Friday, February 11, 2000

Housing group made deals with insiders, relatives




BY ROBERT ANGLEN and MARK CURNUTTE
The Cincinnati Enquirer

        A West End development group has used a taxpayer-funded program to write checks to its board members, hire family members and repair relatives' homes.

WHO GOT WHAT?
  General ledgers obtained by The Cincinnati Enquirer show Genesis Redevelopment Inc., wrote these checks in 1998 to board members, their relatives and the executive director totaling about $12,000.
  Genesis has refused to release any financial records and its members have refused to respond to repeated interview requests.
  • Board member Henderson Kirkland's son, Mark Kirkland, was paid $5,500 for landscaping and painting.
  • Board member Jackie Shropshire was paid $4,937 to act as “construction supervisor” at a Genesis project.
  • Executive Director Ty Gilbert-Sha bazz was paid $1,112 in addition to his salary for “reimbursements” on two Genesis projects. He said these were for “out-of-pocket” expenses such as tools and supplies.
  • Board Vice President Gloria Hemmingway was paid $405 for “reimbursed expenses” and “real estate options.”
  • Ms. Hemmingway's son, Art, was paid $303 for unstated repairs to a house Genesis sold him in 1997.
  • Howard Beatty, brother of board president George Beatty, was paid $64 for “labor.”
  • Mr. Kirkland was paid $14 for unstated reimbursements.
        The nonprofit Genesis Redevelopment Inc. has been given two homes by the U.S. Department of Housing and Urban Develop ment that were sold to the son of a board member and the ex-wife of another.

        And Genesis general ledgers for 1998 obtained by The Cincinnati Enquirer show that board members, their relatives and the executive director were paid more than $12,000.

        Genesis, established in 1986, has refused to release any financial records, but the 1998 ledgers show 40 checks were issued for unspecified reimbursements, landscaping, painting, labor and to supervise construction on projects paid for with federal grants.

        This happened without the knowledge of government officials who are supposed to monitor Genesis. Some of those officials now say some board members may have violated the law.

        “If a board member hired (family members), then that board member is criminally liable, as I understand it,” said Dean Watkins, a supervisor in the city's department of neighborhood services, which oversees Genesis and other neighborhood development groups.

        Although the city has given more than $800,000 in federal grants to Genesis since 1991, officials said they were unaware of the insider payments until contacted by the Enquirer and have no way to track who received money and other benefits out of Genesis accounts.

        Despite Genesis' history of financial problems and a spotty development record — remodeling its own offices, making minor repairs to 11 homes and building only one home while promising 130 units of new housing — the city does not require Genesis to submit copies of checks or lists of project employees.

        “There are definitely ethical issues we have to look at,” Mr. Watkins said.

        While the grant money comes from HUD, officials there say it is up to the city's department of neighborhood services to distrib ute it and make sure it is not misspent.

        “We don't want to be Big Brother,” said Deborah C. Holston, senior community builder for the Cincinnati HUD office. “We look to the local organization to manage the program in an appropriate manner.”

        City contracts with Genesis prohibit conflicts of interest, but city officials say they have no way of tracking payments to board members and their families on Genesis accounts.

        Neighborhood services staff could not provide a list of the 14-member Genesis board and also could not provide copies of individual checks written on Genesis accounts.

        “We never get to that level of detail,” Mr. Watkins said. “That would be a large volume of paper.”

        The former and current executive directors of Genesis confirmed that board members and their families received checks and other benefits, but say they had no control over it.

        “Certain things (board members) wanted me to do were kind of shady,” said former Executive Director Ty Gilbert-Shabazz, adding he was told to ignore bid processes and look the other way when it came to hiring relatives.

        “I didn't say anything because I didn't want to hurt Genesis,” he said.

        Hired in 1994, Mr. Shabazz was asked by the board to resign in November for mismanagement and mishandling of Genesis operations. But Mr. Shabazz said he lost his job because he objected to what he considered to be unethical practices by the board.

        Current President George Beatty and other board members refused to comment.

        “I have heard rumors, seen reports and I have seen copies of the checks,” said Dale Mallory, who was hired as executive director in December. “I do not think it (hiring family members) is a good process.”

        But it is the board's call, he said.

        “I would love to see everybody responsible come forward and clear this thing up,” Mr. Mallory said.

        In a phone interview last week, board Vice President Gloria Hemmingway said that payments to board members' families and repair work done to her own home called into question how Genesis has spent its money.

        “It is strange,” she said, adding the public would probably not forgive perceived abuses.

        In 1995, Ms. Hemmingway's residence was repaired under a Genesis program, which repainted and fixed the fronts of some West End homes. Although the home at 935 Dayton St. is owned by Ms. Hemmingway's grandparents, who live at another Cincinnati address, city directories show it as Ms. Hemmingway's residence. She also reported it as as her residence on a 1999 Genesis board meeting sign-in sheet and on federal income tax returns.

        Ms. Hemmingway said her grandmother called Genesis without any prompting. Although she was living in the house, Ms. Hemmingway said she didn't consider it a conflict of interest to have the house repaired.

        “I didn't think it was a problem,” she said.

        She also saw no problem with directing her son to buy a house from Genesis that HUD gave to the board in 1996. However, Ms. Hemmingway acknowledged telling her son about the home and putting him in touch with the Genesis executive director, who “hooked him up with a bank.”

        Hamilton County auditor's records show that in 1997, Arthur Hemmingway bought a house at 468 Dayton St., for $65,000. A year before, HUD had sold the home to Genesis for $0, auditor's records show.

