This candidate for California governor has a potential conflict of interest in her own home

If former state Senate leader Toni Atkins is elected governor next year, she would oversee a state contract that puts money in her own pocket.

Following a directive from Gov. Gavin Newsom to develop state-owned properties for affordable housing, the California Department of General Services in 2020 hired a consulting firm to help prioritize sites, conduct market research and evaluate applications from contractors.

That firm, LeSar Development Consultants, is owned by Atkins’ spouse, Jennifer LeSar. And because of California’s community property law that gives couples equal ownership of assets in their marriage, the $1 million contract — which was reupped in February through 2028 — has been worth tens of thousands of dollars to Atkins, according to financial disclosures.

It’s just one of the potential conflicts of interest with her spouse’s business dealings that Atkins faces as she seeks the most powerful office in California. Nearly half of the major clients last year at LeSar’s companies employed lobbyists to influence government policy.

Disclosure forms filed by Atkins and LeSar list 51 different entities, including the Department of General Services, from which they received more than $10,000 in income last year through LeSar Development Consultants, LeSar Support Services, LeSar Holdings, Inc. or Global Policy Leadership Academy — all firms for which LeSar serves as president or CEO.

A CalMatters analysis found that 24 of those clients are registered lobbyist employers. They include the counties of Los Angeles, San Diego and Orange, the cities of San Jose, Oakland, and Palm Springs, the insurance provider Elevance Health, the Bay Area homelessness advocacy group All Home and the homebuilder Brookfield Residential.

That means Atkins earns hundreds of thousands of dollars annually from entities that could soon be asking for her signature or veto on priority legislation, requesting funding in her state budget proposals or applying for contracts with her administration.

“People who have business before the state could be using the potential governor’s spouse as an advocate, essentially,” said Jessica Levinson, a professor at Loyola Law School and former president of the Los Angeles Ethics Commission.

No plan for Atkins on managing conflict

Atkins declined an interview request to discuss how she would handle conflicts of interest as governor. She did not say she would take any specific steps to insulate herself from LeSar’s business dealings or make any changes to their current arrangement.

“Toni is proud of her spouse Jen’s decades of work to expand access to affordable housing in California,” spokesperson Danni Wang said in a statement. “Throughout her leadership in both the Assembly and the Senate, Toni has maintained high ethical standards, prioritizing transparency and avoiding any conflicts of interest. If elected governor, she will continue to uphold those same principles and ensure that every decision is made in the best interest of Californians.”

California’s conflict of interest rules disqualify public officials from participating in governmental decisions that would foreseeably have an impact on their personal finances, though there is an exception if the potential effect does not benefit the official any more than it would the general public.

Atkins is not the first politician with a family member whose work creates a potential conflict of interest with their elected office. Nor is she the only 2026 gubernatorial candidate whose income could complicate their tenure.

Lt. Gov. Eleni Kounalakis told CalMatters in April that she would place her extensive property investments — which include downtown Sacramento office buildings that rent to at least three state agencies and dozens of organizations with business before state government — in a blind trust if she won next November. She dropped out of the race on Friday.

But the direct financial benefit Atkins receives from LeSar’s income and the expansive portfolio of a governor, encompassing the entirety of California government, make this a particularly thorny case, Levinson said.

Organizations could theoretically hire LeSar to get closer to Atkins, while Atkins, as governor, could direct more state business to LeSar’s companies — though Levinson stressed that the potential for a conflict of interest does not necessarily indicate Atkins has done anything illegal or unethical.

“None of this means that she’s corrupt or she would make corrupt decisions,” Levinson said.

The relationship has long raised eyebrows

Questions about potential conflicts of interest with her spouse’s work have dogged Atkins throughout her rise in California politics. She married LeSar in 2008, when Atkins was a member of the San Diego City Council, and subsequently served 14 years in the Legislature, where she became the first person in more than a century to lead both the Senate and the Assembly.

As a lawmaker, Atkins received some criticism for introducing bills that would have raised taxes and fees to fund affordable housing development, her spouse’s line of work, so she sought permission from an attorney for the Legislature. After she became the Senate president pro tem in 2018, the Los Angeles Times reported that the clientele at LeSar’s firms had nearly quadrupled in five years. Last year, a campaign watchdog alleged that Atkins illegally used campaign funds for a $22,500 study trip to Austria organized by Global Policy Leadership Academy.

