Housing developers used city-backed property as ‘personal bank account,’ lawsuit alleges
Accusing a prominent affordable housing developer of using a city-financed property “as a personal bank account,” Los Angeles City Atty. Mike Feuer on Wednesday sued the company and several others, alleging they misappropriated millions of dollars of public money.
The lawsuit stems from a $2.3-million loan issued by the city in 1999 to finance the acquisition and development of Richard N. Hogan Manor, a 51-unit housing project at 5500-5528 S. Figueroa St. The money was distributed through the city’s Affordable Housing Trust Fund program, according to the lawsuit.
The city, in the filing in Los Angeles County Superior Court, accuses Figueroa Economical Housing Development Corp. and several other companies and individuals of a fraud, deceit and a breach of contract, among other complaints.
The companies, according to the lawsuit, refinanced the property without the city’s knowledge to get more money and then wrongfully conveyed the deed of trust to another company. The lawsuit alleges that they “treated Richard Hogan Manor as a personal bank account” and that the transactions were “devised to misappropriate money for other uses.”
Feuer’s office declined to comment on the filing.
Kendall Walker, identified in the complaint as the chief executive of Figueroa Economical, told The Times on Thursday that he was unaware of the lawsuit. He did not respond to several follow-up emails and phone calls.
Figueroa Economical is a well-known developer of subsidized housing in Los Angeles. It has secured commitments of $43 million from the Proposition HHH homeless housing bond to work on five projects to create 326 units of housing.
The lawsuit over the Hogan Manor project describes a complicated series of loans and title changes that it alleges were intended to illegally remove the city from the project.
In accordance with the terms of the 40-year loan agreement Figueroa Economical made with the city, the developer loaned money to a company named RCC Credit that, in turn, loaned it to Richard N. Hogan Manor LP, a partner of Figueroa Economical.
But then things went off track, the lawsuit alleges.
In 2017, according to the suit, Vivian Lum, an attorney with Lum Law Offices, which is a limited partner of Hogan Manor, purported to assign RCC Credit’s interest in the partnership deed of trust to another company, the Evergreen Advantage LLC.
Then in 2018, Hogan Manor secured a $7.2-million loan against the property from yet another company, PS Funding, the lawsuit alleges. The city alleges that Evergreen Advantage received $4.4 million in the proceeds from that loan, which should have been paid to the city, according to the lawsuit.
Later, Hogan Manor defaulted on the $7.2-million loan, according to the lawsuit, but the city was unaware of the refinancing effort until it received a notice of the default.
The city accuses Figueroa Economical and the other companies of breaching their duties under the city loan agreement and wrongfully assigning the partnership deed of trust without the city’s consent or notice, causing “unjust enrichment and misuse of government funds,” among other things.
It also accuses the companies of submitting a false financial report to the city. According to the lawsuit, they owe the city $4.46 million on the loan.
Lum didn’t immediately respond to a request for comment. Evergreen Advantage also did not respond to a call from The Times.
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