Follow the Money by Ralph Kanz

Henry Chang bought the property at 5650 Bancroft Avenue in 1987. Later that year he completed construction of a three story, nine-unit apartment building on the site. From the very beginning Chang had difficulty managing the property.

We recently reported on Henry Changís conflicts of interest concerning the Oakland Creek Protection Ordinance and his ownership of a creek side property. During the research for that report we discovered information that there are other required disclosures that Henry Chang has failed to make. Much of what we learned came from the June 2000 depositions of Henry Chang and Ted Dang (former mayoral candidate and Changís good friend) that were taken during the course of litigation for Judicial Foreclosure on the property at 5650 Bancroft Avenue in East Oakland. (The Chang and Dang depositions are on line.)

Henry Chang bought the property at 5650 Bancroft Avenue in 1987. Later that year he completed construction of a three story, nine-unit apartment building on the site. From the very beginning Chang had difficulty managing the property. Ted Dang was an advisor and consultant to Chang throughout Changís ownership of the property. After the buildingís completion Chang obtained a mortgage from Sumitomo Bank for $380,000 to pay off the construction loan used to build the property.

Paul Lum negotiated a lease option on the property in 1993. The agreement was never signed. Lum attempted to manage the property until March 1995 when he walked into Henry Changís office and dropped off the keys and terminated any further attempts at dealing with the property. Mr. Lum had been unable to make the situation work.

ìBy this time the property had only four tenants left. The other five units were in various stages of disrepair. A couple were vandalized; one had a fire. Transients were breaking in and staying in the vacant units. Only half of the remaining tenants even paid part of their rents. There was also the $20,000 in delinquent property taxes. Mr. Chang contacted me and asked for my assistance in working out this dilemma.î November 29, 1995 letter from Ted Dang to Ted Biggs of Sumitomo Bank. This letter also says that the property ìÖcan easily go back to becoming a crack houseÖî

In April 1995 Ted Dang drafted a lease option agreement between Henry Chang and the African American Development Association (AADA). The agreement called for the AADA to pay $6.00 to Chang for the period April 1, 1995 through June 30, 1995. The agreement provided AADA with the option to lease the building from July 1, 1995 through June 30, 1996 for an additional $9.00. During the additional lease term AADA had the option to purchase the property by paying the delinquent taxes of $15,000 and assuming the $315,000 existing loan on the property.

Henry Changís economic disclosure for 1995 shows him selling the Bancroft property on April 3, the date the Lease with Option to Purchase was signed. In March 1996 Chang executed a Grant Deed transferring title in the property to AADA. The title transfer was designed to accomplish three things: First was to remove the embarrassment of being called a ìslum lordî, second was to improve Changís stature in the African American community, improving his chances to be elected to the City Council seat he had been appointed to in 1994, and third was to have the non-profit AADA apply for a property tax reduction with the County, thereby saving $7,000 per year on the property. AADA had never paid the delinquent property taxes as called for in the lease option agreement, yet Chang transferred title to them anyway.

On March 28, 1996 Henry Chang and the AADA signed a Modification and
Assumption Agreement for the Sumitomo loan. (The original 1988 loan had been altered by a June 25, 1995 Modification Agreement). This Agreement provided that the AADA would ìperform and pay all obligation due or owingî and that Chang would ìcontinue to remain obligated under the note.î

ìShortly after acquiring the property in early 1996, AADA requested that the City provide financing of approximately $75,000, mainly to pay past-due property taxes and to refinance the second and third loans on the property.î September 19, 1997 Agenda Report to Office of the City Manager from the Community and Economic Development Agency (CEDA). In addition to the Sumitomo loan, the two additional loans were from OCCUR Information Services for $19,500 and from East Bay Asia Local Development Corporation (EBALDC) for $10,000. Ted Dang is currently the Treasurer of the Board of Directors of EBALDC.

The City of Oakland turned down the request for funding twice in 1996 and 1997. One of the reasons for turning down the loan was that ìthe project has no play area or other open space, and no landscaping. The site offers very little potential for addressing these problems.î The lot at 5650 Bancroft is triangular shaped and has only enough space for the building and some parking. The City apparently did not know about the drainage problems with the building that led to dry rot. The March 16, 1999 letter from Allan Edson of AADA states that, ìthe building was constructed with cheap materials and is now deteriorating.î The letter continues: ìThis year I have repaired and repaved the parking lot/driveway, repaired dry rot in a section of the building and replaced a balcony that was a hazard to tenants identified during an Oakland Housing Authority inspection.î

Until 1999 the property continued to accrue liens for both County property taxes and City of Oakland garbage delinquencies (plus the OCCUR loan was still in delinquency). The beginning of litigation began in 1999 when Amresco Financial I LP bought the note on the property. On June 25, 1999 Amresco wrote a letter to both Chang and AADA notifying them that ìAmresco has not waived the default or its rights to proceed with foreclosure and enforcement of its remedies.î By this time the property tax lien was near $75,000 and the garbage liens near $6,000.

On June 22, 1999 Amresco filed a Complaint for Judicial Foreclosure and the appointment of a Receiver. The City of Oakland was a named defendant as a result of the garbage liens. The case continued on a path towards trial including the June 2, 2000 deposition of Henry Chang by Amrescoís attorney. Portions of that deposition are posted on this Web site. After deposing Chang, it was clear that Ted Dang needed to be deposed, and it appeared Dang knew more about the events at 5650 Bancroft that anyone. Dang was deposed on June 21, 2000. Shortly after the depositions the parties came to a settlement agreement. Part of that agreement was that the City of Oakland would receive $2,978.99, representing one-half of its liens against the property.

The property was sold at the conclusion of litigation, and the new owner evicted everyone that was not a Section 8 tenant. The new owner then raised the rents and installed Section 8 tenants in all the units.

Changís deposition raises questions about who paid for his attorney, Clifford Mau. (See pages 73, 74, and 76). If he did not pay, then Chang should have been reported that as a gift on his economic disclosure forms. Dangís deposition again reiterates that the property was ìa crack house in a bad neighborhood.î (page 36, Dang deposition).

Back in April of this year City Attorney John Russo and City Council member Larry Reid helped to demolish an East Oakland house that for years had been the scene of drug dealing. City officials have vowed to close down similar properties around the City and to destroy them when necessary.

Did Russo and Reid know that Council member Henry Chang once built and owned just such a problem house in East Oakland?