JUDGE: HUD, not Nail, at fault
The Clarion-Ledger, Mississippi
January 26, 2003
By Gregg Mayer
Clarion-Ledger Staff-Writer
Former Metro Manor manager exonerated in court.
A federal judge has ruled that the former manager of the Metro
Manor apartments shouldn’t be faulted for not using his investors’
money to repair the dilapidated complex.
Instead,
U.S. District Court Judge William Barbour said the U.S. Department
of Housing and Development had a responsibility to provide enough
federal funds to operate and repair the 19-building complex as part
of its subsidy agreement.
J. Steve Nail,
president of Intervest Corp., which managed the complex, has been
criticized and fined for the unsafe conditions at the complex. He
said last week he’s been contending for years that the law
was on his side.
“In
Barbour’s opinion now, it makes it very clear,” Nail
said.
Metro Manor,
a west Jackson complex razed last year by the city, was a lightning
rod of controversy in the late 1990s amid reports of rodent infestation
and unsanitary living conditions.
By 2000, HUD
foreclosed on the property, the tenants moved out and the U.S. attorney’s
office filed suit against Nail and owners of other complexes for
mismanagement. Those lawsuits were eventually dismissed when the
federal court ruled HUD shouldn’t have continued to make payments
to the owners when it knew the properties were substandard.
But in August
2000, Nail was fined $1000 in Jackson’s environmental court
for not keeping the property “safe and sanitary.” He
said then he wanted to contest the civil charge but thought it was
best to plead and move on.
HUD also barred
Nail in January 2002 from renewing expiring federal contracts or
entering into new ones with the government for three years. In addition
to Metro Manor, HUD alleged Nail didn’t keep up another property
in Indianola known as Eastover.
Nail sued.
Barbour ruled
Dec.20 the debarment should be over-turned. The judge said HUD used
“unsound legal theory.”
The judge
said HUD’s decision “to debar (Nail) was arbitrary and
capricious, and not in accordance with the law. “ As stated
above, there is an abundance of evidence that Metro Manor and Eastover
properties were in fact in deplorable condition. It may be that
Plaintiffs mismanaged the properties through negligence or otherwise.
However, HUD based the decision to debar Plaintiffs’ failure
to invest private funds.”
HUD officials
did not return messages left on the agency’s answering machine.
Since 1994,
Nail said he made refinancing proposals to HUD to fund improvements.
However, Nail said HUD turned him down. Shortly thereafter, he said,
outside investors were able to refinance the bonds on the complexes
and “sucked all the money out of the complexes.”
Nail plans
to recoup losses for investors from the two properties, which he
estimates to be about $3 million for Metro Manor and $1.5 million
for Eastover. He also wants to recoup management fees.
Despite the
problems in Jackson, Nail was honored by HUD in 1998 for cleaning
up a trouble property in Birmingham, Ala.
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