Building on Broken Promises
D.C. Developer's Projects Marred by Unchecked Spending and Dubious Deals
By Debbie Cenziper
The Washington Post
December 8, 2008
The partnership began at a crumbling apartment complex on a hillside south of the Capitol when longtime D.C. Council member H.R. Crawford told tenants, "I can show you how you can be a homeowner."
Within months, he struck a deal to raze the rental complex and build dozens of affordable townhouses with $25 million from the U.S. Department of Housing and Urban Development, promising tenants the rare chance to buy into the new community. The rise of Walter E. Washington Estates, completed in 2003, brought growth and hope to one of the city's most blighted neighborhoods and forged Crawford's reputation as a fierce and successful advocate for affordable housing.
But the project hailed as a turning point in the District was tainted by unchecked spending and deals that benefited Crawford and his partners while leaving hundreds of tenants with little chance of returning to the rebuilt community, The Washington Post has found. The city has since awarded more than $8 million for four other Crawford projects and, after he was joined by larger partners, tens of millions more. None of the developments has been completed.
Crawford denies spending government money improperly and said he has worked for years to revive distressed neighborhoods.
"Have I done everything right? Probably not," he said. "But I have done the best I could managing some of the toughest developments in lower-income communities, the work that very few wanted to do."
At Walter E. Washington Estates, records show, Crawford used hundreds of thousands of dollars to fund his own property management firm even after paying his company more than $3 million in developer's fees, a practice developers and HUD officials say amounts to double-billing. He doled out contracts to consultants with ties to the government, including a former HUD administrator who had supported the project. Although he had agreed to return some of the proceeds from the home sales to HUD, he under-reported that income in documents to the agency and paid nothing back.
In the end, 141 townhouses were built. Just three original tenants bought in.
Crawford, records show, sold the HUD-subsidized homes to two city officials, five of his employees or their relatives, and a couple who have bought and sold millions of dollars in properties in the Washington region. Crawford also sold a house to his daughter, putting his name on the deed, with the city granting a five-year property-tax exemption reserved for lower-income buyers.
Longtime tenant Florence Smith had persuaded her neighbors early on to support Crawford, believing that if they gave up their rental apartments, they would one day return as homeowners. Smith soon began to fear that the original tenants would not inherit the new community.
When she died of cancer in 1998, her children mounted a brick from one of the demolished buildings in her headstone, a symbol of the home she believed she had lost.
"She thought that tenants would all get houses, that Crawford would be a man of his word and that people would be able to come back," said Smith's daughter, Wanda. "They were double-crossed."
More criticism emerged after the project was complete: A forensic audit commissioned by the new homeowners found that Crawford overbilled their homeowners association by $900,000.
Despite complaints from some homeowners and tenants, HUD failed to intervene while city housing officials continued to award Crawford grants, loans and bond money for other developments. Much of the money came from the D.C. Department of Housing and Community Development, which twice bailed Crawford out of troubled projects by providing millions of dollars to new developers who repaid his old debts and bought Crawford's properties for millions more than he had paid.
Years later, much of the city's money has been spent and more than 500 tenants have been forced from rental apartments to make way for the new projects.
"There's nothing but dirt," said Michelle Giles, a home health aide who was one of dozens of tenants who left Trenton Terrace Apartments in Southeast Washington after Crawford received city money in 2001 to buy and begin redeveloping the complex. After taking on a partner, the complex has been torn down but no homes have been built on the rubble-strewn lot.
"It just looks like they wiped our whole life history off the face of the earth," Giles said.
Crawford, 68, said he has long been the "go-to guy" when communities want to overhaul troubled housing complexes. One of the District's first major African American property managers and real-estate developers, he said he took on the redevelopment of rundown, crime-ridden buildings often at the request of city officials or tenants.
Inner-city development is challenging, Crawford said, with developers taking on all of the up-front risk with no guarantee of a profit. He said he launched his projects in neighborhoods that were "under siege" from gangs and crime.
"I have tried to make these projects places where families would be proud to live," he said.
A spokeswoman from the city's housing and community development agency defended Crawford's projects, saying his expenses were legitimate. "The objective of each project was to preserve or create affordable housing opportunities. . . . The project costs associated with these projects were eligible costs," Najuma Thorpe said in a brief written response to questions.
But HUD officials say they have launched an investigation into the stalled projects because in many cases the city used federal money to fund them.
