HUD wants $2.3 million from greedy Cleveland poor housing operators

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.

Vesta Corporation CEO Arthur Greenblatt’s mismanagement of federal funds connected to Rainbow Terrace has resulted in horrible living conditions for the low-income property’s residents.

The HUD OIG audit was released from the Chicago, Illinois regional office on September 28, 2018.  Russian American 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.

Vesta Corporation’s upper management team can’t manage federal funds properly says HUD’s inspector general; but they’re paying themselves excessive fees for their law violating management.

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.

Arthur Greenblatt’s Vesta Corporation was already not investing HUD program funds in properly maintaining Rainbow Terrace before the March 26, 2018 fire.

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.

Contact this author at brewerquest@gmail.com

Eric Jonathan Brewer

Cleveland's most influential journalist and East Cleveland's most successful mayor is an East Saint Louis, Illinois native whose father led the city's petition drive in 1969 to elect the first black mayor in 1971. Eric is an old-school investigative reporter whose 40-year body of editorial work has been demonstrably effective. No local journalist is feared or respected more.

Trained in newspaper publishing by the legendary Call & Post Publisher William Otis Walker in 1978 when it was the nation's 5th largest Black-owned publication, Eric has published and edited 13 local, regional and statewide publications across Ohio. Adding to his publishing and reporting resume is Eric's career in government. Eric served as the city's highest paid part-time Special Assistant to ex-Cleveland Mayor Michael R. White. He served as Chief of Staff to ex-East Cleveland Mayor Emmanuel Onunwor; and Chief of Communications to the late George James in his capacity as the Cuyahoga Metropolitan Housing Authority's first Black executive director. Eric was appointed to serve as a member of the state's Financial Planning & Supervision Commission to guide the East Cleveland school district out of fiscal emergency and $20 million deficit. Former U.S. HUD Secretary Alphonso Jackson told Eric in his D.C. office he was the only mayor in the nation simultaneously-managing a municipal block grant program. Eric wrote the city's $2.2 million Neighborhood Stabilization Program grant application. A HUD Inspector General audit of his management of the block grant program resulted in "zero" audit findings.

As a newspaper publisher, Eric has used his insider's detailed knowledge of government and his publications to lead the FBI and state prosecutors to investigations that resulted in criminal prosecutions of well-known elected officials in Ohio; and have helped realign Cleveland's political landscape with the defeat of candidates and issues he's exposed. Eric's stories led to the indictments of the late Governor George Voinovich's brother, Paul Voinovich of the V Group, and four associates. He asked the FBI to investigate the mayor he'd served as chief of staff for public corruption; and testified in three federal trials for the prosecution. He forced former Cuyahoga County Coroner Dr. Elizabeth Balraj to admit her investigations of police killings were fraudulent; and to issue notices to local police that her investigators would control police killing investigations. Eric's current work has resulted in Cuyahoga County Judge John Russo accepting the criminal complaint he guided an activist to file against 24 civil rights-violating police officers in the city he once led for operating without valid peace officer credentials. USA Today reporters picked up on Eric's police credentials reporting from his social media page and made it national.

Eric is the author of of his first book, "Fight Police License Plate Spying," which examines the FBI and local police misuse of the National Crime Information Center criminal records history database. An accomplished trumpet player and singer whose friendship with Duke Fakir of the Four Tops resulted in his singing the show's closing song, "Can't Help Myself": Curtis Sliwa of New York's Guardian Angels counts Eric among his founding chapter leaders from the early 1980's role as an Ohio organizer of over 300 volunteer crime fighters in Cleveland, Columbus and Youngstown, Ohio. For his work as a young man Eric was recognized by Cleveland's Urban League as it's 1983 Young Man of the Year.

Known in Cleveland for his encyclopedic knowledge of government and history, and intimately-connected with the region's players, every local major media outlet in Cleveland has picked up on one of Eric's stories since 1979. There is no mainstream newspaper, television or radio outlet in Cleveland that does not include an interview with Eric Jonathan Brewer in its archives over the past 40 years.

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