Homestead Memories

District Attorney Doug Henderson recently announced that he will not be prosecuting anyone in connection with the Project Homestead scandal.  I have spent literally hours with the News and Record's approximately thirty news stories that sequentially explicated this sordid mess. 

Around the time of Henderson's announcement, it was stated repeatedly that the crux of the matter was an estimated $500,000 that had been misused.  The scandal, however, was of enormous proportions, with many dimensions.  One needs to go back to the original reporting to be reminded of the magnitude of the scandal, because memories are prone to fail us.

I wish to outline many of those aspects of this story, as the News and Record represented them:

1. Michael King was Project Homestead's (PH) Executive Director.  He had been pastor of the Garden of Prayer Baptist Church since age 20.  He was also a board member of the Simkins PAC, and a member of the Greensboro Pulpit Forum.  He was extremely influential politically because of his get-out-the-vote activities on behalf of the PAC's machine candidates.  PH's original mission was to provide affordable housing for the poor.

2. Initial stories indicated that $286,000 had been spent on travel between 2000-2001.  At least part of this was blamed on work that PH employees were doing in eastern North Carolina, Reidsville and Forsyth County.

3. During the same time period, PH generated greater than $300,000 in phone expense.  This was again partially blamed on cell phone and walky-talky use in other areas. 

4. Legal and accounting fees of greater than $700,000 were accrued during 2001.

5. King's income was found to be approximately $160,000 during 2001, including portions from the non-profit PH and also from its for-profit subsidiary.   It is apparently illegal for executives from a non-profit receiving governmental funding to receive salary from the non-profit side and the for-profit side.  (This problem also applied to Randolph Mitchell, the PH CFO.) 

6. King was described as owning a home in Brown Summit valued above $650,000.  He also owned a lot and home on Belews Lake.

7. King's brother had a construction company that received work from PH. 

8. The US Dept. of HUD had expressed concerns that the organization had generated excess profits; had engaged in conflicts of interest; had charged prohibited fees or commissions from buyers; and had been excessively slow in submitting to review.

9. During the late 1990's, PH bought a lot in the reasonably upscale Polo Farms development in Summerfield.  It sold the lot to King, who then sold it at personal profit.

10. Some key names in connection with PH and their former positions: Alton Thompson, board chair; Randolph Mitchell, CFO; William Brown; Gloria Ratliff, VP; Thomas J. Scott, VP; Rodney Beasley, board member; Kevin Henry, COO; and John Underwood, employee.

11. Randolph Mitchell left the organization and sued, accusing King of sexual coercion.  He was granted a large severance when he separated from PH.  (Other male employees were alleged to have been coerced for sex also.)

12. Rodney Beasley bought two properties from PH.  One was rehabbed by PH.  He bought it well below appraisal and he later sold it at a profit of $31,500, even as PH lost money on the deal.  The poor buyers of PH did not receive this type of advantage.  In fact, some of the poor customers were reported to have paid more than the appraised price.

13. Kevin Henry, who also attended King's church,  bought two properties from PH.

14. John Underwood bought two homes from PH and sold at least one at a profit of $35,500.  He ordinarily would not have qualified for a PH home.  He also had a $20,000 loan forgiven.

15. A Creekridge property owned by PH, and funded by the City, was sold to King's private company-- Real Property Investors-- and was thereupon sold for thousands more.

16. The sons of one of the funders of PH, the Rasheed brothers, bought properties from PH.  The funder in question ran the NC Community Development Initiative.

17. One of the requirements for governmental funding was that all proceeds needed to be plowed back into the program.  This was violated whenever the properties were sold at a profit and the proceeds went to other individuals or organizations instead of PH itself.

18. Business was done with individuals who did not meet eligibility requirements. 

19. Complaints had been registered by buyers regarding serious structural issues.

20. In one instance, a married couple was advised to legally separate in order to qualify for a home loan; and then to merely live together.  It was represented to them that "lots of people do it."

21. The last city audit revealed that greater than $740,000 had been spent on cruises, other trips and personal items from 1997-2001.  The company generated greater than $5.5 million in excess overhead because of its business practices.   (The company's overhead was 30% of sales compared with an industry average of  15%). There was no documentation for $480,00o in "potentially personal purchases."  This included $267,000 for travel (cruises and vacations).  Of these "potentially personal purchases", only $60,000 were documented to have been repaid back to the organization.  Bonuses were sometimes granted to cover these amounts; sometimes these amounts were written off.  Some names associated with these purchases: Michael King, Randolph Mitchell, John Underwood, Debra Alston, Kevin Henry.   Expenses related to cruises alone totalled $112,000 from 1997-2001.

