City-funded co-working space led by daughter of council member
City Council member Kathleen Wazny said her phone started ringing when news broke that a council member’s daughter was hired to run Stoke, the city’s new tech incubator program.
People were concerned about the connection between council member Dalton Gregory and his daughter Heather Gregory, who was hired last month by the nonprofit group that runs Stoke on the city’s behalf, Wazny said.
Was it nepotism?
Dalton Gregory says “no.” He says he didn’t do anything to help his daughter get the job. And, since she’s been hired, both he and the nonprofit have filed conflict-of-interest statements disclosing the relationship. Gregory says he won’t participate in any future council discussions or votes that concern Stoke.
“It wouldn’t be proper,” he said.
The nonprofit Dallas Entrepreneur Center agreed to run Stoke for the city. DEC started by launching similar programs in Dallas and Addison in 2013. They support small startup companies that share workspace with each other and learn the nuts-and-bolts of running a small business.
Stoke opened in Denton on Aug. 1 and operated without a director for the rest of the year. Then, DEC hired Heather Gregory from a pool of 30 applicants to serve as Stoke’s director, according to Trey Bowles, co-founder and CEO of DEC.
She had the track record, including valuable experience in Denton, Bowles said. She was a former director of SCRAP Denton, a nonprofit business that takes donated arts and craft materials and resells them. She also helped run a similar program in Portland, Oregon.
“We got the best person for the job,” Bowles said.
Heather Gregory, 34, didn’t return calls and messages for comment on this story. But she told the Denton Record-Chronicle on Jan. 14 that she plans to adapt DEC’s program for Denton in a way that taps the city’s creative community, including musicians, media artists, photographers and videographers.
How we got here
City leaders decided several years ago to put some taxpayer money into starting a technology incubator. A local developer agreed to reconstruct a building near the downtown train station and the city agreed, in turn, to lease about 9,000 square feet in the building for Stoke.
The city built the space to support technology work with high-powered internet connections, conference rooms, lockers, a large meeting space, a kitchen and more. But City Hall staff didn’t want to be on the hook for managing Stoke and providing programs. Instead, they negotiated a contract with Bowles and the Dallas Entrepreneur Center to manage the day-to-day affairs.
DEC gets money to run Stoke in two primary ways: a contract payment from city government, and membership fees from individuals and small companies renting offices and desks.
From July 2016 to January 2017, Stoke took in about $54,000, including $16,250 from the city, according to a review of city records. From July to January, Stoke spent about $32,000, most of it supporting an employee who helps DEC serve its satellite locations.
Bowles said DEC hasn’t drawn up a budget for Stoke for 2017 yet, but he expects those figures to increase with the Denton director in place.
Nepotism in state law
There’s no law against a private business hiring family members. It’s a common practice. Some family businesses even have a succession plan to hand the company over to the children, according to attorney Vicki Hart Wilmarth, of Amarillo.
But it’s different in the public arena, she said. Family connections are discouraged by both the state and individual cities through their charters.
“You’re not dealing with profits,” she said. “We hold taxpayer dollars to the highest standards.”
Texas law prohibits a public official from appointing or confirming an appointment of a close relative who would be paid, directly or indirectly, from public funds or fees of office.
“Nepotism involves familial relationships, and different degrees of familial relationships, that are providing a benefit,” says C.B. Barnes, an El Paso area attorney.
In 2011, two El Paso County judges faced criminal indictments after each hired the other’s family member to work in their offices several years ago. One of the judges was acquitted. The other is in federal prison convicted of an unrelated crime.
Dalton Gregory said his daughter informed him when she applied for the job at Stoke last fall. When he learned she was called for a final interview, and that some city staff would sit in on the interview, he asked the city attorney’s office to advise him on both the city charter and state law related to nepotism.
Gregory said he was prepared to step down as a council member, if it was necessary.
“I’m not going to stand in the way of my daughter’s career,” he said.
But it wasn’t necessary, he said.
DEC didn’t ask the City Council to appoint, or confirm the appointment, of Heather Gregory as Stoke’s director. DEC’s contract with City Hall was approved in October 2015. Gregory voted for the contract, but that was long before his daughter entered the picture. The contract gives DEC latitude to operate Stoke as it sees fit.
However, both he and DEC filed conflict disclosure statements. Gregory filed the conflict-of-interest form required of elected officials on Jan. 19. DEC filed the same form on Jan. 24. They filed the conflict-of-interest statements after some people began asking questions about how Heather Gregory got the job.
State rules requires a vendor, like DEC, to file a different form — a conflict disclosure questionnaire — within seven business days of learning of the conflict. The questionnaire asks the vendor to describe and disclose more, including the income paid to or from the government official or family member.
Bowles said he completed the form sent to him by the city attorney’s office.
One of the most important duties elected officials have is the fiduciary duty to taxpayer money, according to Hana Callaghan, professor in the Markkula Center for Applied Ethics at Santa Clara University in California.
Elected officials are sometimes called upon to make sacrifices, she said.
“And that means the public comes before your family sometimes,” Callaghan said.
That duty of impartiality and fairness to all constituents includes the hiring process. So, if a government vendor hires the family member of a government official, there will always be doubt, she said.
“Did they do it to curry favor? Will the person they hired be difficult to manage in the future?” she asked.
PEGGY HEINKEL-WOLFE can be reached at 940-566-6881 and via Twitter at @phwolfeDRC.