The head of an Oregon-based real estate enterprise that’s received more than $70 million in taxpayer funding to house or feed wildfire survivors, asylum seekers and others is one of the state’s largest tax delinquents.
Sean Keys, founder of real estate investment company Fortify Holdings, is delinquent on more than $913,000 in personal state income taxes and nearly $12,000 in transit and withholding taxes, according to the Oregon Department of Revenue. That makes him the 28th largest tax delinquent listed by the state as of Friday.
State officials relied heavily on Keys’ Fortify Holdings beginning in 2021 to provide much-needed shelter options, securing the rights directly and through a community organization for more than 750 rooms and small studios in seven properties under Fortify’s control from Medford to Lincoln City to Portland.
Limited liability companies affiliated with Fortify soon amassed a string of unpaid taxes after striking deals to provide that housing, records show. Until last week, the companies owed $718,000 in unpaid property taxes in Jackson, Lane and Lincoln counties, with some of the debt dating back two years.
The state separately filed a $217,626 lien in March 2023 against Keys that also named Fortify Holdings. That lien was released in November, indicating the debt was partially or fully paid, and the state has not yet filed paperwork to recover the $925,000 in taxes that officials now say Keys owes.
Keys, responding to written questions from The Oregonian/OregonLive, said he’s proud of his work providing housing for the state, and no state employee has raised concerns about his personal income tax delinquency or the previous tax lien or unpaid property taxes linked to Fortify affiliates.
Keys said his personal taxes are “undergoing a thorough amendment process by our tax professional.” He blamed “some current economic challenges” for falling behind on various property tax business obligations.
Keys said it’s common for someone with multiple real-estate holdings to dispute various taxes based on changing market and valuation dynamics. He added that “tax liens are also very common and not out of the ordinary.”
“I regret that I have fallen behind in paying business and personal taxes but understand it is my responsibility to get all taxes paid in full along with any penalties,” Keys said.
Oregon law generally prohibits state agencies from contracting with businesses that are delinquent on their taxes, including property taxes. But there’s no prohibition against doing business with a company whose leadership personally owes back taxes.
Oregon is still covering the costs to house wildfire survivors at four properties in Medford linked to Fortify. Oregon Housing and Community Services is steering its money to a nonprofit that is contracting with Fortify affiliates to house more than 500 people, and the nonprofit still has $8.5 million to spend.
Frankline Muthomi, an assistant professor of public administration at Portland State University, said tax delinquency shouldn’t always prevent government officials from awarding a contract, particularly if an individual or business is unaware of the debt. But repeatedly securing government contracts despite a history of delinquency is different, he said.
“I think at the state level, the state Legislature should consider regulating and finding ways to mitigate that kind of an abuse,” he said.
California may be more aggressive than Oregon. Individuals or companies identified as the largest tax delinquents are ineligible to do business with the state, said Jennifer Iida, a spokesperson with the Department of General Services, although she declined to say if the prohibition would apply to companies whose principals owe personal debt.
State officials have generally declined to discuss tax delinquencies tied to Keys and Fortify affiliates. Rudy Owens, a spokesperson for the Department of Revenue, said the state cannot release information beyond what is included in public records, due to strict confidentiality around tax information under state law.
Spokespersons for the Oregon Department of Human Services and Oregon Housing and Community Services would not say if the state had withheld any money under its contracts with Fortify affiliates or if officials asked ACCESS, the local community organization selected to distribute state money, to stop paying the companies.
Housing spokesperson Delia Hernández did say state officials began reviewing tax issues for Fortify affiliates two months ago after hearing concerns from ACCESS. Gracie Perry, a spokesperson for the Medford nonprofit, said concerns about Fortify Holdings and its affiliates involved the past-due property taxes and reported debts to southern Oregon contractors. Public records show contractors had filed at least $220,955 in liens against the companies.
“OHCS is assessing these issues and is prepared to take any action necessary to protect taxpayer contributions while ensuring the safety and security of the vulnerable families and individuals living in properties owned by Fortify Holdings and its subsidiaries,” Hernández wrote in an email.
