Federal officials have temporarily banned a Santa Monica-based company from managing or buying additional low-income apartments in the Washington, D.C., area, alleging that the firm misreported and misused funds intended for repairing two rundown projects.
The company, Associated Financial Corp., headed by A. Bruce Rozet, is among the nation's largest private owners and managers of housing for the poor.
In one of the toughest actions it can take, the Department of Housing and Urban Development on Friday barred AFC from taking over any more projects for the next 12 months in the capital or neighboring counties in Maryland and Virginia.
HUD charged that an AFC subsidiary misused funds approved by HUD for repairs at Tyler House Apartments and Sursum Corda Village in Washington, and "falsely certified" that the money was going to the repairs. HUD did not detail where the money went.
HUD's Washington field office alleged that residents at Sursum Corda Village were denied hot water for five weeks because the company failed to repair damaged pipes, and residents were forced to live in some units where raw sewage seeped from upper to lower floors. One HUD official said that conditions at Sursum Corda were "permitted to utterly disintegrate."
Bill Glavin, a HUD spokesman, said the action by HUD, besides barring future management activities, also prevents Rozet and his dozens of companies and limited partnerships from buying further properties in the area for the next year. The action can be appealed.
In a telephone interview, Rozet vowed to appeal, saying, "I think it's part of a plan to shift attention away from the real abuses that went on."
He called the move "clearly a continuation of the harassment of us, in keeping with (HUD Secretary) Jack Kemp's pronouncement that he is going to make it difficult for us to do business."
The company's problems began in June, when Kemp toured one of Associated Financial's most troubled housing projects--the 300-unit Tyler House in Washington--and declared conditions there to be "scandalous."
At the time, Kemp threatened to permanently bar the corporation from doing business with HUD. AFC executives blame the project's sorry state on HUD's refusal to spend the money needed to rehabilitate it. The housing agency since has seized Tyler House.
Rozet, a prominent Brentwood Democrat, is widely considered one of the most influential private voices in Congress on housing for the poor. But his flagship company, AFC of Santa Monica, has suffered a series of setbacks this year, including HUD foreclosures at two drug-plagued, neglected projects in Oklahoma.
In California, HUD is threatening foreclosure at Ujima Village, a run down, heavily indebted project just south of Watts, and it has instituted foreclosure proceedings at troubled Geneva Towers in San Francisco. AFC manages and owns Ujima and is a general partner in the ownership of Geneva Towers.
Last month, the HUD office in San Francisco notified HUD offices nationwide that Louis A. Cicalese, a part owner of Associated Financial, and Richard Tell, an officer in an AFC subsidiary, failed to comply with a 1988 agreement to upgrade Geneva Towers.
In its suspension notice of the two projects in the East, HUD's Washington field office stated that the action of AFC "seriously reflects upon the propriety of further dealings with (the company) . . . and each constitutes cause to deny (the company) participation in HUD programs within the geographic jurisdiction of Washington, D.C."
"I think it is totally unjustified, blatantly misleading," Rozet said, claiming that HUD has refused in recent months to meet with AFC to discuss the issues.
Rozet forms syndicates of buyers for low-income housing and AFC, of which he is chairman, owns or manages 350 properties comprising 44,000 units of HUD-subsidized housing nationwide, including dozens of properties in California.