oversight

Eenhoorn L.L.C., Multifamily Equity Skimming, Grand Rapids, Michigan

Published by the Department of Housing and Urban Development, Office of Inspector General on 2000-08-31.

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-211-1810

August 31, 2000

MEMORANDUM FOR: Robert M. Brown, Director of Detroit Multifamily Hub,
                  Michigan State Office


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

SUBJECT: Eenhoorn L.L.C.
         Multifamily Equity Skimming
         Grand Rapids, Michigan

We completed a review of the books and records of Eenhoorn L.L.C., a management agent.
We performed the review to determine whether Eenhoorn 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 Eenhoorn L.L.C. misused $59,140 of River Oaks Apartments’ funds for ineligible
and unsupported payments. The payments included: (1) $30,079 for owner distributions to
River Oaks Apartments Limited Partnership; (2) $12,024 for consulting and legal services; (3)
$750 for legal services without supporting documentation; (4) $9,234 for accounting services, a
computer system, and excessive management fees; and (5) $7,803 for payroll fees. The ineligible
and unsupported payments were not for the operation and repair of the Project. They were
made when the Project was in a non-surplus cash position, required over $160,000 in needed
repairs, and/or had not maintained sufficient funds in its reserve for replacement account. The
Project’s Regulatory Agreement and HUD’s requirements restrict Project disbursements to
payments necessary for operating and repairing the Project and restrict distributions to owners to
the amount of surplus cash. As a result, fewer funds were available for the Project’s normal
operations and maintenance and HUD’s interest in the Project was not sufficiently protected.

During the audit, HUD executed a settlement agreement with Eenhoorn L.L.C. effective
August 14, 2000. Under the terms of the settlement, Eenhoorn agreed to: deposit $60,000
into the Project’s reserve for replacement account to replace funds depleted by “certain
inappropriate expenditures and owner distributions” and to assist in making needed repairs;


   Exit
                                                                      Audit Memorandum

repair the items cited by HUD during its July 28, 2000 inspection of the Project by March
30, 2001; pay HUD $41,000 for our audit costs and for inspecting the Project to determine
whether the needed repairs were made; and pay the cost of the repairs from its own funds if
the Project’s reserve for replacement account falls below $75,000. HUD agreed not to take
administrative action against Eenhoorn if it complies with the terms of the Agreement. As
of August 16, 2000, Eenhoorn sent a check to HUD for $60,000 to be deposited into the
Project’s reserve for replacement account and paid HUD $41,000 for our audit costs and
for inspecting the Project. 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.




                                          Page 2                               00-CH-211-1810
   Exit
                                                                               Appendix A

Distribution
Secretary's Representative, Midwest (2)
Senior Community Builder/State Coordinator, Michigan State Office
Senior Community Builder/Coordinator, Grand Rapids Area Office
Director of Detroit Multifamily Hub, Michigan State Office (2)
Deputy Secretary, SD (Room 10100)
Acting 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 10218)
Deputy Chief of Staff, S (Room 10226)
Deputy Chief of Staff for Operations, S (Room 10226)
Deputy Chief of Staff for Programs, S (Room 10226)
Deputy Chief of Staff for Policy, S (Room 10226)
Acting 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)
Assistant General Counsel, Midwest
Director of Federal Housing Enterprise Oversight, O (9th Floor Mailroom)
Assistant Secretary for Housing/Federal Housing Commissioner, H (Room 9100)
Acting General Deputy Assistant Secretary for Housing-Assistant Federal Housing
    Commissioner, H (Room 9100) (2)
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)
Acting Director of Departmental 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) (2)
Deputy Chief Financial Officer for Finance, FF (Room 2202)
Director of Budget, FO (Room 3270)
Audit Liaison Officer, 3AFI (2)
                                          Page 3                             00-CH-211-1810

   Exit
                                                                              Appendix A

Audit Liaison Officer, HF (Room 6232) (3)
Departmental Audit Liaison Officer, FM (Room 2206) (2)
Associate General Deputy Assistant Secretary for Housing, H (Room 9106)
Deputy Assistant Secretary for Multifamily Housing Programs, HT (Room 6106)
Program Advisor, Office of Multifamily Housing Programs, HT (Room 6106)
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
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
Vice President of Operations, Eenhoorn L.L.C.




                                          Page 4                            00-CH-211-1810
   Exit