A San Francisco senior building inspector whose purchase of property under review by his agency led to a call for new ethics guidelines has resigned.
A Chronicle examination of court and property records
in August showed that code enforcement inspector Leo McFadden appeared to use inside information for personal gain by acquiring a distressed property in the Mission District.
The one-story house at 838 Alabama St. was facing code enforcement action by the city Department of Building Inspection when McFadden bought the property for approximately $500,000. After acquiring the property, McFadden quickly obtained permits from his agency to remodel it.
The investment by McFadden -- who has ownership interests in several properties in the city -- raised the appearance of conflicts of interest at an agency responsible for enforcing building and housing codes.
Philip Ginsburg, the city's director of human resources, said McFadden submitted a letter of resignation effective Nov. 17. McFadden did not return telephone messages seeking comment. Amy Lee, acting director of the Department of Building Inspection, declined to comment.
Debra Walker, president of the department's oversight commission, said the agency is working hard to clean up potential conflicts of interest and other ethics issues highlighted by McFadden's case.
"Our department is really taking issues of conflict of interest seriously, and we are putting a lot of work into our new ethics guidelines," Walker said. "I think our staff agrees with this and is welcoming our work."
Lee has estimated that about a third of 298 building inspection department employees have ownership interests in properties other than their own residences. She has since proposed new ethics codes for the department that would restrict employees from moonlighting as real estate investors.
The new guidelines would allow employees to buy real estate in San Francisco, but prohibit them from engaging in construction or remodeling unless the employee or family member owns and lives at the property.
The ethics standards would also bar employees from buying a property in San Francisco if it is under department review or has been within the previous 12 months or if the employee has provided direct services related to that property within the past year.
The city's Ethics Commission is expected to decide whether to endorse those proposed rules in the coming months.
In all, McFadden has an ownership interest in seven properties in addition to his personal residence, according to his most recent public employee economic disclosure statement. Two of those properties are estimated to be worth more than $1 million and five between $100,000 and $1 million, the record shows.
In July, FBI agents removed documents from McFadden's work files related to an unspecified residential property on Alabama Street, but McFadden was neither arrested nor charged with any crime. FBI spokesman Joe Schadler declined to comment on the status of any investigation related to McFadden or the property.
McFadden had been on leave from his job since around the time of the FBI search. He continued to collect on his approximately $100,000 a year salary for all but five weeks of that period, according to the city controller's office.
McFadden also was the inspector in charge of reviewing a property that has been the focus of a criminal investigation by the FBI and San Francisco district attorney. That investigation led to the arrest of city building inspection supervisor Augustine Fallay, who was charged by prosecutors with bribe-taking. Fallay, who has pleaded not guilty, is expected to go on trial next year.
After The Chronicle reported on McFadden's purchase of 838 Alabama St. and his other real estate holdings, Controller Ed Harrington -- at the urging of the city Building Inspection Commission -- opened an audit of the buying and selling of property in San Francisco by staff of the Department of Building Inspection. The audit is continuing.
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