The state of Oregon is now paying for a “deeper analysis and risk assessment on Fortify Holdings,” Hernández said, “to ensure they are in compliance with all standards and expectations” for federal and state grants. The review is set for completion by the end of summer.
Separately, The Oregonian/OregonLive identified from public records more than $147,000 in delinquent property taxes at Fortify-affiliated properties in Washington, nearly $2.2 million in construction liens in two Washington counties and a $26,088 lien filed by the city of Kennewick for the cost of boarding up a Fortify-affiliated property that sat vacant and became a nuisance.
Hernández would not say if state officials knew about the Washington debts.
In Oregon, after a month of correspondence with the newsroom, Fortify affiliates last week paid $423,000 in delinquent Jackson County property taxes, records show. Fortify also provided copies of partial wire payments by its affiliates to two contractors and a record showing one lien had been released.
Keys said company officials are “in the process of paying off all other property taxes and outstanding liens to our valued contractors.
“Going forward, I will satisfy my obligations in a more timely manner.”
‘Full force ahead’
State officials did not seek competitive bids when they turned to Fortify Holdings to secure housing for Oregonians displaced by the 2020 Labor Day wildfires.
Keys had founded Fortify two years earlier, the latest venture in a lengthy development career sprinkled with notoriety and political savvy. Over the years, Keys and his companies, including Metropolitan Land Group, have collectively donated at least $258,000 to political candidates and political action committees, according to state records, including two elected leaders who voiced support for Fortify’s work in southern Oregon.
Keys drew headlines in 2006 when the then-36-year-old built a sprawling polo club on 88 acres near Wilsonville. In 2017, OPB reported that the IRS filed a lien on his business for $337,240 Keys owed in federal taxes, and the state filed a lien for $14,553.
More recently, Keys was among those identified in court documents — but never criminally charged nor named as a respondent in any related civil case — in the Iris Capital home-flipping scheme that cost scores of investors their retirement savings and sent one man to prison. Keys was the real estate manager for Iris Capital and, according to court records filed by an attorney for the investment manager convicted in the case, Keys used Iris properties to secure $500,000 in personal loans and later paid an undisclosed settlement in the case.
The judge, expressing displeasure in the outcome, noted during Shayne Kniss’s 2019 sentencing that “the case occurs in a larger context of bigger players paying their way out of this problem while you’re left holding the bag.”
“I cannot speculate what the judge meant by his statement,” Keys told the newsroom.
State officials turned to Keys and Fortify two years later out of convenience and necessity.
Fortify began buying hotels and motels in other states in 2020 and converting them into housing, which Keys said is a cheaper and quicker alternative to building new apartments at a time when the need for affordable housing is high. Fortify has now purchased and renovated 25 properties in Oregon, Washington, California, Idaho, Nevada and Montana, he said.
The state paid seven Fortify affiliates for rooms at seven hotels and an eighth limited liability company for food services. Keys is listed as the manager for each, according to state business registry records.
One of Fortify’s earliest acquisitions in Oregon, the Inn at the Commons in Medford, was already providing housing to wildfire victims when the company bought it. State emergency management officials met with Fortify in 2021 “to propose leaving survivors in the rooms while the property was converted in phases,” Jake Sunderland, a spokesperson for the Department of Human Services, said in an email.
Fortify soon offered state officials more rooms at two properties Fortify planned to buy, records show. State officials were receptive.
In early March 2021, Micah T. Goettl, a regional emergency coordinator for the Department of Human Services, asked if he could list Fortify’s expanding supply of motel and hotel rooms as a good option for sheltering more wildfire survivors in a presentation to then-Gov. Kate Brown’s administration.
“Share away … after you gave us the green light for a year commitment to start on both sites at our meeting….we went full force ahead to close the Ramada (174 units) and both Lincoln City Properties (100 in total – next door to each other) in March and will have them ready for you for an April 1 delivery,” Keys wrote back.
