Landlord may sue prosecutor
The Clarion-Ledger, Mississippi
February 13, 2000
By Arnold Lindsay
Clarion-Ledger Staff Writer
U.S. attorney's suit against apartment owner was thrown
out
Federal
housing officials knew as early as 1993 about rundown, substandard
living conditions at a Jackson apartment complex but continued to
subsidize it, records show.
No effort
was made to stop funding or force improvement until U.S. Attorney
Brad Pigott filed a lawsuit five years later against the property
owner on behalf of the U.S. Department of Housing and Urban Development.
But that lawsuit
failed when a federal judge found HUD continued to subsidize Metro
Manor Apartments knowing the conditions that existed. Now the owner,
Steve Nail, is contemplating his own lawsuit against Pigott for
malicious prosecution.
"The
case is over and we won. ... it is obvious that this was a malicious
lawsuit filed by one of the biggest threats to our nation today
- an extortionist with a badge," Nail said.
Pigott would
not respond to Nail's assessment.
Because of
possible litigation, Pat Hoban Moore, HUD's senior community builder/state
coordinator, would not comment on Nail's case. She had earlier said
HUD was technically not responsible for allowing the complex to
slip through the cracks because HUD works through local housing
authorities.
But Hickman
Johnson, executive director of the Jackson Housing Authority, said
the inspection findings were always passed on to HUD, which decides
whether to continue funding the properties.
And the inspection
reports of Metro Manor in 1995 alone, done by employees of local
housing authorities and independent contractors, outlined potentially
hazardous conditions that existed at the complex on Jackson West
Boulevard.
While he did
not address the Jackson cases directly, Ferdinand Juluke, director
of HUD's Jacksonville Multi-Family Hub of Florida, Mississippi and
Alabama, acknowledge HUD decides when to cut off funding.
HUD normally
moves quickly to correct problems pointed out in reports by forcing
property managers to make repairs or stopping the payment of HUD
funds if they do not, Juluke said.
Pigott had
sued Nail and, in a second lawsuit, W. Thad McLaurin, Charles C.
Taylor Jr. and Arthur W. Doty, former owners of Jackson Apartments,
in 1998 under the False Claims Act, a civil statute that allows
prosecutors to seek repayment of federal housing funds obtained
by submitting false reports.
The act calls
for landlords to provide "safe, decent and sanitary" living
conditions for tenants in HUD's Section 8 housing program.
Pigott lost
both suits.
In dismissing
the $2.78 million lawsuit against McLaurin, Taylor and Doty on Jan.
28, U.S. District Judge Tom Lee said, since HUD knew of the problems
and corresponded with the defendants, there could be no reasonable
finding the owners knowingly made a false statement or claim to
HUD.
U.S. District
Judge William H. Barbour Jr. had to come to the same conclusion
in August in dismissing the government's $9.8 million lawsuit against
Nail.
Pigott said
he expects an appeal of the Jackson Apartments dismissal to be filed.
But an appeal of the Metro Manor case was withdrawn Jan. 18, at
the discretion of Department of Justice attorneys.
Nail's attorney,
Grey Lewis of Washington, surmised the Nail appeal was dismissed
because it had no merit.
Lewis also
has hinted at a possible lawsuit against Pigott for what he claims
was malicious prosecution and character damage for making Nail appear
a negligent landlord and a "criminal."
Pigott said
the Nail appeal was withdrawn "for a variety of complex reasons,"
on which he would not elaborate. Justice Department attorneys also
would not discuss their reasons.
The inspection
reports of Metro Manor Apartments listed as a danger to the health
and safety of residents: exposed wiring on a laundry room heater,
live roaches and an unorganized maintenance shop.
The reports
also allege employees of Intervest Corp., owner of Metro Manor Apartments,
intimidated tenants with evictions when they complained about repairs
that management ignored.
A report by
Jackson Housing Authority inspector B.J. Walker on June 21, 1994,
on Metro Manor states: "The living conditions on the property
are unacceptable and do not meet minimum basic standards required
by HUD.
"The
physical conditions on site endanger the health and safety of the
residents... nine of the 21 units inspected (43%) had evidence of
roach infestation or several live roaches were observed. Three of
these nine occupied units were reported on the last HUD inspection
11 months ago. The conditions are still unacceptable. This is a
health and safety matter."
