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 Exit 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. Page 2 2001-CH-1802 Exit 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) Page 3 2001-CH-1802 Exit 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 Page 4 2001-CH-1802 Exit
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)