The U.S. Department of Housing and Urban Development has charged that the nonprofit foundation that owns the federally subsidized Concord senior citizens complex in Pasadena has violated several agreements with the agency and may have diverted funds for private purposes.
HUD made the allegations in a complaint filed last week in U.S. Bankruptcy Court in Los Angeles, where the Concord Senior Housing Foundation has submitted a petition for reorganization under Chapter 11 of the U.S. Bankruptcy Code.
Philip McNutt, an attorney representing the housing foundation, characterized HUD's charges as a "witch hunt," and denied that the foundation has committed any substantive violations of its agreements with the agency.
HUD's complaint is the most recent development in a legal battle over the housing foundation's attempt to sell the 150-unit building to satisfy creditors.
HUD, which holds a $2.6-million mortgage on the Concord and subsidizes the rents of its elderly tenants, filed its complaint June 23, the same day Judge William J. Lasarow rejected the foundation's request to sell the building to a private North Hollywood firm for $5.5 million.
HUD opposed the sale, contending that it would result in higher rents and therefore higher rent subsidies.
Lasarow has not yet set a date for a hearing on the HUD complaint against the housing foundation.
The foundation was established to buy the property in 1979 by the Rev. William Steuart McBirnie, a charismatic Glendale minister whose anti-communist sermons on his nationally syndicated radio show helped him to build a network of church-related organizations.
More recently, however, McBirnie and his empire have been sued by former parishioners who claimed that he failed to repay loans. McBirnie, who gave up his pulpit at the United Community Church in Glendale in April after 25 years, has blamed his financial woes on bad investments and poor financial advice.
In the past year, the housing foundation and three other groups with ties to McBirnie--Community Churches of America, the California Graduate School of Theology and the United Community Church in Glendale--have filed for protection from creditors.
Attorneys for United Community Church maintain that McBirnie "has never held any proprietary interest or control over church affairs other than those specifically delegated to him in his capacity as chief minister."
In its complaint, HUD alleges that the housing foundation:
- Violated its deed of trust by failing to defend a lawsuit by former McBirnie followers that resulted in a $1.2-million judgment against the foundation "for obligations incurred by Rev. McBirnie and affiliated organizations for actions unrelated to the operations of the Concord."
- Failed to abide by a court settlement requiring it to amend its articles of incorporation to ensure that future buyers would be nonprofit, non-religious organizations.
- Violated a regulatory agreement prohibiting the foundation from encumbering the mortgaged property or filing any petition in bankruptcy. The foundation has borrowed about $350,000 from the California Graduate School of Theology and about $50,000 from United Community Churches of America.
- Issued a $1,300 check signed by McBirnie's wife, June, for work on a Lake Arrowhead property unrelated to the Concord.
- Failed to submit audited annual financial statements, in violation of its regulatory agreements with HUD.
In response, McNutt said that the foundation's failure to provide the financial statements and change the language its articles of incorporation amounted only to "technical defaults" that would not have mattered had the building's sale been permitted, but which the organization would be "more than happy to bring up to date."
McNutt said that June McBirnie had received some money from the foundation for work she did as social director, but that the money had since been repaid. He said he did not know the amount.
McNutt said that HUD was aware of any liens encumbered by the housing foundation as far back as 1983, when the two organizations reached a settlement over a tenants' suit to block a previous attempt to sell the building to the same North Hollywood firm.
"For HUD to say it didn't approve is pure fabrication," McNutt said.
Judgment on Appeal
McNutt said that the foundation is appealing the $1.2-million judgment against it, contending that it did not receive proper notice of the lawsuit.
HUD's complaint asks the court to order foundation officials to pay the $1.2 million judgment from personal assets and discharge any unauthorized liens against the building.
The document also asks the court to order the housing foundation to abide by its contractual agreements with HUD regarding audits and future buyers of the Concord.
In addition to the housing foundation, HUD's complaint names Community Churches of America, the California Graduate School of Theology, McBirnie, his wife and Herbert Moore, the housing foundation president.
Sale Made No Difference
Nancy Christopher, the HUD attorney who prepared the complaint, said the complaint would have been filed whether or not Lasarow approved the sale of the Concord.
"We would have pursued our rights anyway," Christopher said. "We're looking to protect the property. We want to try to remove the liens and eliminate the reasons for the sale."
Said McNutt: "Obviously, if the Concord didn't owe any money, it might not have to be sold, but the Concord does owe money."
In May, Lasarow tentatively approved the sale to SHB Financial Corp., a North Hollywood-based real estate investment firm that tried to buy the Concord in 1982.
But last week he reversed himself when HUD and Concord residents pressed their opposition to the terms of the deal. Lasarow said he lacks the authority and jurisdiction to force HUD to accept the sale.