oversight

Apex Management Company, Multifamily Equity Skimming, Dayton, Ohio

Published by the Department of Housing and Urban Development, Office of Inspector General on 2001-08-02.

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
                                                                                2001-CH-1802

August 2, 2001

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

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

SUBJECT: Apex Management Company
         Multifamily Equity Skimming
         Dayton, Ohio

We completed an audit of the books and records of Apex Management Company. We
performed the audit to determine whether Apex Management used Crescent Square and Grand
Apartments funds in compliance with the Regulatory Agreements and other agreements, and
applicable HUD policies and procedures. The review was part of our Operation Safe Home
initiative.

We found that Apex Management Company, the former management agent of Crescent Square
and Grand Apartments Projects, improperly disbursed $224,439 of the Projects’ funds for
ineligible or unsupported costs and ineligible distributions over four years, in violation of the
Regulatory Agreements. Specifically, Apex Management paid $138,698 for ineligible costs and
distributions and $85,741 for unsupported costs. We also found that Apex: submitted false 1993
and 1994 certified financial reports to HUD for the Projects; did not maintain the Projects in a
decent, safe, and sanitary manner; and failed to maintain sufficient funds to cover the Projects’
security deposits owed to tenants. As a result, the Projects defaulted on their HUD-insured
mortgages and deferred maintenance allowing the Projects to deteriorate.

Using the procedures developed under Operation Safe Home, we referred our draft audit findings
to the United States Attorney’s Office for the Southern District of Ohio for civil matters. HUD
and the United States Attorney’s Office executed a settlement agreement with Apex Management
Company’s former officials effective June 21, 2001. Under the terms of the settlement, Apex


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                                                                            Audit Memorandum

Management’s former President and Manager, without any admission of wrong doing, agreed to
pay HUD $50,000 in six installment payments. The first installment payment of $25,000 was
received on July 13, 2001. Additional installments of $5,000 each are due on the first of each
month between August 2001 and December 2001. As part of the settlement, Apex’s former
President and Manager agreed not to participate in any HUD funded program for eight years and
agreed not to participate as a contractor in any Federal Government contract or in any Federally
sponsored program for three years. We will continue to monitor Apex’s installment payments
under the Settlement Agreement.

If you or your staff has any questions, please contact me at (312) 353-7832 or Heath Wolfe,
Assistant District Inspector General for Audit, at (312) 353-6236 extension 2677.




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                                                                              Appendix A

Distribution
Acting Secretary's Representative, Midwest (2)
Senior Community Builder/State Coordinator, Ohio State Office
Senior Community Builder/Coordinator, Cincinnati Area Office
Director of Columbus Multifamily Hub, Ohio State Office (2)
Secretary, S (Room 10000)
Deputy Secretary, SD (Room 10100)
Chief of Staff, S (Room 10000)
Assistant to the Secretary and White House Liaison, S (Room 10216)
Press Secretary/Senior Communications Advisor to the Secretary, W (Room 10226)
Acting Assistant Secretary for Administration, A (Room 10110)
Acting Associate General Deputy Assistant Secretary for Administration, AB (Room 10158)
Deputy Assistant Secretary for Administrative Services, Office of the Executive
    Secretariat, AX (Room 10139)
Acting Assistant Secretary for Congressional and Intergovernmental Relations, J (Room
    10120)
Deputy Assistant Secretary for Congressional and Intergovernmental Relations, J (Room
    10120)
Director of Departmental Equal Employment Opportunity, U (Room 2112)
Senior Advisor to the Secretary, Office of Public Affairs, W (Room 10132)
Deputy Chief of Staff for Policy and Programs, S (Room 10226)
Deputy Chief of Staff for Intergovernmental Affairs, 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)
General Counsel, C (Room 10214)
Deputy General Counsel for Housing, Finance, and Operations, CA (Room 10240)
Assistant General Counsel, Midwest
Assistant Secretary for Housing-Federal Housing Commissioner, H (Room 9100)
General Deputy Assistant Secretary for Housing-Deputy Federal Housing Commissioner, H
    (Room 9100)
Assistant Secretary for Policy Development and Research, R (Room 8100)
Acting Assistant Secretary for Public and Indian Housing, P (Room 4100)
Assistant Secretary for Community Planning and Development, D (Room 7100)
Executive Vice President of Government National Mortgage Association, T (Room 6100)
Assistant Secretary for Fair Housing and Equal Opportunity, E (Room 5100)
Chief Procurement Officer, N (Room 5184)
Acting Deputy Assistant Secretary for Multifamily Housing Programs, HT (Room 9100)
Deputy Assistant CFO for Financial Management, FM (Room 2206)
Audit Liaison Officer for Multifamily Housing, HQCGT (Room 3136)
Chief Information Officer, Q (Room 8206)

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                                                                            Appendix A

Director of Departmental Operations and Coordination, I (Room 2124)
Director of Center for Faith-Based and Community Initiatives, S (Room 10222)
Acting Chief Financial Officer, F (Room 2202)
Deputy Chief Financial Officer, F (Room 2202)
Director of Audit Coordination/Departmental Audit Liaison Officer, FMA (Room 2206)
Director of Risk Management, FMR (Room 2214)
CFO Audit Liaison Officer, FMA (Room 2206)
Audit Liaison Officer, 3AFI (2)
Acting Director of Enforcement Center, V (200 Portals Building)
Acting Director of Real Estate Assessment Center, X (1280 Maryland Avenue, SW,
    Suite 800)
Director of Multifamily Assistance Restructuring, Y (4000 Portals Building)
Acting Assistant Deputy Secretary for Field Policy and Management, SDF (Room 7108)
Acquisitions Librarian, Library, AS (Room 8141)
Director, Office of Federal Housing Enterprise Oversight, 1700 G Street, NW Room 4011,
    Washington, DC 20552
Director of Healthy Homes and Lead Hazard Control, L (Room P3206)
Director of National Office of Labor Relations, SL (Room 7118)
Senior Advisor, Subcommittee on Criminal Justice, Drug Policy & Human Resources, B 373
    Rayburn House Office Building, Washington DC 20515
The Honorable Fred Thompson, Ranking Member, Committee on Governmental Affairs, 340
    Dirksen Senate Office Building, United States Senate, Washington DC 20510
The Honorable Joseph Lieberman, Chairman, 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 Fogleman, Subcommittee on Oversight and Investigations, Room 212, O'Neil
    House Office Building, Washington DC 20515
Associated Director of Housing and Telecommunications Issues, United States General
    Accounting Office, 441 G Street N.W., Room 2T23, Washington DC 20548
    (Attention: Stanley Czerwinski)
Steve Redburn, Chief of Housing Branch, Office of Management and Budget, 725 17th
    Street, N.W., Room 9226, New Executive Office Building, Washington DC 20503
Andy Cochran, House Committee on Financial Services, 2129 House Office Building,
    Washington DC 20515




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