oversight

SB Multifamily Fund 10 Limited Partnership Multifamily Equity Skimming Chaska, Minnesota

Published by the Department of Housing and Urban Development, Office of Inspector General on 1998-09-15.

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 RELATED MEMORANDUM
                                                                            98-CH-211-1811

September 15, 1998

MEMORANDUM FOR:               Howard Goldman, Director, Minneapolis Multifamily Hub


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

SUBJECT:       SB Multifamily Fund 10 Limited Partnership
               Multifamily Equity Skimming
               Chaska, Minnesota

We completed a limited review of the books and records of SB Multifamily Fund 10 Limited
Partnership. The review was performed at the request of the United States Attorney’s Office. The
United States Attorney believed there were indications that Project funds may have been
inappropriately used.

SB Multifamily Fund 10 Limited Partnership owned and operated Hazeltine Shores, a multifamily
project located in Chaska, Minnesota. The project’s mortgage was co-insured under Section 221(d)(4)
pursuant to Section 244 of the National Housing Act. The General Partner of SB Multifamily Fund 10
Limited Partnership was Sherman-Boosalis Corporation. The Partnership filed for Section 11
bankruptcy on June 15, 1992. On July 27, 1994, HUD paid off the mortgagee’s claim on the Project’s
defaulted mortgage.

Our review objectives were to determine whether the use of Project funds was reasonable and in
compliance with the Regulatory Agreement and applicable HUD requirements.

We concluded that Project funds were improperly used to make loans to related entities and to repay
owner advances. With the concurrence of the Acting Director, Multi-Family Housing program, on
August 3, 1998, the Assistant U.S. Attorney completed a settlement with SB Multifamily Fund 10
Limited Partnership. To achieve a fair and equitable settlement amount, the Assistant U.S. Attorney
gave consideration to amounts that the Project Owner had previously paid to the co-insuring mortgage
company pursuant to a lawsuit filed for violations of the Regulatory Agreement. Under the August 3,
1998 settlement agreement, the Project Owner paid $42,000 to HUD.

Should your staff have any questions, please have them contact me at (312) 353-7832.




                                               Page 1                                          98-CH-211-1806
                                                                               Appendix A

Distribution
Secretary's Representative, Midwest
Senior Community Builder, Minnesota State HUD Office (2)
Director, Minneapolis Multifamily Hub (2)
Director, Field Accounting Division, Midwest
Field Comptroller, Midwest
Assistant General Counsel, Midwest
Director, Administrative Service Center, I
Assistant to the Deputy Secretary for Field Management, SDF (Room 7106)
Comptroller/Audit Liaison Officer, Office of Housing, HF (Room 5132) (5)
Acquisitions Librarian, Library, AS (Room 8141)
Director, Participation and Compliance Division, HSLP (Room 9164)
Chief Financial Officer, F (Room 10164) (2)
Deputy Chief Financial Officer for Finance, FF (Room 10164) (2)
General Counsel, C (Room 10214)
Deputy Secretary (Room 10100)
Assistant Secretary for Congressional and Intergovernmental Relations, J
 (Room 10120)
Deputy Assistant Secretary for Public Affairs, W (Room 10220)
Deputy Assistant Secretary for Operations, A (Room 10110)
Director, Office of Budget ARB (Room 3270)
Chief of Staff, S (Room 10000)
Counselor to the Secretary, S (Room 10234)
Senior Advisor to the Secretary for Communication and Policy, S (Room 10222)
Assistant Secretary for Housing, H (Room 9100)
Assistant to the Secretary for Labor Relations, SL (Room 7118)
Director, Housing and Community Development Issue Area, U.S. GAO,
 441 G Street N.W., Room 2474, Washington DC 20548 (2)
The Honorable John Glenn, Ranking Member, Committee on Governmental Affairs,
 United States Senate, Washington DC 20515-4305
The Honorable Fred Thompson, Chairman, Committee on Governmental Affairs,
 United States Senate, Washington DC 20515-4305
Mr. Pete Sessions, Government Reform and Oversight Committee, Congress of
 the United States, House of Representatives, Washington DC 20510-6250
Ms. Cindy Sprunger, Subcommittee on Gen. Oversight and Invest., Room 212,
 O'Neill Office Bldg., Washington DC 20515




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