oversight

MJM Management Company, Multifamily Equity Skimming,Cleveland, OH

Published by the Department of Housing and Urban Development, Office of Inspector General on 2000-01-13.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

                                             U.S. Department of Housing and Urban Development
                                             Office of Inspector General for Audit, Midwest
                                             77 West Jackson Boulevard, Room 2646
                                             Chicago, Illinois 60604-3507

                                             Phone (312)353-7832      Fax (312)353-8866
                                             Internet http//www.hud.gov/ oig/oigindex.html




                                                                       AUDIT MEMORANDUM
                                                                             00-CH-211-1807

January 13, 2000

MEMORANDUM FOR: Preston A. Pace, Jr., Director of Columbus Multifamily Hub,
                  Ohio State Office


FROM: Dale L. Chouteau, District Inspector General for Audit, Midwest

SUBJECT: MJM Management Company
         Multifamily Equity Skimming
         Cleveland, Ohio

We completed an audit of the books and records of MJM Management Company. We
performed the audit to determine whether MJM Management used project funds according to
the Regulatory Agreement and other agreements, and applicable HUD policies and
procedures. The review was part of our Operation Safe Home initiative.

We found that MJM Management Company paid $164,842 of Silver Meadows' Project funds
for ineligible loan related payments and asset management fees. MJM believed it could
make the ineligible payments because the Project’s Owner had invested more in the Project
than HUD required. The Regulatory Agreement and HUD requirements restrict Project
disbursements to payments necessary for operating and repairing the Project and restrict
distributions to owners to the amount of surplus cash. The payments of $164,842 were not
necessary for the operation and repair of the Project, and the Project had negative surplus
cash. The payment of the ineligible expenses reduced the amount of money available for the
operation and repair of the Project.

During the audit, MJM Management Company and the Project’s Owner advanced the Project
over $210,000 for the inappropriate loan payments and asset management fees. MJM and
the Project’s Owner established a liability on the Project’s books for the advances. HUD
executed a settlement agreement with MJM Management Company and the Project’s Owner
effective December 29, 1999. Under the terms of the settlement, MJM Management and the
Project’s Owner agreed to remove $215,892 in payables from the Project’s books, thereby
canceling the Project’s liability for payment of the amounts. The $215,892 includes the
inappropriate loan payments, asset management fees, and our audit cost. Based on the
settlement agreement with HUD, we consider this matter closed.

If you or your staff have any questions, please contact me at (312)353-7832.




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                                                                            Appendix A

Distribution
Secretary's Representative, Midwest (2)
Senior Community Builder, Cleveland Area Office
Senior Community Builder/State Coordinator, Cincinnati Area Office
Director of Columbus Multifamily Hub, Ohio State Office (2)
Deputy Secretary, SD (Room 10100)
Chief of Staff, S (Room 10000)
Special Assistant to the Deputy Secretary for Project Management, SD (Room 10100)
Assistant Secretary for Administration, A (Room 10110)
Assistant Secretary for Congressional and Intergovernmental Relations, J (Room 10120)
Senior Advisor to the Secretary, Office of Public Affairs, W (Room 10132)
Director of Scheduling and Advance, AL (Room 10158)
Counselor to the Secretary, S (Room 10234)
Deputy Chief of Staff, S (Room 10226)
Deputy Chief of Staff for Operations, S (Room 10226)
Deputy Chief of Staff for Programs and Policy, S (Room 10226)
Deputy Assistant Secretary for Public Affairs, W (Room 10222)
Special Assistant for Inter-Faith Community Outreach, S (Room 10222)
Executive Officer for Administrative Operations and Management, S (Room 10220)
Senior Advisor to the Secretary for Pine Ridge Project, W (Room 10216)
General Counsel, C (Room 10214)
Director of Federal Housing Enterprise Oversight, O (9th Floor Mailroom)
Assistant Secretary for Housing/Federal Housing Commissioner, H (Room 9100)
Office of Policy Development and Research, R (Room 8100)
Assistant Secretary for Community Planning and Development, D (Room 7100)
Executive Vice President, Government National Mortgage Association, T (Room 6100)
Assistant Secretary for Fair Housing and Equal Opportunity, E (Room 5100)
Chief Procurement Officer, N (Room 5184)
Assistant Secretary for Public and Indian Housing, P (Room 4100)
Chief Information Officer, Q (Room 3152)
Director of Departmental Operations and Coordination, I (Room 2124)
Chief Financial Officer, F (Room 2202)
Director of Enforcement Center, V (200 Portals Building)
Director of Real Estate Assessment Center, X (1280 Maryland Avenue, SW,
   Suite 800)
Director of Multifamily Assistance Restructuring, Y (4000 Portals Building)
Assistant Deputy Secretary for Field Policy and Management, SDF (Room 7108)
Deputy Chief Financial Officer for Finance, FF (Room 2202)
Director of Budget, FO (Room 3270)
Audit Liaison Officer, 3AFI (2)
Comptroller/Audit Liaison Officer, Office of Housing, FM (Room 2206) (2)
Acquisitions Librarian, Library, AS (Room 8141)

Deputy Staff Director, Counsel, Subcommittee of Criminal Justice, Drug Policy & Human
   Resources, B 373 Rayburn House Office Building, Washington DC 20515
                                    Page 3                          00-CH-211-1807
                                                                            Appendix A

The Honorable Fred Thompson, Chairman, Committee on Governmental Affairs, 340
    Dirksen Senate Office Building, United States Senate, Washington DC 20510
The Honorable Joseph Lieberman, Ranking Member, Committee on Governmental Affairs,
    706 Hart Senate Office Building, United States Senate, Washington DC 20510
Honorable Dan Burton, Chairman, Committee on Government Reform, 2185 Rayburn
    Building, United States House of Representatives, Washington DC 20515
Henry A. Waxman, Ranking Member, Committee on Government Reform, 2204 Rayburn
    Building, United States House of Representatives, Washington DC 20515
Ms. Cindy Foglemen, Subcommittee on Oversight and Investigations, Room 212, O'Neil
    House Office Building, Washington DC 20515
Director, Housing and Community Development Issue Area, United States General
    Accounting Office, 441 G Street N.W., Room 2474, Washington DC 20548 (Attention:
    Judy England-Joseph)
Steve Redburn, Chief, Housing Branch, Office of Management and Budget, 725 17th Street,
    N.W., Room 9226, New Executive Office Building, Washington DC 20503
President, MJM Management Company




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