THE VIRGINIAN-PILOT
Copyright (c) 1994, Landmark Communications, Inc.
DATE: Friday, November 4, 1994 TAG: 9411040744
SECTION: LOCAL PAGE: B1 EDITION: FINAL
SOURCE: BY TONY WHARTON AND TONI WHITT, STAFF WRITERS
DATELINE: CHESAPEAKE LENGTH: Long : 126 lines
State and federal prosecutors were asked Thursday to investigate whether housing authority land in Campostella Square was illegally converted to private property.
City Council members are asking for a probe into the 1991 sale of $715,000 worth of land in Campostella Square for the Campostella Commons housing project, according to letters sent by Councilman Robert T. Nance Jr.
An investigator from the U.S. Department of Housing and Urban Development visited Chesapeake this week, and he and city staffers ``uncovered what appears to be serious and alarming facts and circumstances relating to the Campostella Commons project,'' Nance wrote in asking for the probes.
``I request your assistance in determining if a misuse of public funds has occurred,'' Nance said in letters to the U.S. attorney, commonwealth's attorney and state attorney general, ``and if such has happened, to fully prosecute any person or persons who are involved.''
The HUD investigation focuses on two main issues: whether the housing authority has lost claim to $715,000 in property at Campostella Square in a complicated land transfer and mortgage agreement; and how the price of that property rose by $60,000.
``I'm concerned that the taxpayers are ultimately going to have to pay for this,'' said Nance, one of the council's liaisons to the Chesapeake Redevelopment and Housing Authority. ``We need to have the proper authorities investigate it.''
Nance and Vice Mayor Arthur L. Dwyer expressed their desire for an investigation.
``There are all the indications that there is something wrong there,'' Dwyer said. ``And I feel relieved that it is being passed on to the proper authority.''
Nance's letters went to Virginia Attorney General James S. Gilmore, Chesapeake Commonwealth's Attorney David L. Williams and Helen F. Fahey, U.S. attorney for the Eastern District of Virginia. The housing authority receives state and federal funds, potentially putting it under the jurisdiction of all three.
The City Council last year removed the entire board of commissioners of the housing authority for misconduct and appointed new members. Dwyer and Nance emphasized that the investigations they are calling for involve only the activities of the previous board and administration of the authority, not the current one.
Dwyer said he had been convinced during the council's inquiry into the authority last year that there was more to investigate.
Jay Poole, the city's internal auditor, met this week with Steve McCool, an investigator for HUD.
``I'd like to applaud the staff for their diligence in reviewing this matter and bringing it forward,'' Dwyer said. ``We all felt there was something else we could not get to. Mr. Poole and the staff have started to get to the root of the problem, which are some very questionable practices.''
The dispute over the $60,000 price increase has been addressed before. In January, City Manager James W. Rein asked the housing authority to explain how it spent an additional $5,000 per acre for 12 acres purchased in Campostella Square.
A contract for the land set the price at $60,000 an acre, but the authority spent $65,000. Authority officials have said the extra money covered maintenance, liability insurance and the cost of employees working on Campostella Square.
HUD officials were not satisfied, however, and McCool came to Chesapeake to resolve the agency's questions about the deal. But City Attorney Ronald S. Hallman said that what McCool found raised more questions.
``He originally came down to look at the $60,000,'' Hallman said. ``He also was looking at the entire Campostella Commons project, the way the whole thing is structured.''
The housing authority bought the land in Campostella Square and deeded it in November 1991 to Chesapeake Housing Corp., which was once a subsidiary of the authority.
Chesapeake Housing Corp., a non-profit agency, was formed to qualify for tax credits not available to the authority and thereby lower the cost of the project. In November 1991, CHC joined a group called Campostella Commons Limited Partnership with John Sower of Development Finance Corp. in Washington, D.C., to finance, build and run a low-income apartment complex called Campostella Commons.
According to state records, Sower withdrew from the partnership in May 1993, and two new partners came in: the Boston Capital Corporate Tax Credit Fund and BCCC Inc., both of Boston, Mass.
Edmund Carrera, executive director of the housing authority since this spring, said Boston Capital is an agency that finds investors and funds for tax credit projects.
The housing authority deeded the land to the Chesapeake Housing Corp. with a condition that if the land was not developed by Dec. 31, 1992, it would revert to the authority.
Amy Lassiter, the programs administrator for the housing authority, also said a portion of the property was supposed to return automatically to the housing authority 15 years after development was completed. Hallman said he was not aware of that provision.
The project was not begun in time, and the land did go back to the housing authority. Court records indicate that in February 1993, the authority entered into a new agreement with CHC giving it the property once again.
Carrera and Lassiter said the corporation, in turn, rewrote its financial agreement with the Campostella Commons, Limited Partnership.
They said the special conditions were not included in that second financial agreement.
It no longer provides that once the development is completed and financing has been repaid, a portion of the land will return to the housing authority, they said.
The omission has federal and local officials concerned that the authority may no longer have its future rights to the property. The developers have built the apartments and the authority manages them and collects the rents for Campostella Commons, L.P., Carrera said.
``There are questions on whether those documents were prepared correctly,'' Carrera said. ``And whether it (the agreement) is coming to pass in the order it's supposed to be coming to pass. There's a bunch of people looking at this and they want to know the whys and wherefores and whether this is legitimate.''
Carl G. Newbern, president of the Chesapeake Housing Corp., said Thursday that the corporation never intended to take away the authority's rights to Campostella Commons.
``When it (CHC) was put together, it was not to the detriment of the housing authority; it was created to help the housing authority,'' Newbern said. ``You'd have some council members say otherwise. During the hearings they made it clear how they felt.''
Newbern, who was a member of the housing authority board that was removed by the council last year, said he can't remember the details of the transactions involving Campostella Commons because ``it's been so long,'' and because attorneys put the deals together. by CNB