Housing Firm for Poor Suspended : Rentals: Associated Financial Corp. of Santa Monica is target of broad HUD investigation. The company is being barred from taking over more projects.
In the strongest action yet against one of the largest owners of housing for the poor, Housing and Urban Development officials said Thursday that they have suspended a Santa Monica company from taking over any additional housing projects.
HUD General Counsel Frank Keating said the agency’s inspector general has begun a broad investigation of Associated Financial Corp., which is run by influential Democratic fund-raiser A. Bruce Rozet of Brentwood.
“This matter is ongoing, it is broadening,” Keating said, adding that Housing Secretary Jack Kemp requested the additional investigation. “It would be premature to label the investigation (as criminal or civil). However, the investigation will go however far it must go.”
In a letter to Associated Financial’s management subsidiary, Housing Resources Management, HUD said it has “information indicating irregularities of a serious nature” in the company’s dealings with the agency.
The letter, signed by Assistant Secretary C. Austin Fitts, said “adequate evidence” exists that Housing Resources Management misused funds and made false statements about housing projects it controlled in Oklahoma, Washington, D.C., and New Orleans.
Phillip I. Myers, a spokesman for the firm, charged that HUD’s action is “a clear case of harassment for political reasons.” He added: “Why HUD is doing this is a mystery.”
He said HUD took the action based on minor mistakes involving no more than $35,000. “I want to put that in a context that AFC and its affiliates collect and disburse $70 (million) to $80 million a year in rents.”
Last year, HUD took isolated actions against Associated Financial, suspending it from doing new business in Washington, D.C., and Oklahoma, and moving to foreclose on the deteriorating 300-unit Ujima Village near Los Angeles and the 576-unit Geneva Towers project in San Francisco. The company manages and owns Ujima Village and is a partner in Geneva Towers.
The latest action extends the suspension nationwide, though the firm can continue to operate projects it already controls.
The letter said the suspension will remain in place for at least a year while HUD completes its investigation. Fitts’ letter said HUD may impose even stronger sanctions once the investigation is finished.
One such step, the letter said, could be “debarment,” in which HUD would bar Associated Financial and its owners or executives from doing any business with the government.
If it were to debar the firm, HUD would have to seize as many as 350 agency-subsidized housing projects that Associated Financial owns, has interests in or manages. AFC’s portfolio, which includes 45 projects in California, represents 44,000 apartments for poor people. There are no charges of mismanagement at most of the projects.
Keating, the HUD general counsel, noted that Fitts’ letter outlining the reasons for the suspension contains allegations of problems at the Tulsa and Washington projects that were turned up last summer.
But Keating said additional investigations have resulted in new charges. These include allegations that the firm sent false invoices for repair work at the two projects in Tulsa and misused security deposits at two other projects in Oklahoma and New Orleans. Another charge is that the firm violated regulations by not telling local HUD offices of sanctions the agency had taken against it in the past.
“These various rocks we have turned over, the underside is not a pretty sight, so we have asked for more resources (from the inspector general’s office),” Keating said.
In the 1980s, Rozet, Associated Financial’s chairman and founder, was a significant fund-raiser and adviser to such politicians as Democratic presidential candidate Jesse Jackson and Sen. Alan Cranston (D-Calif.). Rozet testified before congressional committees on housing issues and received appointments to commissions that recommended housing legislation.
