By ERIC JONATHAN BREWER
CLEVELAND, OH – A 33-page HUD Office of Inspector General (HUD OIG) audit of how Rainbow Terrace’s Connecticut owners have spent federal money to manage the nearly all-black low-income housing estate shows them unable to prove expenses while overcharging the federal government for management fees. The total amount of money misappropriated by the management company is $2.3 million and HUD wants it back.
The HUD OIG audit was released from the Chicago, Illinois regional office on September 28, 2018. Vesta CEO Arthur N.K. Greenblatt responded through attorney Michael Price, but the response didn’t alter the HUD OIG’s conclusions. The corporation violated federal procurement laws and overcharged the federal government for its management services. Vesta’s got to pay back the money. The “triggers” identified by HUD’s OIG could also generate or may already have generated a federal criminal investigation.
The HUD OIG report does not paint a competent or ethical picture of Vesta’s management under Greenblatt and his management and legal team. His son, Aaron Greenblatt, is the corporation’s general counsel. Upper-management appears to be all-white and Jewish.
The report paints a picture of Vesta Corporation as a business entity that organized to take advantage of federal low income tax credits and to play the mortgage refinance game. HUD insured a $14.8 million mortgage Greenblatt’s company took out in 2001 to purchase the property. He refinanced in 2017 and got another $12.8 million mortgage. He executed a second $7 million mortgage using section 223(f) of the National Housing Act to Vesta’s advantage.
While showing an amazing knowledge of federal laws to secure and refinance three federal mortgages that exceeded $33 million; Greenblatt’s response through Price showed an amazing lack of understanding of how to spend the millions after 17 years of operating under procurement laws that haven’t changed.
Greenblatt’s Vesta website describes the corporation as, “… highly experienced in all aspects of affordable housing development, finance, and management, including effective use of federal, state, and local government assistance programs.”
He describes himself as, “… the first general counsel of the Connecticut Housing Finance Authority (“CHFA”) for which he helped create the Uninsured Multifamily Mortgage Program, and was responsible for devising creative workouts for troubled projects. Prior to his CHFA tenure, Arthur specialized in real estate law with a Hartford law firm. Arthur has a J.D. from the University of Connecticut, School of Law and a B.S. from American International College.”
What HUD’s OIG uncovered in its investigation of Greenblatt’s Vesta is what appears to be self-dealing no-bid contracts to vendors with ties to the corporation. The HUD OIG report did not specifically identify vendors by name, but it’s apparent some so-called “vendors” have ties to Vesta.
Greenblatt’s management team and their procurement practices appear to be unlawfully inflating expenses that when measured against program income shows losses. The losses create the illusion that poor black folk aren’t paying enough rent, are tearing up the property; and Vesta can’t keep up with costs because of the people 11th Congressional District candidate Beverly Goldstein calls “ignorant.”
The flow of language in the HUD OIG’s conclusions clearly gives the public the impression that Greenblatt’s corporation is siphoning off federal funds to their own business interests with no bid contracts. HUD OIG investigators also appear to be targeting “kickback-minded” Rainbow Terrace management employees who are making local and smaller spending decisions.
The HUD OIG revealed that Vesta Cleveland LLC entered a no-bid management contract with Vesta Management Corporation (Vesta Corporation) to manage Rainbow Terrace in 2001. The HUD OIG did not identify if Vesta ever bid the management contract during renewals over the past 17 years.
The HUD OIG report called Vesta’s fees for management and bookkeeping “excessive” and “unsupported.” $691,330 was spent for bookkeeping fees from October 2015 through September 2017.
Greenblatt’s response through Price was that the accounting firm had specialized knowledge of federal programs despite the spending program violations identified by the HUD OIG’s audit that discredited claims of the bookkeeping firm’s competence. Management fees were $95,000 too much, according to the report.
HUD’s OIG only reviewed 211 out of 1563 checks totaling $2.6 million. Federal officials detailed that Greenblatt’s firm could not account for $2.3 million in purchases out of the $2.6 million connected to the 211 checks.
$484,000 was spent on a no bid security contract the project’s manager described as “valid.” She failed to provide proof that it and a $27,653 service contract for cleaning services was procured in the manner required by federal spending laws.
HUD’s OIG specifically said “the project owner did not provide sufficient documentation to support the rationale for not obtaining three required bids and that the costs incurred for the procured goods or services were reasonable.” Any contract over $10,000 a year requires three bids.
HUD wants the corporation Greenblatt leads to pay $2.3 million from Vesta’s own money; and not from program funds. The federal agency accused the Connecticut company very specifically of not investing program money into the quality of life of Rainbow Terrace residents.
HUD’s OIG revealed an amazing display of Vesta owner Greenblatt’s management callousness by exposing him for not properly handling and returning rental deposits to his majority black and poor tenants.
Greenblatt’s trying to acquire another 3000 units of low-income housing and federal mortgage dollars. Demonstrating an inability to spend $2.3 million out of $2.6 million in compliance with federal laws does not equate to an “administrative capacity” to handle more federal money.
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