Charleston developer Douglas E. Pauley is building a 32-unit apartment complex on land formerly owned by state Treasurer John Perdue in Mason County. The FBI and U.S. Attorney's Office are investigating.
CHARLESTON, W.Va. -- A month after Mason County commissioners voted against a Charleston developer's plan to build an apartment complex on land owned by West Virginia Treasurer John Perdue, a state housing agency board that Perdue serves on approved changes that paved the way for the $3.67 million project to be funded and constructed, records show.In May 2009, Mason County commissioners voted unanimously against a request from Perdue and developer Douglas E. Pauley to issue a letter to the West Virginia Housing Development Fund supporting -- or not taking a position on -- Pauley's proposed apartment complex for seniors and the disabled near Point Pleasant.A month later, the Housing Fund's board voted unanimously to strike a decade-old requirement for local support from the agency's "Qualified Allocation Plan," which sets ground rules for developers, such as Pauley, who apply for low-income tax credit funding.Perdue's aide and designee to the Housing Fund board of directors -- former assistant treasurer Paul Hill -- was among those who voted for the change.
Housing Development Fund staff members later stripped the local-support requirement from the agency's project application forms, clearing the way for Pauley to finance the project and buy 11 acres of farmland from Perdue and his wife, Robin, in December 2010."It seems like they were changing this for one person," said Rick Handley, a Mason County commissioner. "You shouldn't change something just because someone doesn't get their way. I'd like to know who changed it, and why they did it all of a sudden?"The FBI and U.S. Attorney's Office are investigating Pauley's land deal with Perdue. Last month, federal prosecutors told Pauley he wouldn't face criminal charges, provided he continues to cooperate in the investigation.Perdue has said he and his wife followed "all legal procedures" while selling the Mason County property to Pauley. He refused to comment last week.Pauley, a Perdue campaign contributor, paid the Perdues $215,000 for the Mason County property. About two weeks later, the Housing Development Fund awarded Pauley a $3.67 million stimulus grant to finance his apartment project.Records show the Housing Development Fund's former qualified-allocation plans had required project applicants to submit a letter of local support or no opposition from local officials since 2000.Without the support letter, Pauley's Mason County project -- called Milton Place, after Perdue's late father-in-law -- wasn't eligible for federal funding under Housing Development Fund rules at the time.That changed after the Mason County Commission rejected repeated requests from Pauley and the Perdues for such a letter.At a June 11, 2009, meeting, Housing Fund Senior Director Sherry Bossie, who oversees low-income tax credit projects, advised board members that sections of the proposed 2009-10 allocation plan had been removed "due to recent issuance of guidance from the IRS," according to the meeting minutes.At the time, Bossie did not specifically mention that the local-support requirement had been deleted, the minutes show. Bossie said "requirement for requests, administrative and processing, and allocation policies" sections were removed from the 2009-10 allocation plan. The local-support letter stipulation had been included in the "requirements for requests" section, according to a Sunday Gazette-Mail review of funding allocation plans from previous years.Such plans -- every state's housing financing agency has one -- detail the selection criteria and application requirements for housing tax credits.
Then-Gov. Joe Manchin formally approved the Housing Fund's 2009-10 allocation plan changes on July 27, 2009.Bossie did not respond to questions last week about the housing board's decision to drop the local-support letter requirement from the 2009-10 funding plan.State Democratic Party Chairman Larry Puccio, who served as chairman of the Housing Development Fund's board at the time, also didn't return several phone messages left for him over the past two weeks.The Gazette-Mail requested a copy of the "IRS guidance" Bossie referred to at the June 2009 Housing Fund board meeting, but housing officials provided no documentation. The newspaper reviewed IRS guidance reports in 2009 and couldn't find any that suggested removing the local-support requirement."If this was changed by the feds, that's one thing," Handley said. "But if the state changed it, then it comes back to one project, and that doesn't sit right with us as county commissioners."The Internal Revenue Service and other federal agencies didn't require housing developers to secure local officials' support for low-income tax credit projects. That was strictly a West Virginia Housing Fund eligibility requirement -- until the agency changed its rules.
