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A California lawyer has been cleared of violating state conflict-of-interest rules after brokering a tax incentive deal between Best Buy Inc. and the city of Dinuba that resulted in him earning over $8 million. The state’s ethics watchdog, the Fair Political Practices Commission, launched an investigation in 2020 following a Bloomberg Tax examination of his role in negotiating the Best Buy deal and similar agreements between several other cities and retailers. The investigation was closed without enforcement action.
The issue was a 2015 agreement that saw Best Buy designate its warehouse in Dinuba as the point of sale for online sales to California customers. As a result, all local sales taxes paid on those purchases went to Dinuba rather than where the buyer lived. Under the agreement, the city gave half the revenue to Best Buy and 10% to the lawyer in question, Robert E. Cendejas.
In a letter released by the commission on December 29, 2022, commission Senior Counsel Bridgette Castillo said there was insufficient evidence to show Cendejas violated state law by negotiating in his interest while representing the city. Cendejas did not negotiate the agreement in a public capacity for the city and “only had an expectation of income after online businesses were recruited to the City of Dinuba, which did not occur,” Castillo said in the letter.
Best Buy opened the warehouse in Dinuba in 2009. The 2015 tax-sharing agreement did not change the company’s operations in the city, but it did change the flow of sales tax revenue from online sales to California customers. Since then, according to data from the California Department of Tax and Fee Administration, Dinuba’s total sales tax revenue has increased from $4.9 million a year to a peak of $30.8 million in 2020. According to city budget documents, most of that increase is due to the tax-sharing agreement.
City-issued checks and other public records show Dinuba has paid Best Buy $37.9 million and Cendejas $8.2 million through the third quarter of 2022—meaning Dinuba has kept around $30 million since 2016. Cendejas’ attorney, Thomas Hiltachk, did not respond immediately to a request for comment.
“Mr. Cendejas has always exhibited the utmost integrity and professionalism in his dealings with the City of Dinuba,” assistant city manager Daniel James said. “We are glad the FPPC investigation is completed, and his reputation has been cleared.”
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In conclusion, the California lawyer involved in the Best Buy tax-sharing deal with the city of Dinuba has been cleared of violating state conflict-of-interest rules by the Fair Political Practices Commission. The deal, which has generated significant controversy, saw Best Buy designate its warehouse in Dinuba as the point of sale for online sales to California customers, resulting in a significant increase in sales tax revenue for the city. Critics argue that the deal has deprived other cities of revenue and that California’s tax system needs more broadly reform to ensure a more equitable distribution of tax revenue.
REFERENCES:
California Watchdog Clears Lawyer at Center of Tax-Sharing Deals