That same month, the state performed a cursory review of the company and key players, searching for any civil and criminal cases involving Metropolitan Land Group, Fortify Holdings and the various affiliates. The Department of Human Services wanted to “conduct some extra due diligence” and asked for the Department of Justice’s help, records show.
The search turned up only an unrelated bankruptcy case for a company in Illinois. Records show the paralegal conducted civil and criminal checks for Metropolitan Land Group’s president, John O’Neil, and the company’s chief financial officer, Barry Boley.
Spokespeople for the Department of Human Services and Department of Justice declined to explain why the background check omitted Keys. Lisa Morawski, the human services communications director, said the agency went above and beyond by conducting any due diligence on the company, given those types of checks are “not part of the usual contracting process.”
Margaret Van Vliet, a former director of Oregon Housing and Community Services, who analyzed Foritfy’s 2021 proposals as a consultant for the state, said she suggested the state scrutinize the company. “I recall suggesting that more due diligence be done by DHS or somebody on Fortify as an entity,” Van Vliet said.
Later in March 2021, Fortify’s president, Ziad Elsahili, pushed state officials to sign a long-term agreement to lease Fortify’s small studio apartments, converted from hotel rooms, at a monthly rate of $2,000 apiece. Elsahili told state officials the company needed a state spending commitment to show to their lender – whom Fortify would not identify in emails – in order to close a deal to purchase the former Ramada hotel in Medford.
Elsahili included the registered lobbyist for Metropolitan Land Group on those email exchanges, records show. Metropolitan Land Group reported spending $13,000 on lobbying that year but it’s not clear what the company wanted to influence because Oregon doesn’t require specific disclosures.
Some local politicians welcomed Fortify to southern Oregon with open arms.
Medford Mayor Randy Sparacino wrote a letter of support to Fortify in January 2021, telling Fortify’s president that city leadership was “excited” about the hotel conversions and “our staff is committed to assisting you … through the City permitting and potential land-use approvals.”
In November 2022, Fortify made a $10,000 campaign contribution to Sparacino, who was running as a Republican for state Senate District 3. “Donations to my campaigns have no role in my decision-making,” Sparacino told the newsroom, adding that Fortify’s contribution did not influence his decision to write the 2021 letter.
Rep. Pam Marsh, D-Ashland, sent at least one email, in March 2021, suggesting the state focus on securing rooms at Fortify’s Ramada site for wildfire survivors after a different location fell through. In July 2022, Fortify made a $1,000 donation to Marsh’s political campaign.
Asked about the contribution, Marsh told The Oregonian/OregonLive her interest in the state leasing rooms from Fortify was motivated by the dire need for housing in her community, where more than 2,500 homes were destroyed by wildfire.
“It is important to remember how desperate the community was,” Marsh said. “So those Fortity properties were really embraced as the option that we had for people.”
‘Little negotiating power’
Some state officials have expressed concern about the rental rates charged by Fortify’s affiliates.
Van Vliet, the former director of Oregon Housing and Community Services, wrote in a March 30, 2021, email that Fortify wasn’t providing adequate financial information when seeking leasing commitments from the state, and she noted that Fortify had included a lobbyist in the discussion.
A few days later, Van Vliet in her role as a consultant told agency leaders in an email that the proposed rents Fortify wanted “are far above market and would require State subsidy of some form.”
Van Vliet told The Oregonian/OregonLive that she recalled telling state employees she was uncomfortable with the long-term commitments they were contemplating with Fortify Holdings and she recommended against proceeding. Hernández did not directly respond to newsroom questions about Van Vliet’s concerns.
Oregon Housing and Community Services ultimately authorized monthly room rates of $1,500, to be paid by the nonprofit ACCESS, Hernández said.
Separately, the Department of Human Services paid Fortify’s affiliates a nightly rate for rooms, ranging from $116 to $134, and also negotiated a monthly converted studio apartment lease for $1,500 to $1,750 in various purchase orders, with different prices depending upon the hotel location and time.
