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Landlord Lashes HUD, Will Sell His Federally Subsidized Housing Units

February 15, 1990|JOHN HURST and DAN MORAIN | TIMES STAFF WRITERS

WASHINGTON — The head of a company that controls tens of thousands of subsidized housing units for the poor announced Wednesday he is divesting himself of most of the dwellings after accusing the federal Department of Housing and Urban Development of trying to drive him out of business and making him a "scapegoat" for HUD's own problems.

A. Bruce Rozet, chairman of Associated Financial Corp. of Santa Monica and an influential Democratic fund-raiser, said at a news conference HUD's allegations that his firm has seriously mismanaged low income property are part of a campaign of "dirty tricks."

Rozet denied accusations that his firm mismanaged property and related federal funds and said that HUD Secretary Jack Kemp, a Republican, might have political motivations in suspending his company last month from acquiring any further federally subsidized housing projects.

"Over the past eight months, we have been the target of a carefully orchestrated campaign to discredit us and drive us out of business," Rozet said in a prepared statement.

Kemp quickly responded with a broadside of his own in the increasingly bitter dispute. He said in a prepared statement that living conditions at several low income properties "managed or controlled by AFC or its spider web of partnerships speak for themselves. . . .

"But my outrage is not directed at any one owner or manager," the statement continued. "It is directed at the fact that while the federal taxpayer has provided handsome subsidies and tax benefits to encourage the private sector to own and manage housing for low income people, some owners have taken the money and run--leaving families . . . living in squalor and fear."

Rozet said he is negotiating with individuals interested in acquiring 300 of the 350 housing projects controlled by his company nationwide.

He said, "for the sake of the tenants who are innocent victims in this cross-fire, we hope to be able to pass the baton to individuals who share our sense of vision and commitment to meeting the need of disadvantaged people."

Rozet refused to identify the individuals interested in taking over the properties. But Stephen D. Moses, a partner of Rozet on several housing projects--including some of those that are in allegedly poor condition--told The Times that Rozet asked him about a month ago if he was interested in joining with a group to acquire the housing units. Moses said he turned down the offer, fearing he would run into the same problems with HUD that Rozet experienced.

HUD on Wednesday released a Jan. 24 internal memo accusing Associated Financial and itsaffiliated company, Housing Resources Management, of a raft of violations involving low income housing in Washington, D.C., and Oklahoma.

Rozet maintains that HUD's accusations of mishandled money can be explained partly because of HUD'S own bookkeeping procedures. The funds allegedly mishandled, he said, are relatively minor, totaling about $35,000 out of more than $70 million in rents per year handled by the firm.

But HUD General Counsel Frank Keating says the accusations represent only a "snapshot" of American Financial's network of housing, and he expects further examination to reveal more problems.

"We took a photograph . . . of two jurisdictions, Washington, D.C., and Oklahoma, and examined some isolated (housing) projects," he said. "We have not examined the rest of the portfolio yet. . . . (From) this isolated snapshot, we shudder to think what might develop in a larger examination."

The HUD memo also indicates the FBI has joined the federal office of the inspector general in an investigation of alleged overcharges by Housing Resources Management on vacant units at two housing projects in Oklahoma.

Rozet denies the allegation.

The dispute heated up one day after Charles Bazarian, a former business associate of Associated Financial from about 1980 to 1985, was sentenced to five years in prison by a federal judge in Oklahoma City after pleading guilty to skimming funds from HUD projects and a savings and loan swindle in Orange County.

"What you have done," said federal Judge David Russell, "is at the very heart of the scandal that has engulfed HUD" and the savings and loan industry.

Asked about his relationship with Bazarian, Rozet said the convicted swindler never worked for Associated Financial, but he did act as a finder of housing projects for purchase.

The housing projects were sold to investors interested in tax savings through a system that allows such investors substantial breaks on taxes in return for purchasing interest in the dwellings.

A large part of Associated Financial's business has involved putting together syndicates of investors to finance the purchase of such housing for which the company is paid fees.

Sometimes the housing is in extremely poor condition, and critics maintain there has been little incentive for the investor-owners to make needed repairs.

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