Concern Over Newsom’s Shared Office At Founders Den

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Lt. Gov. Gavin Newsom's plan to lease office space from a San Francisco company whose managing partner contributed $12,000 to his statewide campaign raises ethical concerns, government experts say.

The lieutenant governor announced last week that he is not going to open an office in the state building in San Francisco but instead will work from shared office space at a private club in the South of Market district.

Zachary Bogue, a managing partner of the private, invitation-only Founders Den for entrepreneurs, contributed the maximum amount allowed under law to Newsom's primary and general election campaign for lieutenant governor, and he invited Newsom to work in the new office space, according to a spokesman for Newsom.

But some experts in governmental ethics said they have concerns about Newsom's move because the 17 startups in the shared office space could get special access to a top state official, thanks to a campaign donor.

"I think that it raises a red flag and poses some important questions about fairness and how campaign relationships may have an impact on officeholder actions," said Judy Nadler, former mayor of Santa Clara and senior fellow of government ethics at Santa Clara University's Markkula Center for Applied Ethics.

"Being in the environment where the lieutenant governor is there and being part of an incubator that has basically been blessed by the lieutenant governor gives all persons who are involved a real advantage over people who weren't invited to become part of this," she added.

Newsom did not comment on the matter, but his spokesman, Francisco Castillo, said the lieutenant governor wants to focus on economic development and job creation in a real-world setting. The terms of the lease, Castillo added, were the same as those for start-ups.

"He feels that working among these entrepreneurs will redefine how government and business interact," Castillo said. "There's no hidden agenda."

Last week, in a video interview taped at Founders Den and posted on, Newsom said, "It's nice to be here … wearing a governmental hat because a lot of these folks want to move from a space like this into their growth phase, and how do you interact with permitting? How do you interact with tax incentives or government in a general sense, regulatory sense?"

'One-stop shop'

He went on to say, "I've got experience on the receiving end and on the giving end in terms of setting up those regulations. But hopefully I can be a one-stop shop to help some of these businesses as well."

State officials like Newsom actually have to rent space in state office buildings, paying out of their allotted budget. Newsom is keeping the main office in the Capitol, which costs $5,530 per month, according to the Department of General Services.

Newsom terminated a lease on a small space in a state office building in Los Angeles, which cost about $650, and entered into a six-month lease with Founders Den for one desk space and access to the common area, said Eric Lamoureux, spokesman for the Department of General Services. The new lease is $500 per month.

Tom Poser, who represents several shared space operations in San Francisco at the commercial real estate firm Jones Lang LaSalle, said the type of space Newsom is renting typically goes for between $500 and $600.

Founders Den is located at 665 Third St., two blocks from AT&T Park in a hip, up and coming area of the South of Market neighborhood. The former home of the Northern California Print Center originally housed MJB Coffee Co.'s headquarters. The industrial building has been converted into loft office space, featuring large windows.

Founders Den shares the building with at least a dozen other businesses. Its ground-floor office is easy to get to, but an office manager for the building sits at the front. The lieutenant governor's new desk is set among clusters of desks in the office's main work area, upstairs from a "clubhouse" space on the ground floor, an area with a coffee shop-like atmosphere that includes clusters of couches, tables and chairs.

On a recent visit, Newsom's space was empty, except for a power cord and a few of his business cards.

Next desk over

Michael Levit, one of four managing partners who set up Founders Den, works at the desk next to Newsom. He did not contribute to the campaign. Levit has a startup, called Spigot, which "provides publisher and advertiser solutions to downloadable software companies."

Levit said Newsom's wife, Jennifer Siebel Newsom, and his wife attended Stanford University together but that he had only met the former mayor a few times before he became a member of Founders Den. Bogue could not be reached for comment.

Levit said visitors without an appointment would be asked to call Newsom's main office in Sacramento. When a Chronicle reporter and photographer dropped by last week, the office manager was friendly but didn't offer access until she found Levit.

Levit said the space opened six weeks ago. In addition to the startups that rent space – ranging from private offices to the cluster of desks in an open room – sponsors are welcome to use the clubhouse.

No staff

The lieutenant governor will hold meetings there as he will in the Sacramento main office, said Castillo, but there will be no staff there. Newsom looked at other similar hubs for space in San Francisco but chose Founders Den, Castillo said. He said he didn't know why the lieutenant governor made the specific choice.

Doug Heller, executive director of the good government group Consumer Watchdog, said he does not know of another elected official renting space inside a private office – the state does lease space in privately owned buildings – and said Newsom will need to take steps to make sure there is no impropriety with a donor.

He suggested Newsom "recuse himself," by announcing that he wouldn't provide individual assistance to the startups around him.

"It's the job of public officials to make the barriers to influence too high to scale, and so Newsom better put up some pretty big cubicle walls to ensure that it doesn't look like his donor's company is getting special access," Heller said.

E-mail the writers at [email protected] and [email protected].

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