After being contacted by The Post, HUD officials said they discovered that the city provided "materially inaccurate" information to the federal government in June by reporting that one of Crawford's delayed projects, vacant for three years, was completed and occupied by low-income families.
"We find this deeply troubling," HUD spokesman Brian Sullivan said. "It calls into question the accuracy of any data that the city is reporting to us."
Thorpe disputed HUD's account, saying the city reported the project was complete because, among other things, the HUD money had been repaid.
HUD officials, meanwhile, said their management of Walter E. Washington Estates lacked "monitoring and oversight," and the agency is launching a second investigation.
"The agency should have done a better job and will make every effort to ensure this does not happen again," HUD spokesman Jereon Brown said.
Crawford has been a fixture in District housing since the 1960s, when he began managing several of the city's subsidized apartment complexes.
A devout Catholic raised in the District by working-class parents, he became known as a benevolent businessman who would give jobs to ex-convicts or rent apartments to struggling families without good credit or steady work. He preached discipline and self-help, cracking down on tenants who didn't pay on time or keep their homes clean. Many tenants lacked life skills, so Crawford made a point of teaching the basics, even how to operate a refrigerator.
This month, at a community center he built in Southeast, more than a dozen people attended a job training class. Children ate lunch in an early education charter school with bright blue walls.
"Children couldn't play outside here before" because of the drug dealing and blight, Crawford said.
"There are a lot of people around town who want to zap H.R., but a lot of people think he's a great guy. . . . I'm one of them. He's got a big heart," said the Rev. Raymond Kemp, a senior fellow at the Woodstock Theological Center at Georgetown University who has known Crawford for 35 years.
In 1973, President Richard M. Nixon named Crawford to be an assistant secretary at HUD, a position that made him one of the administration's highest-ranking African American officials. There, he was considered an innovator for pushing to tear down the nation's worst public housing complexes and create mixed-income communities.
Later, Crawford started a property management firm, overseeing hundreds of apartments subsidized by HUD, his former employer. He also became a developer, building, among other things, housing for veterans in the late 1990s and renovating an apartment complex in Southeast at the same time he was working on Walter E. Washington Estates.
A prominent civic leader, Crawford served on the D.C. Council for a dozen years, part of a generation of powerful politicians with strong ties to four-term mayor and council member Marion Barry. Crawford once helped raise $25,000 to buy Barry a Chrysler New Yorker to boost his spirits after his 1990 conviction for cocaine possession.
For decades, Crawford's business dealings have been mired in controversy.
In 1976, he was fired from HUD for seeking consulting contracts from local housing agencies that had received HUD money. Crawford said he had announced that he would resign from HUD and that he had done nothing wrong; the Justice Department ended an investigation without action. In an audit four years later, HUD found that Crawford's property management company had misspent almost $134,000 in federal money on "excessive" management fees, political and social activities, and loans to employees. Auditors later lowered the figure, and Crawford repaid some of the money while denying wrongdoing.
When he was a D.C. Council member, a federal grand jury investigated Crawford's use of council and city funds and contracts awarded to his associates. One of Crawford's aides and a contractor pleaded guilty. Crawford denied wrongdoing and was not indicted.
In 1996, four years after leaving the council, Crawford laid out his vision for what would become Walter E. Washington Estates.
HUD had foreclosed on the 331-unit apartment complex a year earlier when the owner refused to make repairs. Tenants decided to buy the property themselves and found an appealing partner in Crawford, with his expansive résumé, thriving property management firm, key government contacts and experience as a developer.
According to early plans, Walter E. Washington Estates -- named after the District's first mayor under home rule -- would have dozens of townhouses and a community center. Several dozen homes would be set aside for the former tenants and priced in the $90,000 range.
"Sales are restricted to first-time homebuyers only. No INVESTORS!" an early proposal noted.
HUD agreed to support the development despite the 1980 audit that challenged Crawford's use of federal housing dollars. The agency sold the property for $1 to Crawford's company and the tenants association and contributed $25 million for construction.
HUD directed Crawford to put the first $2 million from the proceeds of the home sales into a trust fund to help low-income families with down payments and to support the new homeowners association. Any additional proceeds would be returned to HUD.
HUD also told Crawford to provide the original tenants with a rent-to-own option if they couldn't afford to buy, records show.
Smith, the tenant leader, eagerly signed on. She had raised her children in the complex and wanted to help her neighbors become homeowners.
"She felt honored that Crawford would come to her and want to work hand in hand with her," said her son, Charles. "To be able to do this for the community and the people that she lived with and worked for was extremely exciting."