Atkins has always denied any wrongdoing.

Then-state Sen. President Pro Tem Toni Atkins speaks in the Senate chambers of the state Capitol on Dec. 5, 2022. Her spouse’s housing consulting companies do business with the state and employ lobbyists.

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Martin do Nascimento

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CalMatters

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LeSar’s business portfolio has grown to include four companies, which employ nearly three dozen people. The largest, LeSar Development Consultants, is a management consulting firm that provides strategic advising on affordable housing and homelessness projects. LeSar Support Services manages longer-term housing, public health and disaster recovery programs. Global Policy Leadership Academy offers training courses and study trips focused on urban development. All receive operational support from LeSar Holdings, Inc.

Though not among the most elite tier of affordable housing consultants in the state, LeSar carries considerable influence in the industry, particularly as she has carved out a unique lane with auxiliary services like her training academy, said Ben Metcalf, managing director of UC Berkeley’s Terner Center for Housing Innovation.

“There are some obvious synergies and benefits from her involvement in both of those organizations,” said Metcalf, who has attended a Global Policy Leadership Academy study trip.

On a statement of economic interests that LeSar filed last year with San Diego County for her consulting work, she reported the fair market value of LeSar Development Consultants at more than $1 million and for each of her other three companies at between $100,001 and $1 million. State financial disclosures only require filers to provide broad ranges.

Atkins reported receiving more than $100,000 in gross income from each of the four companies last year. That means, under California’s community property law, that LeSar earned at least double that amount — more than $800,000 — across her businesses.

The total income Atkins received is unknown. But nearly 40 of LeSar’s clients paid her enough last year that it triggered disclosure requirements for Atkins as well, because she earned more than $10,000 from each of them. That included the Department of General Services and 18 lobbyist employers.

“There are potential conflicts of interest with respect to any state agency consulting contracts,” Thomas Hiltachk, a political and election lawyer whose firm helped set up a blind trust for Arnold Schwarzenegger when he became governor in 2003, said in an email. “Such conflicts could also appear with any private consulting clients if such clients have matters or legislation under the Governor’s authority.”

Few solutions for avoiding conflicts

The Department of General Services hired LeSar Development Consultants for its affordable housing project in November 2020, on a three-year contract worth nearly $1.1 million, according to a copy provided to CalMatters. LeSar was paid $301.41 per hour, including labor, fringe benefits, overhead and profit.

Shortly before it expired, the contract was extended for another year for an additional $364,000. Then in February, the department signed a new three-year contract, for just over $1 million, which will keep LeSar Development Consultants advising on proposals to build housing on state-owned properties through 2028. LeSar’s rate has increased to $350 per hour.

“DGS is using the consultant to help as needed, through project initiation, preparation for and evaluation of proposals submitted by developers, provision of advice for complex policy, technical and procedural matters concerning affordable housing development, and ground lease and financial closings,” Fallon Okwuosa, a department spokesperson, wrote in an email.

CalMatters obtained several other public contracts that LeSar Development Consultants signed with cities and counties listed in Atkins’ statement of economic interest last year. They include a $964,800, one-year contract to produce a housing strategy for San Diego County; a $161,230, one-year contract to update Ventura County’s homelessness strategy; a $120,000, one-year extension of a contract to provide loan underwriting services for San Jose; a $100,000, one-and-a-half-year contract to advise San Jose on financing affordable housing projects, with renewal options through 2030; and a one-year extension of an ongoing $259,600 contract with Monterey County to update its exclusionary housing ordinance.

These local governments all employ lobbyists to weigh in on state budget funding requests and legislation.

Levinson and Hiltachk agreed that there are no easy solutions for Atkins to address the potential conflicts of interest if she is elected governor. Unlike with assets, such as property or investments, Atkins cannot put her spouse’s work in a blind trust.

And it would be complicated, Levinson said, for Atkins to recuse herself from every policy decision that affects LeSar’s clients.

“There’s just too many things that the governor does and too many ripple effects from a governor’s decisions,” Levinson said.

Because even the appearance of conflict of interest could undermine the public’s confidence in Atkins as governor, she added, LeSar might ultimately be forced to narrow the scope of her work or step back from her firms altogether.

“You’re punishing people who might never engage in nefarious behavior,” Levinson said. “But there’s a reason for that.”

This article was originally published on CalMatters and was republished under the Creative Commons Attribution-NonCommercial-NoDerivatives license.