        Mr. Shabazz said another HUD house, given to Genesis in 1995, went to the ex-wife of board member Henderson Kirkland. According to the auditor, Elsie Harrison bought the house at 454 Dayton St., from Genesis in May 1996 for $55,000.

        Because of Genesis' refusals to comment or release any information, it is unknown what was done with the proceeds of the house sales.

        The two houses were foreclosed HUD properties, said Lana Vacha, director of Community Planning and Development for HUD in Columbus. She said HUD normally charges groups such as Genesis about 50 percent of market value, which in some cases is very little money and could explain the zero purchase price.

        “We don't give property away,” she said. “It just might seem like it.”

        She also said that the property comes “with no strings attached,” so Genesis could do anything it wanted with the property — including selling it to board relatives.

        What board members can't do is hire relatives without going out for a public bid, said Ms. Vacha.

        What was more likely to happen at Genesis, Mr. Shabazz said, is that board members would hire family and friends without ever seeking a bid.

        “You see the same names come up over and over again. ... Those are the ones who would be preferred contractors,” Mr. Shabazz said. He also said board members made decisions to hire relatives instead of seeking bids from professional contractors.

        “So what?” Jackie Shropshire said when asked about checks he received before becoming a board member. “What about it?”

        A boxing trainer who runs the Queen City Boxing Club, Mr. Shropshire was paid $4,937 from Genesis accounts in 1998 to act as “construction supervisor” at 428 Clark St. — the only house Genesis built in 10 years of development.

        Refusing all other comment, Mr. Shropshire referred questions to Mr. Shabazz, saying, “He was the one in charge.”

        Mr. Shabazz said he had no input on hiring Mr. Shropshire. He said Mr. Shropshire has no professional construction experience, but was paid to oversee work being done by the general contractor on the Clark Street house. He said Mr. Shropshire was first hired then put on the board because he was friends with individual board members.

        “He was a friend of all of ours,” Ms. Hemmingway said. “We all knew him.”

        Although Ms. Hemmingway agreed to be interviewed, she said other board members, including board president Mr. Beatty and board member Mr. Kirkland, instructed her not to talk.

        Mr. Beatty has also refused to respond to requests from the Enquirer for copies of Genesis financial records.

        As a nonprofit agency supported by public funds, Genesis is required by law to make its records open to the public.

        Mr. Mallory said Genesis records are a "mess” and only board Treasurer Sidney Cooper has access to all of the accounts and checkbooks.

        Mr. Cooper did not return repeated phone calls.

        The 1998 ledgers show 40 payments ranging from $14 to $1,567 went to the executive director, board members and their relatives, mostly for work on Clark Street. Another $950 was spent at a hamburger and rib restaurant for a “grand opening” at Clark Street.

        One of 40 neighborhood development corporations in the city, Genesis was set up in 1986 to use federal grants to attract private investors and create housing.

        Neighborhood services documents show more than a third of the money given to Genesis — $334,000 — has been used for salaries, rent, utilities and equipment.

        In 1995, an auditor hired by Genesis to review accounts for 1993 and 1994 said “missing receipt and disbursement documents, unauthorized signatures on checks and disbursements made without written documentation of the board” left her unable to certify the audit as complete.

        The auditor questioned unidentified check disbursements totaling $11,862, unsupported cash disbursements of $2,542 and $8,022 in long-distance telephone charges. Another $98 charged to the federal grants went to a 1-900 psychic hot line.

        To receive HUD grant money, Genesis is required to pay for annual audits that are reviewed by the city. Although several safeguards were established following the 1995 audit, Cincinnati Internal Auditor Greg Hanfbauer said he isn't surprised the checks to board members were not discovered in annual reviews.

        “An auditor is not going to find everything,” he said. “The things we looked at would not have detected performance issues.”

        Auditors focus on bookkeeping methods and internal controls rather than individual receipts and canceled checks.

        Staff in neighborhood services, which was last audited by HUD in 1993, said money was distributed on a voucher system, which requires Genesis to show how funds are spent but does not say who received payments. Genesis might report it spent money on painting, but the voucher would not show if a board member's relative did the work.

        Neighborhood Services Director Cheryl Meadows said hiring relatives of board members “certainly raises a red flag.” But she cautioned there is no way for the city to know if Genesis used the federal money to hire relatives or if they were paid out of some private pool of money the city does not control.

        She said banks and other private institutions might have contributed to Genesis, and that money would not fall under the federal grant requirements.

        Cincinnati Councilman Phil Heimlich called it “a shell game” and said city officials have been willing participants by continuing to give Genesis money year after year.

        “Obviously there has been no oversight, no accountability,” said Mr. Heimlich, who raised questions about Genesis financial and development history during budget hearings two months ago. “It's like they're putting the money from the city in one pocket and then paying their relatives out of the other pocket.”

        While Genesis' 1998 federal tax returns were unavailable from the Internal Revenue Service, its 1996 and 1997 filings show that nearly all of its income came from public support.

        Tax forms required of all nonprofit agencies show that 100 percent of Genesis funding from 1992 to 1995 came from government grants. Adding a year's worth of income in 1997 filings dropped that percentage to 99.9.

        “This nonprofit corporation was set up under the law to meet the needs of the people in the West End, specifically to provide decent housing,” Mr. Heimlich said. “It was not set up to funnel money to people on the board and their relatives.”

Genesis established to give West End residents a voice



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