THE VIRGINIAN-PILOT
Copyright (c) 1996, Landmark Communications, Inc.
DATE: Tuesday, January 23, 1996 TAG: 9601230245
SECTION: LOCAL PAGE: B1 EDITION: FINAL
SOURCE: BY TONI WHITT, STAFF WRITER
DATELINE: NORFOLK LENGTH: Medium: 72 lines
Former developer Michael T. Wise, a central figure in a scandal that has left the Suffolk Housing and Redevelopment Authority facing state and federal repayment demands, pleaded guilty in federal court Monday to bank fraud on an authority-funded, low-income Suffolk apartment project.
According to papers filed in U.S. District Court, Wise admitted diverting nearly $31,500 in loans from Cenit Bank on the project, for which he also received a $90,000 rental rehabilitation grant from the authority.
Wise admitted inflating prices and not paying or underpaying subcontractors for work on the Rawls Apartment Project on Main Street in Suffolk. He also certified work that was never done.
At the time, Wise and the authority's then-executive director, V. Janette Rountree, said they had a ``social relationship.''
Wise, 47, declared bankruptcy after he exhausted the $90,000 grant and more than $232,000 in bank loans that had been designated for the project.
He is scheduled to be sentenced on April 19 and faces a maximum penalty of 30 years in prison and a $1 million fine.
He also may be ordered to repay Cenit Bank.
In 1992, The Virginian-Pilot detailed mismanagement in the Suffolk rental rehabilitation grant program, including problems with the Rawls Apartment project at 318 N. Main St.
The investigation showed that the authority gave grants designated for low-income housing to developers who used them to build luxury apartments. Some projects were not inspected, and at least one row of homes later had to be demolished because they did not meet minimum standards.
State and federal officials looked into the situation, and when they concluded there was mismanagement of the grants, Rountree resigned.
Officials with the Department of Housing and Urban Development want Wise to be forced to pay restitution for more than half of the federal grant money he received on the apartment project, according to letters between HUD and the Virginia Housing Development Authority obtained by the newspaper.
But the plea will not permit the court to order restitution on the grants, because Wise only admitted to defrauding the bank, not the authority, state or federal government, one of the Justice Department's lawyers said.
HUD has estimated that more than $50,000 of the $90,000 grant Wise received for the apartments was misused. Robert Jennings, a financial analyst with HUD, said his agency was waiting for Wise's case to clear federal court before decisions were made about seeking repayment of the misused money.
HUD is demanding restitution of other authority grants. It is requiring that Virginia return $157,000 in misused Suffolk rental rehabilitation money. The state has therefore told the authority to return those funds so it can repay the federal government.
The amount can be reduced to $142,137 if Suffolk applies for a hardship exemption, state and HUD officials said.
As of Monday evening, the authority had not repaid any of the money, HUD and state officials said. It was unclear whether the authority had applied for the exemption.
Neither Leroy Bennet, the chairman of the Suffolk Housing Authority, nor Myles E. Standish, the city manager could be reached for comment Monday.
In December, Standish wrote a letter to the state housing authority that said the city was trying to decide ``how to proceed with the request for repayment of funds.'' Federal officials had asked the state to finalize repayment plans by January 5. ILLUSTRATION: Photo
Michael T. Wise admitted to diverting thousands in loans. He
declared bankrupcy after exhausting the loans and grant money.
KEYWORDS: FRAUD SUFFOLK HOUSING AND REDEVELOPMENT AUTHORITY by CNB