly to e-mail and voicemail requests to be interviewed for this story. He did respond indirectly. Last week, he wrote a column titled "SF Weekly Preparing New Attack on Housing Clinic" for Beyond Chron, a Web site run by his nonprofit.

Defending his organization, Shaw wrote that Mendoza was a competent employee who merely left due to personal problems. "We are extremely proud of our management of the Mission over the years. Rather than wait for Smith to misinform the public, we're setting the record straight," Shaw wrote, in anticipation of this column. "After we hired Carlos Mendoza as general manager in February 2004, the Mission became a much calmer environment."

These smooth waters became choppy last fall, when "Carlos reported to us that he was going through some personal problems," Shaw continued. "Carlos' personal issues soon triggered concerns about his relationship with a couple of the hotel's tenants. An investigation was conducted, and for some time there was not sufficient evidence to conclude that Carlos should be terminated. When that evidence emerged in July 2007, Carlos was removed from his post and his employment ended."

Mendoza says the "personal problem" allegations, in which he was said to have had an affair with a tenant, are false, and that he resigned because he thought he was being unfairly accused.

Shaw's public spin on the Mission Hotel situation contrasts sharply with THC's own court filings requesting restraining orders against Mendoza.

Mendoza "continues to stalk and threaten employees. He continues to threaten and extort tenants," according to requests for restraining orders filed by a THC attorney. According to the filing, Mendoza was furious that some employees had ratted him out.

Fox, THC's lawyer, was scheduled to appear Sept. 5 in court to explain Mendoza's alleged criminal activities. I had hoped to see an illuminating description of life inside one of the city's largest poorhouses.

Not long before this hearing date, a copy of the filing appeared on a blog run by Jeff Webb, a resident of the THC-run Seneca Hotel. Webb's blog item was then picked up by two other San Francisco–based blogs. Fox subsequently asked the court to postpone the THC–Carlos Mendoza hearing until Sept. 21. Neither she nor Mendoza showed up for the second date. Mendoza says he was not served with notices to appear.

Whatever the truth of the allegations in the restraining order requests, sources allege that THC's reputed "Vice Hotel" was a well-oiled machine. Drug dealing was the most visible illicit activity, according to residents, former residents, and employees.

"I got myself into the money-loaning business," said a source who recently moved out of the Mission Hotel. "[Users would] buy drugs from [a dealer] and when they ran out, they'd borrow money from me. It got to the point where [the dealer] had something resembling a Glide Memorial Church bread line every third of the month. This ran all night. I asked, 'How in the hell are you getting away with this shit, and nobody's going to jail?' He tells me, 'You can conduct any business you like in here, as long as you pay rent.' I said, 'But I'm on General Assistance; they pay my rent.' He said, 'No, as long as you pay rent.'"

"Rent," this source said, meant payments to the hotel manager.

Another tenant I spoke to also said Mendoza would warn the aforementioned dealer of the police's presence. "Carlos would go to his door, give him a soda, and say, 'You've got to slow down the traffic tonight,'" said the tenant, who claims to buy drugs from this dealer.

Since Mendoza left, however, the dealer "has not slowed down his dealing. He's still selling crack. I bought some last week, and it made my chest hurt," said the tenant, adding that at least six other occupants currently deal crack from their rooms. "There's no secret. It's done on the stairway. You can see people coming in and out."

Not everyone in the hotel welcomes the drug trade. Combined with the prostitution that several residents said went on in bathrooms and elsewhere in the hotel, the trafficking created a menacing atmosphere.

Mendoza "put me right in the middle of what they call the drug corridor, and I don't do drugs, and I was afraid," one woman said. "I was coerced, intimidated; they called me a narc. It was a horrible situation."

Mendoza said he actually reduced drug dealing in the hotel, and that he did not receive kickbacks or any other sort of benefit from dealing.

It's not a shocking idea that someone in a position of authority over vulnerable people might be accused of abusing power. But it is peculiar that a city-funded charity with an $18 million annual budget might allow such a situation to persist.

In his "setting the record straight" column last week, Shaw noted that his agency runs criminal background checks on employees. He also suggested that anything I might write should be considered unfair because I've criticized him in the past, citing a 2005 column in which I referred to him as a "skid row kingpin."

In spending three weeks talking with former THC employees and with social service providers who work with the homeless, I'll grant Shaw this: I've come to doubt that he's a cynical person. He's widely admired for having organized San Francisco's downtown poor during the 1970s. And nobody I spoke to believes that Shaw approved of what was going at his hotel.

But Shaw's organization seems to be set up in such a way that these supposed problems are widely believed to have been allowed to fester for too long. Some of his former allies believe he may not be effectively managing what has grown into a large and complex organization.

The Care Not Cash program has helped grow THC from a 20-employee charity to a multipronged organization employing some 200 people. Meanwhile, a THC structure has evolved that may keep managers such as Mendoza from being held accountable.

THC runs in-house tenant "advocacy" organizations that tenants and workers with other nonprofits believe may actually prevent problems from coming to light. Of THC's total $18 million 2005 budget spent on the housing program, the agency spent $500,000 per year running city-funded tenant-advocacy groups such as the Central City SRO Collaborative, the Mission SRO Collaborative, and its Code Enforcement Program, in which SRO employees help tenants complain about building defects. As stand-alone advocates, these groups provide a valuable counterbalance to downtown slumlords with a reputation for cheating and even abusing tenants.

However, as a branch of THC, which is the city's largest private low-income hotel landlord, such programs create a troubling situation where the organization is able to handle complaints in-house. Tenants groused to me about speaking with SRO Collaborative lawyers, only to find that they'd been identified to a building manager as a complainer. The widespread view among THC tenants is that this system of in-house advocacy means that complaints against THC can be swept under the rug.

Critics say Shaw has positioned himself as a left-wing "progressive" leader, allying himself with leading politicians such as Supervisor Chris Daly. At the same time, Shaw's organization provides a valuable political service to Gavin Newsom by carrying out the lion's share of the mayor's Care Not Cash program. News about possible problems in THC hotels can reflect badly on these politicians.

[[Readers' Note: Paragraph Deleted]]

[[Correction Note: In the Oct. 10 story "The Vice Hotel," we incorrectly stated that the Tenderloin Housing Clinic (THC) spent $1 million of its $18 million budget during 2005 on lobbying expenses. The error was due to a misreading of the nonprofit's IRS filings. Those filings actually state that the clinic spent no money on lobbying expenses that year. Columnist Matt Smith took THC's $1 million "lobbying nontaxable amount" entry to mean that the nonprofit had spent that much money on lobbying. In fact, this line refers to the maximum amount the IRS allows a charity to spend on lobbying without paying tax. SF Weekly regrets the error.]]

The tragedy of the Mission Hotel is that well-meaning San Franciscans pay a fortune so that this type of "supportive housing" might provide a refuge from the violence, drug dealing, and despair of the streets. Indeed, Shaw himself characterizes the hotel this way in his recent Beyond Chron item:

"Smith views the housing of over 2,000 formerly homeless single adults in decent, safe, and affordable housing as a failure. Smith seems completely unrestricted by facts and objective reality, and like our President, feels more comfortable inventing his own world."

Residents, however, say the Mission Hotel is one of the more dangerous places they've been.

Emmett Oliver, for instance, keeps his eye on the straight and narrow while attempting to suppress his anger about what he sees as a treacherous environment at the Mission Hotel.

"I'm not dealing, and I'm going to make damned sure you're not dealing, too," Oliver said during our first meeting, by way of explaining his theory of nuisance abatement. "It's the city that pays for this place. So we shouldn't have to live this way."

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Matt Smith

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