California Watchdog Clears Lawyer at Center of Tax-Sharing Deals

A California lawyer didn’t violate state conflict-of-interest rules when he brokered a tax incentive deal between Best Buy Inc. and the city of Dinuba that has netted him more than $8 million, the state’s ethics watchdog ruled.

The Fair Political Practices Commission notified Robert E. Cendejas that it closed its investigation without taking enforcement action. The commission launched the probe in 2020 in response to a Bloomberg Tax examination of his role in negotiating the Best Buy deal, as well as similar agreements between several other cities and retailers.

At issue is a 2015 agreement through which Best Buy designates its warehouse in Dinuba as the point of sale for online sales to California customers, meaning that all local sales taxes paid on those purchases go to Dinuba rather than where the buyer lives. The city gives half the revenue to Best Buy and 10% of it to Cendejas.

In a Dec. 29, 2022, letter that the commission released Thursday, commission Senior Counsel Bridgette Castillo said there was insufficient evidence to show Cendejas violated state law by negotiating in his own interest while representing the city.

Cendejas didn’t 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 didn’t 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, 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 data from the California Department of Tax and Fee Administration. Most of that increase is due to the tax-sharing agreement, according to city budget documents.

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 somewhere around $30 million since 2016.

Thomas Hiltachk, an attorney with Bell, McAndrews & Hiltachk LLP who represented Cendejas in the FPPC matter, didn’t 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 that the FPPC investigation is completed, and that his reputation has been cleared.”