For years, St. Louis redevelopment officials gave millions of dollars in federal funds to two neighborhood redevelopment groups that they headed, a violation of federal conflict-of-interest laws, according to an audit obtained Tuesday by the Post-Dispatch.
Mayor Vincent C. Schoemehl Jr. must end the practice, says the audit from the U.S. Department of Housing and Urban Development, the agency that gave the money.
The funds were given to the St. Margaret of Scotland Housing Corp., active in the Shaw neighborhood, and the DeSales Community Housing Corp., which is active in the Compton Heights, Tower Grove East and Fox Park neighborhoods.
Some board members of the city’s Community Development Agency sat also on the boards of the two agencies.
A spokesman for Schoemehl did not respond to questions. But Chuck Kindleberger, acting director of the city’s Community Development Agency, said the ”possible” conflicts of interest ”no longer exist, having been corrected more than two years ago.”
HUD wants Schoemehl to repay $50,415 in block grants that auditors say was given to city employees as commissions for selling property the city bought with block grants between 1986 and 1988. The bonuses were in addition to their salaries.
Michelle Duffe, who headed the Land Reutilization Authority, a city agency that acquires tax delinquent property, paid the bonuses to herself and some employees, the audit said.
In a memo date July 3, HUD’s regional inspector general, Phillip L. Whitaker, said: ”Conflict of interest situations . . . resulted in improperly spent federal grant monies. There is also the potential for favored treatment of individuals and/or subrecipient agencies.”
Whitaker’s report was based upon an investigation conducted by the General Accounting Office, the investigative agency for Congress, said John Susi, deputy manager of HUD’s St. Louis office.
The GAO began investigating the city’s block grant program last year at the request of Rep. William Clay, D-St. Louis. Clay’s office declined to comment on the report.
HUD gives St. Louis about $20 million in block grants annually for a variety of programs, including housing, economic development and social services. The money is targeted for areas populated by people with low-to-moderate incomes.
The city funnels the block grants to the Community Development Agency, whose board members have often run neighborhood organizations that received block grant funds, according to the audit.
One of those neighborhood organizations was the St. Margaret of Scotland Housing Corp., which received $3 million in block grants and Urban Development Action Grants between 1982 and 1989 for housing and other programs.
Two members of St. Margaret’s board – Dennis Coleman and the Rev. Richard Quirk – were members of the Community Development Agency’s board, which gave the block grants to St. Margaret’s, the audit said.
”I was a member of both groups,” Quirk said. ”I never voted on any proposals that were directly to affect St. Margaret’s. We were citizens committed to reviving our neighborhood. We did our best not to engage in any improper actions.”
Duffe also served on the corporation board. Neither she nor Coleman, who is now executive director of the St. Louis County Economic Council, is now a member of St. Margaret’s board.
Coleman denied that he had been a member of St. Margaret’s board while he ran the Community Development Agency. ”I was on the St. Margaret board for a very brief period of time,” he said. ”I think I attended a couple of meetings.”
The audit also raised conflict-of-interest questions over $1 million in block grants that had been given to the DeSales Housing Corp., whose board members included Coleman and Janice Huebner, another CDA board member.
Coleman said he had resigned from the DeSales board when he became the city’s CDA director. He returned to the DeSales board when he quit the job with the Community Development Agency.
”I abstained on any vote that had anything to do with DeSales,” Coleman said. ”I don’t think there can be a conflict if you abstain from voting.”
The CDA board gave block grants also to the Land Reutilization Authority, which used some of the federal funds to pay its employees, including Duffe.
Those employees also worked for a private company, LRA Real Estate Inc., that was headed by Duffe and housed in city-owned offices.
LRA Real Estate, which is now defunct, was formed to sell property owned by the city and private landowners. Its employees were to get commissions for selling private property but not land bought by the city with block grants, the audit said.
But HUD auditors found that Duffe had paid a total of $50,415 in commissions to herself and other LRA Real Estate employees who sold city-owned land bought with block grants while their salaries were paid ”in part or in whole” with block grants.
Duffe was on vacation and unavailable for comment Tuesday.
”It is unusual” for city employees to receive commissions for selling land acquired with block grants, Susi said. ”It shouldn’t happen.”
Instead of giving that money to employees, Susi said, the city should have used the $50,415 for other programs, such as housing.
Shaw Archives 