22. King's father sat on the board.  He also had a home that PH rehabbed for him.  PH then bought the home from him, and quickly sold it to a low income buyer.

23. Records (including payroll records, invoices and receipts) were found to be disorganized or nonexistent-- and this includes records for 16% of the home sales.

24. Potentially personal purchases included firearms, jewelry, clothing, shoes, sporting goods, utilities, cash advances, entertainment tickets, health club membership dues, drug store purchases, hair salons, ABC stores, restaurants, airline tickets for spouses and other non-employees, cruises for employees and spouses, hotels, electronic stores, car maintenance and mobile car washing. 

25. PH failed to pass along sufficient equity to low income buyers despite receiving free lots and second mortgages from the city.  Although the value of the city's contribution was $17,000 per house, only $5,000 in equity was passed along to the poor. 

26. The purchase of the L. Richardson Hospital building, with a tax value of $1.2 million, occurred.  PH then sold it to a for-profit limited partnership for $149,000.  City money was used to rehab the structure.  PH essentially "gave away the assets of the organization."

27. The commingling of funds from different sources was described as being in violation of governmental policy. 

28. A local accounting firm named Costello Hill and Co. performed annual audits in accordance with governmental requirements.  It communicated via letter certain concerns regarding sloppy accounting, personal purchases, travel, lost records, high salaries for executives and cash advances to employees.  It expressed concerns that labor costs related to construction were not credited and passed along in the form of equity to poor homebuyers.  These letters, however, were not shared with the city.  Its audit reports mentioned no reservations about the company's operations-- and these were the documents that were shared with the city.  At Michael King's request, the firm was reported to have written two letters to the city that tended to diminish any concerns regarding the organization. 

29. Another local accounting firm, Delman and Co., kept the books for PH.  David Delman is associated with this firm, which received nearly $4o,000 per month from PH.

30. A credit card was taken out in the name of CharlesEtta King, the ED's wife, by the organization.  It generated $10,000 in personal purchases and $1,300 in rental car expense.

31. In Goldsboro/Kinston, PH built fewer houses than its state funding demanded.  This left the city of Goldsboro with $190,000 in penalties. 

32. In its own defense, the board of directors of PH advised the city that it was not provided with the information it needed by Michael King.  In fact, this board was a sham.  It only met seven times over a five year period. 

33. It was reported March 30, 2004, after investigations were already underway, that the PH computer server was missing.

34. During 2001, the mission of PH changed.  It was now to serve moderate or middle income households as well as the poor.  (This, of course, was a mistake.)

35. A Dutchman RV was purchased by PH during 2001.  It was traded for a construction trailer for King's personal use.  He moved it to his Belew's Lake lot, provided landscaping, and apparently used it as a vacation home.

Again, all of the above is based on my understanding of the News and Record's reporting.  I have attempted to synthesize information to reduce duplication.  Please feel free to suggest corrections. 

I am not a legal expert.  It is not clear to me which of the above offenses should be regarded as criminal, and which are civil.  Somewhere amongst all these 35 items I listed, however, there must be at least one offense that merits prosecution or litigation.

The premise that non-profit boards, and accountants performing work for these organizations, do not have a legal fiduciary responsibility to the public-- when public monies are involved-- seems to be amiss in my opinion.  In other settings, we have seen litigation and prosecution based on such offenses as fraud, embezzlement, obstruction of justice, conspiracy and negligence.  Why are not employees, board members and accountants  presumed to be accountable when they are engaged in wrongdoing, are complicit with it, or are otherwise negligent?

Indeed, accessories or accomplices to crime are sometimes held to account.   In this case, nearly everyone is getting a pass--except Mr. King himself.  But some terrible wrongs have been committed, because the taxpayers' money was stolen many times over, and the poor were cheated out of benefits that society allocated to them.

More tomorrow.

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[whatever]

You need to know the facts and stop printing
rumors. This not-for-profit was the most successful and it was black and people could not stand the fact. Write about GEHM the not-for profit that Project Homestead Saved. People always want to concentrate on the negetative you need to be sued for putting out false information. For anyone that wants to know the truth read the Rhinotimes of greensboro

[outsider]

It is ignorant comments like the one above that keep cheating dishonest people in power. Instead of accepting that maybe there was a black minister who cheated people and not to mention the dishonesty of his wife, and problably ties to Greensboro City Council members and other political members in the state.That maybe they were getting over on the public and cheating people and taking free money for their own use. Stop fooling yourself and vote for people that wont allow this crap instead of saying "oh well they were black they could'nt have done it". That's B.S.!!!