SANTA CLARA — The city of Santa Clara filed an ethics complaint this week accusing the general manager of Levi’s Stadium of possible conflicts of interest by buying stocks in two companies that do work for the stadium.
The San Francisco 49ers, who manage Levi’s on the city’s behalf, disclosed in a letter to the city last week that stadium manager Jim Mercurio purchased stock from Visual Labs in 2017 and VenueNext in 2018.
He reported those stock purchases in annual economic disclosure forms filed with the city, but it wasn’t until a local blogger raised questions about the VenueNext stock that the team reviewed Mercurio’s finances and also questioned his stock ownership in Visual Labs.
The city says Mercurio’s purchase of shares in both companies may have violated conflict of interest laws that prohibit certain government officials, including consultants and people who do work on the government’s behalf, from handling contracts in which they they have a financial interest. It’s asking the state ethics watchdog, the Fair Political Practices Commission, to investigate.
“There are two problems. Was the decision made in his financial self-interest, and would an average member of the public think or worry it was?” Tracy Westen, an attorney and founder of the Center for Governmental Studies, said in an interview.
“There arises a question of credibility and trust. If a person has a potential dual interest…a member of the public who doesn’t study this thing is wondering if he’s doing it for himself or for the city,” Westen said.
Mercurio works for the 49ers, who contract with the city to manage the stadium. He can approve certain contracts and expenses that the city will ultimately pay for. Visual Labs and VenueNext did work that benefited the stadium, raising questions about whether Mercurio’s decisions on the city’s behalf also benefited himself financially.
The team’s lawyer, Hannah Gordon, acknowledged in a letter to the city that Mercurio’s shares in Visual Labs, “while not illegal, creates the appearance of a conflict of interest,” and said Mercurio last week sold back shares in both companies at no profit. In addition, the 49ers have canceled a contract with Visual Labs and paid the city back for their share of those costs.
“We self-reported this issue to the (city) and will fully comply with any potential FPPC inquiries,” said Rahul Chandhok, the team’s spokesman.
VenueNext provides a stadium app that allows users to buy tickets for NFL games and other types of events at the stadium. In her letter, Gordon argued there isn’t a conflict of interest in part because the contract isn’t public: the 49ers paid VenueNext through a separate company than the one that contracts with the city, and the city itself never paid VenueNext for any of those services, she wrote.
Mercurio bought VenueNext shares in 2018, years after the 49ers hired the company to create the app, according to the letter.
City Attorney Brian Doyle says most costs between the stadium and city are usually split in half, but he isn’t sure how payments to VenueNext were handled because the 49ers haven’t provided a copy of the contract.
The city does pay for services from Visual Labs, which provides body cameras for stadium security. Mercurio signed an initial contract with the company in 2016,and a three-year contract in June 2017 that expires in 2020. In December 2017, he bought $2,500 worth of stock in the company.
The team contends Mercurio’s financial interests in both companies were not illegal because the law didn’t apply to him at the time.
In April 2018, the Fair Political Practices Commission determined in an advice letter that Mercurio, in his role as the stadium’s manager, is a consultant to the city and thus required to follow conflict of interest rules.
Gordon argued the law didn’t apply to Mercurio until that point.
“Since that time he has merely administered the contract’s terms without in any way changing those terms,” Gordon wrote in the letter.
The city put the 49ers on notice as early as June 2017 that conflict of interest laws apply to Mercurio’s position, Doyle said.
Westen says the timing of the state agency’s advice isn’t relevant.
“If I buy shares in a company that benefits from my decisions, then nobody really focuses on it until years after,” he said. “It does not follow that there’s no conflict simply because of the timing. Although it’s tenuous, he potentially benefited from decisions he’s made [regarding] Visual Labs.”
Doyle also disputed the argument that Mercurio didn’t have influence over the Visual Labs contract. After receiving $10,500 in initial payments, Visual Labs was paid an additional $78,543 in usage fees, based on hourly charges, while Mercurio was supervising the contract.
“Even if obtaining a financial interest in a company after a consultant enters into an agreement with that company might be found not to be a violation of Section 1090, it would seem that causing tens of thousands of dollars to flow to that company as usage fees would be,” Doyle wrote in his complaint to the Fair Political Practices Commission, referring to conflict of interest laws.
There may be no outstanding legal issue because Mercurio has since sold his shares and the 49ers have cancelled the contract, Westen added.
Violating government code 1090 can result in fines or civil or criminal penalties, including disqualification from holding public office.
The state ethics agency has not yet determined whether it will investigate the city’s allegations.
“But it’s a warning shot across the bow for government to pay attention,” Westen said. “This may not be the most serious example of a violation, but there could be others, and somebody needs to pay attention.”
Contact Thy Vo at 408-200-1055 or firstname.lastname@example.org.