Thursday, October 09, 2008

Unauthorized municipal expenditures - Record - Christie subpoenas Paramus records

Published in the Bergen Record, Monday, October 6, 2008

[Funds transferred without Council approval; Christie subpoenas]

Affordable housing funds shifted

Monday, October 6, 2008
Last updated: Monday October 6, 2008, EDT 6:43 AM

Paramus Mayor James Tedesco authorized the transfer of nearly $4 million in affordable housing funds without obtaining the Borough Council's approval, an apparent violation of affordable housing rules, public records show.

Council approval for borough expenditures is required under state guidelines, said Chris Donnelly, a spokesman for the New Jersey Department of Community Affairs.

Tedesco, a Democrat who became mayor in 2003, ordered the largest transfer — $3.6 million — from the affordable housing fund to the Paramus Affordable Housing Corp. in January 2004, according to municipal records. The rest of the money was allocated in three smaller transfers over several years.

Tedesco, who also is president of the non-profit PAHC, offered only a written statement conveyed through Keith Furlong, the borough's spokesman.

"If the borough did not adopt any specific resolutions, this was an oversight," Tedesco said.
His Republican predecessor, Cliff Gennarelli, ordered a similar transfer, but for a much smaller sum, $100,000. Gennarelli did not respond to requests for comment.

The U.S. Attorney's Office has served at least two subpoenas related to the borough's affordable housing program. The non-profit received one in August and the borough received one in July.

It is unclear what specifically drew federal attention.

Much of the overall $4 million transferred to PAHC eventually went to contractors, whose role in building affordable housing in Paramus is unclear.

The money eventually made its way to Paramus Affordable Development LP, a for-profit company that disbursed borough, county and state funds to contractors for a 46-unit project completed in 2005.

A significant portion of the project's funding — $3.6 million — came from the borough itself. Bergen County paid $900,000, and the state provided about $4.4 million.
The state guidelines also bar a mayor from formal involvement in releasing affordable housing funds, Donnelly said.

"The town council authorizes expenditures," he said. "The CFO would ultimately execute them."
The borough did not provide any council resolutions authorizing the transfers, despite several public records requests by The Record. Instead, it provided four resolutions that did not specifically authorize the transfers.
$3.6M mystery
Council members who served in 2004 also did not recall voting to release the $3.6 million. Former council members Sandra Gunderson, Joe D'Ambrozio and Connie Wagner, who is now an assemblywoman, said they did not remember allowing that sum for affordable housing.
"When it came to affordable housing, I saw virtually nothing," Gunderson said.

The current council president, Frank Ciambrone, also served on the council at the time. He did not respond to several calls for comment.

In a letter to Paramus Chief Financial Officer Joseph Citro on Jan. 6, 2004, Tedesco requested that $3.6 million be moved from the borough to the PAHC account "as per the agreement approved by Dennis J. Oury LLC."

Oury was Paramus' borough attorney in 2004. State records also list him as the registered agent for PAHC.

State records held by the Department of Community Affairs show that $3.6 million was transferred, but federal tax records show no record of $3.6 million coming into or going out of PAHC in 2004.

Tax law experts could not reconcile the contradiction. Victoria Bjorklund, former chairwoman of the IRS Advisory Committee on Tax Exemption, said that if the non-profit received $3.6 million — as state records indicate — then, by law, the money would have to appear on the tax form.
"All the contributions should be shown," she said. "It should show up at least on the balance sheet as funds that came in. If it came in and went out the same day, it should still show up."
Oury involvement 
Oury resigned as counsel for the Bergen County Democratic Organization last month after he and BCDO Chairman Joseph Ferriero were indicted by a federal grand jury on eight counts of fraud conspiracy not related to Paramus.

The indictment accuses them of using political influence to gain contracts for a consulting firm in which both had financial stakes. Oury's attorney, Gerald Krovatin, did not return calls for comment.

The accountant who handled PAHC's 2004 tax return, as well as the returns in 2003 and 2006, was William Katchen, according to the tax records. He, too, did not respond to several requests for comment.
46-unit project 
The U.S. Department of Housing and Urban Development slapped Katchen with a one-year suspension from federal housing work in 1990 after the Passaic Housing Authority misspent $1.7 million in taxpayer money. He was the authority's accountant.

After money was released to PAHC, state records show it went into an escrow account held by the New Jersey Housing and Mortgage Finance Agency.

The mortgage agency then released the money to Paramus Affordable Development LP, the for-profit company that disbursed funding for the 46-unit project.

Eugene Walsh is president of Paramus Affordable Development LP, a company that shares an address with four of those contractors:
* Penwal Affordable Housing Corp. (non-profit): Walsh and Laury Pensa, directors.
* Canyon Capital Corp. (for profit): Pensa, president, incorporator, agent.
* Summit Capital Corp. (for profit): Pensa, president, incorporator, agent.
* Steamboat Corp. (for profit): Walsh, president; Pensa, agent and incorporator.
Steamboat received a $976,500 development fee from Paramus Affordable Development for a project with an $8.1 million budget, according to records provided by the state. Canyon received at least $44,000, and Summit took in at least $5,000.
Development fee 
In a financial disclosure form filed with the state's Housing Mortgage and Finance Agency, Walsh wrote that Penwal — which, according to its tax form, has "implemented and developed low-income housing projects in Dumont, Garfield, Jersey City and Paramus" — would get the development fee. He did not mention his interest in Steamboat on the form.

Other records obtained from the state mortgage agency show that the development fee went to Steamboat.

A financial disclosure form submitted to the state for Steamboat does not list Walsh or Pensa's interest in Penwal or Paramus Affordable Development LP. Pensa's signature appears on that financial disclosure statement.

In addition, a public records request submitted to HMFA by The Record showed that disclosure statements for Penwal and Canyon Capital were not filed with the agency.
Walsh and Pensa did not return calls about the payments.

Bergen County's United Way President Tom Toronto, who has experience with state-funded affordable housing projects, said development fees are a common cost of such projects. He also said any changes regarding development fees would have to be approved and recorded by HMFA.

"HMFA has to bless it each step of the way," he said. "Otherwise, the money wouldn't flow."


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Plainfield resident since 1983. Retired as the city's Public Information Officer in 2006; prior to that Community Programs Coordinator for the Plainfield Public Library. Founding member and past president of: Faith, Bricks & Mortar; Residents Supporting Victorian Plainfield; and PCO (the outreach nonprofit of Grace Episcopal Church). Supporter of the Library, Symphony and Historic Society as well as other community groups, and active in Democratic politics.