Low income housing tax credit developer and star government witness in the Dallas public corruption trial Bill Fisher admitted in testimony in federal court today that he paid $55,000 to a community organization to support his application to the state for low income housing tax credits.
Fisher’s testimony is reported in the Dallas Morning News’ Crime Blog.
I posted in a blog entry here on July 29 the contract between Fisher and the Black State Employees Association of Texas (BSEAT) for $55,000. To earn the money, BSEAT was required to obtain support letters for Fischer’s development from the city council member and state senator for submission to the Texas Department of Housing and Community Affairs (TDHCA) and to speak in favor of the development at TDHCA public hearings.
Rules in the current Qualified Allocation Plan (QAP) appear to prohibit developer’s from paying community organizations to support their housing projects. The QAP in force at the time Fisher paid the community organization is not available on the internet at this time. Here is the current rule…
(L) A certification that the Applicant, Developer, or any employee or agent of the Applicant has not formed a Neighborhood Organization for purposes of subsection (i)(2) of this section, has not given money or a gift to cause the Neighborhood Organization to take its position of support or opposition, nor has provided any assistance to a Neighborhood Organization to meet the requirements under subsection (i)(2) of this section which are not allowed under that subsection, as it relates to the Applicant’s Application or any other Application under consideration in 2009. (QAP page 34)
The Dallas Morning News reported Fisher’s testimony today as…
Fisher said he agreed to pay $55,000 to Allen McGill’s and Darren Reagan’s BSEAT group (which prosecutors allege was a sham organization).
Why? Busch [federal prosecutor] asked.
“At the time they appeared to be an established community group and we needed help,” Fisher said. “Our projects were going south and it would probably have been a blow to our business we would not have recovered from.”
Fisher: “We’re desperate at this point.” He said he his company was basically ready to involve BSEAT in any way to salvage the projects. The company had invested more than $1 million on those two projects based on Hill’s purported support, Fisher said.
Fisher said he signed a contract with BSEAT on Oct. 20, 2004.
Zinger of the afternoon came when Busch asked Fisher, who else did you hire for your projects?
“Who didn’t I hire,” Fisher said, then ticked off some other names, including consultant Carol Reed and a former state senator (David Kane?). “We pretty much involved anybody we could to salvage it.”
Bribing community organizations to support your proposed low income housing development is disgusting.
Fisher does not seem to have been bothered by the ethics of his actions. This is further proof of the “culture of greed” that I have blogged has infected some developers in the housing tax credit development industry in Texas.
This scandal, reported on the front page of the state’s leading newspaper is not going to blow over. These practices have inflicted major damage to public support for housing programs. State sanctions against developers resorting to the type of actions that Fisher engaged in need to be carefully reviewed by TDHCA board and staff. Rules must be put in place and vigorously enforced to permanently remove developers from doing business with the state who resort to bribing community organizations to support their projects.
Offering a bribe to a community group is not nearly as disgusting as a sham community group insisting on a bribe in order to support a tax credit project, then funneling some of the take to the elected officials while also insisting that only certain friendly contractors be hired in the process. The developer in this case may be a ——(insert insult here), but at least he had the courage to stop the shake down practice while other developers continue allowing the status quo. Which is worse?
It does not look like courage on the part of the developer to me as much as economic self interest.
The developer has sought to portray himself in the press as courageous for standing up to a corrupt process. But the testimony shows he was only too willing to play the game until the price became too high. (See my August 12 blog for details).
The community shakedown artists and corrupt officials in this case will be punished by the court. That is as it should be.
The policy question is whether will we continue to allow a tax credit system in Texas to operate in a way that sends board members of TDHCA (several years ago) to prison for taking bribes from developers and sends elected officials and pseudo community organization people to jail every few years for taking bribes from developers whenever the competition for tax credits makes one developer angry enough to turn on another developer and blow the whistle. The government’s own witness admits he was playing this payoff game himself until the price got too high (half of his $1.5 million developer fee).
This trial has taught us what we all knew — corruption is endemic in the Texas LIHTC program. There is too much money on the table. It allows developers to use it to pay off people and all that extra money attracts shakedown artists.
As I said, the courts will deal with the extortionists. But shame on us for trying to put all the blame on them. We must clean our own house of those whose personal ethics are so low that they play these games.
Courage only in the sense that the developer could loose his livelihood by bucking the system. His economic self interest gets muddied after wearing the wire. After all, who now wants to work with the guy or his company?
The price to play only elevated to a level that the developer did not want to pay because of the system that requires the support of state and local elected official support (local support if the development is in a high LIHTC concentration area) and neighborhood groups. I’ve never known a developer to willingly part with money in the form of a direct bribe to sway a community group to support their development without being asked. I have seen many instances where developers were encouraged to hire certain consultants/lobbyist to gain the support of elected officials and neighborhood groups for their developments. And from where do these consultants gain the political influence? A cynic would say from campaign contributions. What’s the difference you may ask? Contributions filed with the Texas Ethics Commission are legal.
You mention that the courts will also take care of the sham community groups and corrupt officials, but you fail to mention that at least one developer and his wife have cut deals and will serve some jail time. It seems as if the courts are working to purge the system on both sides of application process.
Based on your analysis, it would seem as if the only thing to do is to purge the overly proscriptive statue governing the QAP and eliminate the support letter from state and local officials and community groups. That seems easy enough to do, except when you consider that many legislators benefit directly from this system and they are the ones that would have to make the change. Perhaps Rep. Hodge will carry that piece of legislation for you in the next session.
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I share your pessimism that the Texas Legislature will roll back the local elected official scoring points.
I set out in a blog entry on August 7 ways to objectify the letters of support from community groups and local officials. If those reforms are put in place they would go a long way toward curtailing these abuses.
I would also add the reform I suggested in my post of August 13 — cutting back on the excessive levels of developer profit in the LIHTC program. A large part of this behavior is fueled by the excessive money sloshing around in developer’s pockets through the tax credit program.