DuPage housing group fights to recoup millions
The DuPage Housing Authority is seeking to recoup some of the millions of dollars it owes the federal government by withholding subsidy payments to the operator of two senior housing projects.
But the groups running the Rose Glen and Myers Commons apartments in Roselle and Darien are taking legal action to prevent the housing authority from cutting off payments until it collects an estimated $4.3 million from the two entities.
Rose Glen Limited Partnership I and Myers Commons Senior Housing I L.P. have filed separate lawsuits accusing the Wheaton-based agency of breach of contract for announcing that it won't make any more payments to both projects starting May 1.
"The federal government pointed out a lot of problems that the DHA was having," said Joseph Kincaid, the attorney representing Rose Glen and Myers Commons. "A lot of this is their (the authority's) attempt to cast blame upon these two senior facilities."
DuPage Housing Authority officials say stopping the payments is one way they could recover some of the more than $10 million in federal money that the agency misspent or failed to account for.
The authority's former executive director John Day was forced to resign last year after two audits critical of the agency by the federal Office of Inspector General surfaced.
DuPage County Board Chairman Dan Cronin then replaced every member of the housing authority board when a third audit charged the agency improperly spent more than $5.8 million in federal money and failed to adequately document another $4.7 million.
Now officials with the revamped authority have an estimate of how much of "unsupported" spending mentioned in the audits is tied to the Myers Commons and Rose Glen deals.
An independent hearing officer appointed by the authority to review both deals concluded that the Rose Glen project received roughly $888,000 in overpayments and that Myers Commons shouldn't have been paid about $3.5 million, according to documents obtained by the Daily Herald.
The hearing officer decided that The Stough Group, which manages Rose Glen and Myers Commons, overcharged the authority for rent at Rose Glen. Meanwhile, it was determined that the Section 8 contract for Myers Commons was improperly awarded.
The contract for Myers Commons -- a 91-unit apartment complex near Lemont Road and 83rd Street -- was executed in March 2005. The Section 8 contract for Rose Glen was approved two years later.
U.S. Department of Housing and Urban Development officials have said the DHA didn't follow HUD's program requirements before approving and contracting housing assistance for units at Myers Commons and Rose Glen.
The hearing officer appointed by the DHA decided that the involvement of The Stough Group's Michael Pizzuto in the Myers Commons deal violated HUD conflict-of-interest rules.
Those rules prohibit a board member from having an interest in a Section 8 contract with the housing authority while serving on the panel and for one year after leaving.
But Pizzuto, who resigned from the DuPage housing board in June 2003, has said that the contract for Myers Commons wasn't executed until nearly two years after he stepped down.
"There was no conflict of interest," said Kincaid, who added that rents at Rose Glen were set by the housing authority and not Pizzuto.
Pizzuto has provided paperwork to HUD that he claims proves there was nothing improper about the way both contracts were awarded. He has said there was a competitive process, and federal regulations were followed.
But until both lawsuits are resolved in court, DHA officials say they believe they have the right to withhold payments to Rose Glen and Myers Commons.
"We are proceeding to comply with HUD's directives on how to resolve all the various issues at the two projects," said Thomas Good, the chairman of the housing authority board.
"At the same time, we are looking to a long-term resolution that's in everybody's best interests."
Housing officials said the tenants at both projects shouldn't be affected by the subsidy payment stoppage or the lawsuits.
Residents have been advised to continue to pay their share of the rent.