When government dollars began to pour in, however, Smith couldn't figure out who was getting paid or what service was being provided, and she feared her signature as head of the tenants association had been forged on checks to contractors, according to her notes. In her files, she noted questions on copies of two checks totaling $7,700, in one case writing, "Not filled out or signed by Florence Smith."
When asked by The Post for an accounting of how Crawford spent the government's money, HUD provided records that often lacked invoices and receipts. Records do show, however, that Crawford spent millions on fees for marketing, consulting, management, security and other non-construction costs.
Crawford reported paying almost $330,000 beginning in 1997 to A&D Security Consultants, which had incorporated only months earlier in the District and listed its address at Crawford's office building on Pennsylvania Avenue SE, records show. The company, which at times collected more than $10,000 a week to provide security guards, had been owned by former D.C. police sergeant Benjamin Ashe, longtime assistant chief Carl V. Profater and former D.C. Black Police Caucus head Lowell Duckett, who had strong ties to Barry. Barry was serving his fourth term as mayor at the time.
Ashe said that the company had been registered in Maryland under a different name and that it got the job from Crawford by responding to a request for security services. Duckett would not comment. Profater did not return calls.
Crawford also paid almost $100,000 in consulting fees to Othello Mahone, former interim director of the city's housing agency. In early 2000, records show, Crawford wrote directly to Mahone seeking housing agency money for two new housing projects. Mahone left the agency that June and within months started working for Crawford as one of six consultants paid to provide construction management at Walter E. Washington Estates.
Mahone said he saw nothing wrong with taking a job with Crawford after he left city government.
"I've done development before . . . and I needed a paycheck," he said.
Another consulting contract for construction management went to Elliot M. Johnson Jr., who had been a housing program specialist at HUD.
In 1997, Johnson, while working at HUD, sent an e-mail to agency staffers laying out "talking points" that supported Crawford's selection as the developer of Walter E. Washington and the fees he had charged. Johnson left HUD in 1998 and became a consultant for Crawford, drawing $179,000 before returning to HUD in late 2000.
Johnson said he was asked to review the Walter E. Washington project by his bosses at HUD. He said he took the job with Crawford because it offered him flexibility and the chance to work in the private sector.
"My interest, background and experience has always been in affordable housing," Johnson said.
HUD records show Crawford paid his own company more than $3.2 million in developer's fees over seven years, roughly in line with the markup other developers say they charge. But he also paid his company an additional $640,000 in fees for such things as marketing and management. Of that, more than $230,000 paid the salaries and benefits for employees at Crawford's management company, records show.
HUD officials say the agency expects developers to pay those expenses from their developer's fee, which is standard in the construction industry. But the agency did not object to the payments when they were detailed in Crawford's expense reports and an audit.
Crawford said his spending was proper. He said that he hired A&D Security to keep watch over a high-crime area and that he had allowed the owners to use his office address because they had just started the company. Crawford said he hired Mahone and Johnson because they understood the affordable housing business.
Although HUD officials said a developer's fee should cover operating expenses, Crawford said he did nothing wrong by billing for both because he was managing the rental complex and redeveloping it at the same time.
"The Crawford method was different because it takes a great deal of effort and staff to manage a project that has deteriorated," he said.
Crawford also said all his fees and expenses were vetted by HUD and financial experts. "A record of every dollar spent was tracked and made public and approved by HUD," he said.
HUD officials, however, said the agency failed to adequately oversee the project.
"There is no doubt that additional monitoring and oversight . . . was needed and would have resulted in more accountability with the developer," said HUD spokesman Brown. "The department is currently reviewing the documents and determining what enforcement actions should be taken at this time."
In the end, records show, HUD never received any of its $25 million back. Although the original agreement with HUD required Crawford to give some of the proceeds of the home sales to the agency, he begged off, saying that construction costs had spiraled. In 2003, he submitted a report to HUD that showed that he would just break even after selling the houses.
HUD waived repayment.
Crawford, however, under-reported the proceeds from the sales. His report showed the houses brought in $15 million, with his company receiving $1 million in sales commissions. But land records analyzed by The Post show the homes sold for about $17.7 million.
Crawford could not account for the discrepancy but said all the money from the home sales went into the construction of the project.
For its part, HUD was supposed to track how much money Crawford repaid and how many original tenants bought into the new community.