On May 7, 2009, Mason County commissioners voted unanimously against Pauley's project, saying the apartment complex was "out of character" with the surrounding area. Commissioners also noted that nearby homeowners opposed the project, which is located six miles north of Point Pleasant.Although the Housing Development Fund rescinded the local-support requirement from its funding allocation plan the following month, the provision remained in the agency's "administrative documents that applied to anyone who submitted an application," a Housing Fund lawyer said last week.
On Aug. 13, 2009, Pauley sent a letter to the Mason County Commission, requesting a "written letter of unqualified support or no opposition" for his project "in accordance with the provisions of the West Virginia Housing Development Fund's low-income tax credit program . . ." Pauley forwarded a copy of his letter to Bossie.Two weeks later, County Commission President Miles Epling sent a letter to Bossie, notifying her that commissioners were "vehemently opposed" to Pauley's Milton Place project."There was no local endorsement of this project," Epling wrote. "We trust that your agency will not have any desire to force it on us."Mason commissioners said they never heard back from Bossie.In September 2009, Pauley filed a complaint with the U.S. Department of Housing and Urban Development against Mason County commissioners, alleging they discriminated against the elderly and disabled by refusing to support his project.Later that month, Pauley offered to drop his discrimination complaint if commissioners would issue a letter of support or pay him $30,000, records show.Commissioners refused both requests.Weeks later, HUD's Office of Equal Opportunity sent investigators from Philadelphia to Mason County. HUD agents interviewed Handley and Commissioners Miles Epling and Bob Baird.Epling, a U.S. Marine Corps veteran who received a Purple Heart for wounds suffered during the Vietnam War, lost both of his legs in battle. Baird was 76 years old when Pauley filed his discrimination complaint.HUD investigators never returned to Mason County or issued a report on their findings, Mason officials said.For months, Mason County commissioners presumed Pauley had dropped the project, but heard rumors last December that the Housing Development Fund's staff had approved a $3.67 million federal stimulus grant that allowed Pauley to buy Perdue's land and start construction.On Dec. 30, commissioners wrote a letter to Bossie about Pauley's project. They said she didn't respond, so commissioners filed a Freedom of Information Act with the Housing Development Fund on March 3, hoping to pry loose answers."Frankly, we have been baffled as to why any government agency in our state would take the position that they do not have to respond to questions from their citizens," County Administrator John Gerlach wrote in the commission's FOIA request.Gerlach also asked, "Did the Housing Development Fund allow the Milton Place development to participate in the low-income housing tax credit program without local approval as required by law?"The FOIA request prompted a response from Housing Development Fund Executive Director Joe Hatfield three weeks later -- although public officials are supposed to respond to such requests within five days.Hatfield's one-sentence answer: "Local jurisdiction approval of the project is not required under federal law.""He never told us why that changed," Handley said. "It's really aggravating."Last week, Housing Development Fund officials would not disclose the date when agency staff members -- in response to the June 2009 allocation plan change -- stripped the local-support requirement from its project funding application.This past June, the Housing Development Fund board approved the agency's 2011-12 funding allocation plan. The local-support requirement was left out of that plan, as well. Assistant Treasurer Danny Ellis, who now represents Perdue on the Housing Fund board, voted to approve the plan, meeting minutes show.Last month, federal agents raided Pauley's Encore Management office in Charleston, seizing hundreds of boxes of documents. The FBI returned the documents a week later, after Pauley agreed to cooperate with the investigation.Pauley, a former Housing Development Fund employee, has received tens of millions of dollars in federal funding through the state agency. He owns and manages more than 40 low-income apartment complexes across the state.Federal subpoenas released this week show investigators are scrutinizing Pauley's housing projects and the tax-credit funding he's received through the Housing Development Fund. Investigators also are reviewing recent meetings Pauley has had with Housing Fund staff members.Perdue isn't named in the subpoenas or the search warrant the FBI used to seize documents from Pauley's Charleston office.Reach Eric Eyre at email@example.com or 304-348-4869.