In another
report, Jackson Housing Authority inspector Brenda Mason on July
19, 1995, rated the Metro Manor below average.
"Laundry
- exposed wire on heater, this has been on previous reviews, counter
top damaged, wall needs repair and painting. Maintenance shop unorganized,
safety hazards for employees. ... This office continuously receives
complaints from tenants stating they have placed work orders which
are not responded to by management.
"Tenants
have stated if they continue to question management regarding the
work orders, they are advised they will be evicted for one reason
or another. Tenants feel they are being intimidated by management
and being threatened with eviction if they complain to this office
or the managing agent," Mason wrote.
An inspector
from Management Solutions of America on Aug. 8, 1995, wrote: "The
living conditions on this property are unacceptable and do not meet
minimum basic standards required by HUD."
Nail said
the reports were not totally accurate because none of his staff
had ever threatened a tenant with eviction for making complaints.
"That
was never proven. That was just a statement when (the government)
was trying to make a case against us," Nail said.
In addition,
Nail said monthly pest control efforts were made, but the uncleanliness
of some tenants made elimination of roaches impossible.
"The
problem we got out there is when people do not keep their house
in a neat and sanitary manner, you're going to continue to have
roaches and rats. When we get a complaint we tell the guy to go
back out and spray," Nail said.
Juluke said
up to 95 percent of property owners who receive HUD subsidies are
satisfied with the amount they are paid and maintain the properties
to HUD standards. HUD calculates the amount an owner will need to
maintain properties before the agreement is approved and the owner
agrees with he enters the contract, Juluke said.
HUD also has
instituted new rules to more rapidly terminate future payments to
property owners who allow their buildings to fall into disrepair
or force the owner to more quickly repair them.
Pigott earlier
said he would propose to HUD's Washington office that Nail and others
who accepted federal monies but allowed their apartment complexes
to deteriorate be debarred.
On Friday,
he clarified his previous statement to say he supports ongoing efforts
by others to debar Nail.
HUD officials
in January 1999 began the process of trying to debar Nail for allegedly
failing to maintain the physical upkeep of Eastover Apartments in
Indianola and mismanaging finances for the complex.
A Jan. 26,
1999, audit report from the office of Nancy H. Cooper, HUD's district
inspector general for audit for the Southeast/Caribbean Region,
accused Intervest Corp. of mismanagement and deferring maintenance
that cause the Indianola structure to require more than $900,000
in repairs.
She also accused
Intervest Corp. of overbilling HUD for $26,508 in Section 8 subsidies
by improperly calculating rent. HUD pays 70 percent of rent for
Section 8 tenants and the tenants pay 30 percent.
Government
documents also accuse Nail of taking from Metro Manor $489,307 above
money allotted for management fees, which they said could have been
used to fix the property.
"Our
office certainly concurs in the recommendation that the HUD inspector
general has already made, that serious administrative sanctions
be made against Intervest based also on the findings on their conduct
that we were able to discover during our litigation involving Metro
Manor," Pigott said Friday.
Nail, who
has five government financed apartment complexes, denied any wrongdoings
in the matters. HUD's unwillingness to increase payments to him
or offer other financial incentives to finance upgrades of the properties
is the root of the problem, he said.
"HUD
sued me before they lost. They have no grounds to debar me,"
Nail said. "If (HUD) would have done anything that I would
have asked them to do, this whole issue would not have been a problem.
This is something that HUD has to fund.
"We have
audits that approved by HUD on an annual basis. It's prima facie
evidence that you have to have more money in the project ... they
quit giving us rent increases. Instead of doing anything to help
the property, they blame the owner which helps them breach their
contract."
Lewis said,
in good faith, the government should have exhausted other remedies
to clarify the Metro Manor dilemma before filing suit against Nail.
Among those remedies are increasing the amount of rent payments
to Nail or offering him other financial incentives to upgrade the
apartments.
"I think
it's very unethical to have used the False Claims Act in a situation
like this. The False Claims Act is probably the most dangerous law
the government has. (Pigott) never once asked for any of the contractual
remedies they had a right to use," Lewis said.
"(Pigott)
is attempting to have (Nail) debarred although we've won every case.
We haven't even begun on Brad Pigott. The fact that he's going to
debar Steve Nail means 'I'm going to put you out of business and
I'm going to destroy all of your companies.' (Pigott) is just using
his office for political purposes."
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