The rates it paid were in line with federally established reimbursement rates, following the agency’s standard practice, said Sunderland, the spokesperson.
“Fortify never received a rate higher than” the federal rate, plus taxes, he said.
The Department of Human Services has since changed its shelter contract process. The agency last year established an open solicitation process and expects to secure rooms in 10 hotels across the state, with rates generally at or above federal reimbursement levels, officials said.
State officials turned to Fortify again in fall 2022 to solve a different housing challenge in Portland.
Officials at the Department of Human Services scrambled to quietly find shelter for asylum seekers and, again, without seeking competitive bids, secured 125 rooms at a hotel near the Portland International Airport owned by a Fortify affiliate.
For the first five months, the state paid Fortify’s affiliate a room rate of $176 per night before reducing it slightly, to $165.
After the state ended its funding last year, the Portland Refugee Support Group struck a deal with the company to keep renting rooms.
The cost: just $55 per night, records show.
“The arrangement with Fortify comes at a significant cost for PRSG, but is drastically lower than the State’s previous contract,” Peter Newbegin, executive director for the nonprofit, wrote in a December 2023 email to a state official.
Sunderland said the agency had “no comment on the contracts that other entities might have had with Fortify.”
But in a separate email exchange, Department of Human Services Director Fariborz Pakseresht said state officials would need to be able to explain to lawmakers why the state paid three times more per room than the nonprofit.
Max Seiler, finance and procurement chief for the Department of Human Services, defended the rate by saying that, at the time, “it was a politically complex topic that wasn’t being openly talked about.” He added that sheltering for $55 per night “never presented itself as a possibility.”
“We were approaching as the state wanting to shelter a mysterious group of asylees,” he wrote in an Dec. 21, 2023, email to Edwin Flick, director of the agency’s Office of Resilience and Emergency Management, and Liesl Wendt, the agency’s deputy director, who had also questioned the “backstory” in the “huge” difference in pay.
“There was little negotiating power and reason for anybody to accept less than the rates they would typically get through the federally-recognized per diem rate,” Seiler wrote. “Fortify was the only option we could find willing to shelter this population together … for an indeterminate amount of time.”
In all, Fortify’s affiliates have collected $54.5 million from the Department of Human Services and Oregon Housing and Community Services. The money has been spent to house wildfire survivors, unhoused people needing a place to recover from COVID, patients discharged from hospitals without a place to go and people in wildfire-burned areas who lacked stable housing before the blazes. Fortify affiliates separately collected $16.5 million from the Department of Human Services to house and feed asylum seekers.
Oregonians can learn about Keys’ tax delinquency only because of a 2019 law that requires the revenue department to publish the names of individuals and businesses who owe more than $50,000 in unpaid taxes, penalties and interest to the state. The state began disclosing the names last July, when Keys was listed as owing $224,470.
As of Friday, the state had not recorded a tax lien against Keys in Multnomah County for his $925,000 tax delinquency. But the agency issues distraint warrants for all delinquent balances, authorizing the state to take action to collect debt, such as by garnishing wages or seizing assets, without needing to record a lien with the county clerk, said Owens, the Department of Revenue spokesperson.
The state generally records liens with county clerks only if a taxpayer is not working with the state and after a 60-day appeal period on the tax assessment has passed, he added.
Over the last 17 years, the IRS and state of Oregon have recorded around a dozen liens against Keys ranging from $366 to $337,240, according to a public records summary from Lexis Nexis. Keys appears to have reached resolutions on all of those tax debts, because the tax agencies removed the liens.
“What is important is that all my past taxes have been paid,” Keys said, “and any that are currently under review will be paid in full.”
Hillary Borrud is an investigative reporter. Reach her at 503-294 4034 or hborrud@oregonian.com.
Yesenia Amaro is an investigative reporter with a focus on social issues and communities of color. Reach her at 503-221-4395; yamaro@oregonian.com.
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