In 1997, a Post reporter asked HUD why Crawford had been given $25 million even though he had been fired by the agency years earlier, prompting then-HUD Secretary Andrew Cuomo to direct the inspector general to review the project. The inspector general's report, which looked only at the start-up of the project, recommended, among other things, that HUD provide more oversight to ensure that the original tenants had the opportunity to buy the new houses.
In response to the report, HUD officials asked Crawford to provide monthly updates detailing the income of buyers and whether they were former tenants. Crawford told HUD that many tenants did not respond to letters alerting them to the home sales.
The letter, however, said nothing about local subsidies or the trust fund, both of which could have helped tenants buy a house. Crawford told them only that, "Walter E. Washington Estates, a townhouse community of affordable three and four bedroom houses, is now open. If you are credit worthy, you may qualify for one of these new units. Please feel free to stop by if you would like."
HUD did not investigate further.
Crawford said that he provided homeownership workshops and counseling but that most tenants couldn't qualify for mortgages. He said he decided not to use the trust fund to subsidize down payments and did not pursue the rent-to-own option detailed in the agreement with HUD.
"Everyone could not afford to become a homeowner, nor had the credit to buy a home," he said. "I am confident to say that everyone . . . ended up with better housing than was offered on the site at that time."
When the complex was almost complete, Crawford sold one of the houses to his daughter and included his name on the deed even though he had promised in a 1996 letter to the city that "neither I nor my company will have any ownership interest in this property." The house has more than doubled in value to about $320,000. City officials would not discuss the property-tax exemption, saying only that "the property owner met the legal requirements."
Crawford, who owns or has an interest in other local properties assessed at a total of about $4 million, said he simply co-signed the mortgage for his daughter. The house sits on a hill with a commanding view of Southeast, just above a neighborhood street that bears his name: "H.R. Drive."
In 2003, records show, HUD stepped in again, asking Crawford for an accounting of the $2 million trust fund he had been required to set up to help tenants and the new homeowners association. Crawford submitted a chart to HUD showing that the fund had been depleted, but he did not say what the money had been used for.
His reports showed that the money had been transferred into a separate account established to maintain the neighborhood and that the account, which Crawford managed, had been running in the red for more than two years.
Again, HUD did not investigate further.
In 2005, a security company sued the homeowners association for failing to pay a $20,000 bill. Homeowners demanded that Crawford account for the money in the fund, eventually hiring a forensic accountant to track the dollars.
"That's when a can of worms began to open," said homeowner Joe Madison, a radio show host. "Where was the money?"
Madison and his wife moved into Walter E. Washington Estates in 2002. He said Crawford, whom he had known for years, urged him to settle there and had paid him $7,500 as an incentive to move in. Madison, who said he did not ask for the money, said Crawford wanted to show that prominent families were interested in the neighborhood. According to an audit submitted to HUD, Crawford labeled the expense as "marketing."
Over time, Madison said, he and other homeowners began to suspect that Crawford wasn't spending money properly. They said their suspicions were confirmed by their accountant, who found that Crawford had inappropriately charged the homeowners association $900,000.
Crawford disputed the allegations, saying that costs in the project went "haywire" and that the dues paid by homeowners were too low to subsidize expenses.
To settle the matter, Crawford said he wrote a check for about $175,000 to $200,000 to the homeowners association.
Years later, the effects of the depleted account can be seen throughout the neighborhood: The pool has been closed for two years, the gates at the entrance often don't work and security cameras are broken.
"It was just chaos . . . everything was out of order," said homeowner Jerome DuVal, who moved his family out of the neighborhood in 2006. "There were a lot of false hopes."
Riding a wave of praise for the development of Walter E. Washington Estates, Crawford was awarded millions of dollars from the city for four more projects meant to provide hundreds of homes for working families.
In 2003, the housing agency used HUD money to lend Crawford $2.3 million so he could buy and redevelop the 291-unit Parkside Terrace apartment complex in Southeast.
Records show that Crawford used more than $500,000 to pay deferred maintenance, old bills and operating deficits at the complex. HUD officials say they expect developers to cover their own operating expenses and use HUD money to produce housing.
HUD also expects developers to begin construction within 12 months. But three years after receiving funding, Parkside Terrace had not been renovated. Most of the HUD money was gone, and every tenant had moved out.
HUD officials said the city housing agency was supposed to monitor expenses and deadlines and had been chastised in a 2006 HUD report for ineffective oversight at Parkside and other housing projects.
