CHA Contracting Woes

by  Editor-in-Chief

Residents of public housing are constantly being told by the Chicago Housing Authority and its private housing contractors to properly manage their personal affairs in order to be lease compliant under their $1.6 billion Plan for Transformation. But is the CHA properly managing its own state of affairs?

Mismanaged CHA Contractor under Federal Indictment
On June 15, 2005, a federal grand jury indicted three employees of CHA property manager William Moorehead and Associates, including William Moorehead himself, for “allegedly fraudulently” taking nearly $1 million housing funds appropriated for “more than a dozen U.S. Department of Housing and Urban Development subsidized properties, including housing units operated by the CHA between 1994 and 2002,” according to U.S. Department of Justice documents.

The cases against Moorehead’s and one co-defendant, 47-year-old Patricia Taylor, are pending, but Brian Townsend, a 40-year-old co-defendant in the case, was sentenced to four months in prison. He also had to pay a $4,000 fine and was ordered to perform 500 community service hours for falsifying the financial records of the private management company.

Townsend was sentenced in early January this year, after pleading guilty in September 2005 for his part in the rip-off the city and federal government funding meant for Chicago public housing residents.

Under count one of the criminal charges of wire fraud against the 62-year-old owner William Moorehead and the two former financial controllers of his company, the threesome “fraudulently converted, misapplied, misappropriated, embezzled, transferred, and took at least $995,000 from HUD and CHA housing projects they were managing, and from the Marion Stamps Memorial Charity Fund,” according to the U.S. States Attorney.

Under the civil indictment, Moorehead allegedly used housing funds to pay personal and business expenses, to purchase a car for his own use, and to purchase a certificate of deposit, which he then pledged as collateral for a personal loan that he obtained to purchase two Mail Boxes Etc. franchises, according to the complaint.

The civil suit seeks monetary damages of $3,128,550 in addition to costs and attorney and auditing fees. If convicted in the criminal case, Moorehead and Taylor could face a maximum penalty of five years in prison and $250,000 fine. But Moorehead alone faces a second count that carries a maximum of 20 years in prison and a $250,000 fine in addition to mandatory restitution, according the U.S. Department of Justice document.

In early 2000, Moorehead & Associates’ contract was terminated by the St. Louis Housing Authority from managing 418 family and senior apartments. Moorehead still had contracts to manage approximately 7,000 CHA public housing units at Evergreen Tower Apartments, Evergreen Terrace Apartments, Kenneth Campbell Apartments, Lake Michigan Apartments, Lawndale Gardens Apartments, Midway Gardens Apartments, Robert Taylor Homes, Southwest Scattered Sites and West Scattered Sites, and 65th Street Apartments. The demolition company was accused of “not submitting financial reports,” according to St. Louis Housing Authority Executive Director Cheryl Lovell.

“He didn’t follow his contract. And our contract says if you don’t follow the contract requirements, we can terminate you at any time for default. They worked for us about 5 or 6 months, and we terminated the contract because they failed to submit timely financial reports. The reason you were required to turn financial reports in is so that you cannot play with the money,” Lovell said during a phone conversation in mid-August.

“So, I would say that we took positive and swift action before there was any ability for them to defraud us of any money. Once we took it back and got all the accounts in order, I don’t believe we found anything substantial that was inconsistent with the records. If we did, we would have called the inspector general.”

Also, in an article written by Residents’ Journal Assistant Editor Beauty Turner in 2002, “Resident janitors who lived in the now-demolished Robert Taylor Homes and worked for Moorehead had complained that their paychecks had been bouncing for the last four months of 2001. The private management company was engaged in unfair labor practices, while Moorehead was managing the property as well as being the Service Connector for the former CHA site, according to the article titled “Manager Ousted From Robert Taylor,” that appeared in the June/July 2002 issue.

In the January/February 2002 RJ, a former resident council president at the time said of Moorehead, “If this company can’t even balance their books, how could they teach us to balance ours?

Despite those accusations of non-payment and non-compliance with the Section 3 program made against Moorehead and his company, the CHA continued to contract with the private management firm, and hired them to manage some of their senior portfolios.

The CHA declined to discuss any issues relating to Moorehead and Associates because of the court case against the management company, according to spokesperson Derek Hill.

Hill would only say in a July 05 email that the public housing agency was cooperating with the U.S. States Attorney’s office.

“The CHA has cooperated with the federal government throughout its investigation and will continue to do so as needed. We take very seriously any allegations of misconduct that may negatively impact our public housing families.”

In another emailed statement to Residents’ Journal, CHA said they currently have a good screening process in place to check the backgrounds of contractors bidding to manage and demolish their properties, among other services.

“The CHA does a number of background checks on the companies bidding for CHA contracts. Currently, the CHA checks a list of debarred companies and performs a Dun & Bradstreet check for the company’s financial information. (This ensures that contractor is running a financially sound business and would thus be in a better position to fulfill their contract obligations with the CHA.) CHA also asks bidders for references within their proposals, which CHA then checks. Additionally, CHA asks for contractor affidavits and inquires as to whether the company is involved in any lawsuits,” stated the July 16 email.

CHA claimed to have had no idea that Moorehead and Associates had been fired from managing the family and elderly units at the St. Louis Housing Authority while they were managing some CHA properties in 2000.

“No. We were not aware of the firing,” Hill’s email read.

Moorehead couldn’t be reached at the time of this report. The message for the number at his office located at 833 N. Orleans St. said the line was being checked for trouble.

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