In 2006, with Parkside at a standstill, Crawford cut a deal with help from the housing agency.
The nonprofit D.C.-based Community Preservation and Development Corp. stepped in to buy Parkside Terrace. Under the terms of the sale, Crawford received $7 million for the property, an estimated $5 million more than he had paid for it. Community Preservation assumed Crawford's unpaid HUD loans, with the city providing new funding so the nonprofit group could repay them.
"It was a failed project that everyone agreed needed to be fixed," said Gerry Joseph, Community Preservation vice president.
Crawford remains a partner in the project, which could bring him about $1.3 million in developer's fees, records show.
He struck a similar deal at Trenton Terrace Apartments in Southeast, a project that was also years behind schedule, freeing himself from an unpaid city loan through a deal with a new developer while selling the property for $1.6 million more than he had paid.
Crawford said the income wasn't all profit because he had to repay other loans and liens. He said that he tried to rehabilitate both developments and that his expenses were legitimate. At Parkside, he said he performed extensive analysis and repairs but in the end found that more money was needed to get the job done. Trenton Terrace, Crawford said, was plagued by crime and environmental problems, such as lead-based paint, and the city wanted to tear down the complex.
Crawford said he eventually sold most of his interest in the properties to bigger developers who had "access to resources as well as a commitment to low-income housing."
"I am in this business to make a profit," he said. "If you can provide an exceptional service that helps to lift people up from despair while making an honest living, then you are either talented, lucky or both."
Staff researcher Meg Smith and database editors Sarah Cohen and Dan Keating contributed to this report.
Millions Spent, Projects Delayed
http://www.washingtonpost.com/wp-dyn/content/article/2008/12/06/AR2008120601921.html?wprss=rss_print
Highland Addition, Southeast
History: In 2003, the city decided to build 188 housing units on vacant land and awarded development rights to H.R. Crawford's company. The city contributed $1.6 million in 2005 and $500,000 in 2007. So far, about $1.2 million has been spent on architects, engineers, legal fees and project management.
Status: Nothing has been built. City officials blame zoning and other delays, along with a $5 million shortfall for road work and other infrastructure improvements. Crawford said the project was delayed because of changes in the architectural team as well as funding gaps.
Parkside Terrace Apartments, Southeast
History: The city provided loans totaling $2.3 million in 2003 to help Crawford's company buy the property and launch a massive rehabilitation.
Status: Renovations have not been done. Tenants left the building in 2005 and Crawford sold the property to another developer for $5 million more than he had paid. The city gave the new developer additional funding to repay Crawford's old loans. Construction started this year on more than 300 housing units. Crawford is still a partner on the project.
Crawford said he made repairs at the property but did not have the funds to renovate the building, which was overwhelmed by sewage problems and other breakdowns.
Trenton Terrace Apartments, Southeast
History: Through the East of the River Community Development Corp., Crawford's company received a $1.25 million city loan to buy the complex in 2001 and launch the development of more than 100 new housing units.
Status: Homes have not been built. Crawford emptied the property of tenants and sold it in 2004 to another developer for $1.6 million more than he had paid. The city gave the new developer additional funding to repay Crawford's old loan. The new developer tore the buildings down but has not started construction because financing has not been secured. Crawford is still a 15 percent partner on the project. He said the complex had environmental and crime issues, the architect and engineer could not agree on a development plan, and the city ultimately wanted the buildings torn down.
George Washington Carver Estates, Northeast
History: Tenants teamed up with Crawford to redevelop the property into a rental complex for seniors and more than 100 townhouses, with the city contributing money to buy the property and $4 million to launch the development in 2004 and 2005. In 2006, the D.C. Housing Finance Agency also contributed millions through tax-exempt bonds and low-income housing tax credits.
Status: The senior center is complete, but no townhouses have been built. Several tenants who feared that they could not find anyplace else to live sued Crawford's company and the tenants association for housing-code violations after they lost their heat, gas and water, forcing them to move out. The case is pending. Crawford attributed the delays to the permitting process and design changes.
Photo Credit: By Michael Williamson -- The Washington Post Photo
A PROJECT DELAYED: In 2003, H.R. Crawford received $2.3 million from the city to buy the 291-unit Parkside Terrace apartment complex in Southeast Washington and begin a massive rehabilitation. Three years later, the complex had not been renovated and every tenant had left. Crawford said funding and other problems delayed the project, and he has since teamed up with a larger developer. Construction at the site began earlier this year.
|
