By Jim Schutze
By Rachel Watts
By Lauren Drewes Daniels
By Anna Merlan
By Lee Escobedo
By Eric Nicholson
Williams Run was supposed to be a sterling example of the latest thinking in affordable housing when Virginia McGuire convinced state officials to approve her plans to buy and rehabilitate the place in December 2000.
Unlike public housing, where the poor are concentrated in problem-ridden complexes, Williams Run was going to be an idyllic community. People from all walks of life would live together, there beneath the canopy of live oaks that shade the 252-unit complex near White Rock Lake. Single moms and minimum-wage laborers could live alongside students, government workers, accountants and other working professionals.
To keep the tricky population mix in balance, McGuire and her newly created nonprofit organization, Green Bridge Development Corp., promised to provide an array of social service programs not typically found at apartment complexes owned by profit-driven landlords. There were to be after-school programs for the kids, a new computer lab and English classes for adults.
Williams Run, located along the northern edge of Tenison Park golf course, was perfect for such an experiment. A product of the 1980s building boom, the complex was beginning to show its age, and the cost of constant repairs had prompted its owner to sell.
McGuire seemed like an ideal buyer. An expert in government housing policy whose political ties date back to the days when her father, Jim Wright, was Speaker of the U.S. House, McGuire knew how to tap into tax breaks and government-subsidized financing, the key tools the government provides for creating low- and moderate-income housing. Today, 16 months after buying the complex, McGuire is marketing Williams Run as a place "where dreams come true."
If that's the case, Lisa Hyland wishes her landlord would wake up.
"When they sold it, it just really went downhill," says Hyland, who moved to the complex in late 1999. "I had lots of friends here, but they all got disgusted and left."
Hyland says all you need to do is take a look around to see why. Wood balconies are rotting. The security gate seldom works. On one building, a gutter has pulled away from the roof and now hangs ominously over a resident's back porch. Inside Hyland's apartment, the washing machine leaks, but she says the management refuses to fix it.
Since the complex changed hands, the vacancy rate has climbed to 25 percent. McGuire confirms that middle-income residents have fled and are being replaced by low-income families, including some who rely on government assistance. These are the tenants who might benefit from the social services McGuire promised the state two years ago that she would create. But so far, none have been provided.
To some housing advocates and a couple of former tenants who have dug into the financial details of the property's sale, Williams Run is a case study in how state and federal housing programs can be exploited for profit.
Instead of being used to renovate, repair and maintain affordable complexes, the government incentives provide a layer of cream that savvy developers and their nonprofit partners can skim as up-front profits. By far the richest of those is a 4-year-old Texas program waiving all property taxes--city, county and school--for nonprofit organizations that claim they are providing affordable housing.
McGuire insists that she is running one of these "mission-driven" organizations. She calls her work in creating and maintaining affordable housing a "noble" cause.
But when Williams Run changed hands, McGuire and her husband, former state housing official Scott McGuire, were the first ones to benefit. At the closing, before a single low-income person was housed, a for-profit company run by Scott McGuire pocketed a $400,000 fee. Virginia McGuire's nonprofit was paid $100,000, money she used to pay herself.
While the deal was going through a state review, former tenants say the McGuires carried out a strategy of deception that kept them in the dark. The information blackout ensured that no opposition arose before the deal was sealed. The McGuires were so wary of criticism that they sued two tenants, brothers Hal and Ted Barker, for libel after they started to complain about the couple's business practices.
The lawsuit sparked a nasty feud between the Barkers and the McGuires that continues to this day.
"These people have no intention whatsoever to help poor people," Ted Barker says of the McGuires. "These people are sharpies. They know where the loopholes are. They know them by heart."
But the loudest critics of these types of deals are the McGuires' colleagues in Texas' affordable housing sector, who say the state's property-tax-break program has spawned a new breed of developer that cares very little about helping the poor.
"In many cases what is going on is properties are being transferred without any physical improvements and without significant rent reduction," says John Henneberger, co-director of the Austin-based Texas Low-Income Housing Information Service. "Community organizations concerned about providing housing see the abuses, and it makes them personally nauseated."
The critics, who say millions of dollars are being siphoned away from cities and school districts in exchange for few social benefits, have been pushing for reform before tax-break scandals become front-page news. This spring, Texas legislators and state housing officials have begun studying ways to rein in a program that is galloping out of control.
Today, Lisa Hyland is shopping for another apartment. At Williams Run she pays $585 a month for a one-bedroom unit, $30 less than under the old landlord and a good fit for the $30,000 a year she makes processing insurance claims at a dental office. But even the cheap rent is no longer reason enough to stay.
On a recent Saturday afternoon, Hyland talked about life at the complex while walking her dog. It is a chore she no longer feels comfortable doing at night, thanks to a rash of muggings and assaults that has made the once-tranquil complex a dangerous place to live.
"I'm scared to be here by myself," Hyland says. "I just put up with it, and now I'm to the point where I've got to go."
"It was meant to help a small group of organizations, a handful," says Ray Ocanas, executive director of the Texas Association of Community Development Corporations. "It was supposed to help them provide services like day care, adult education, computer centers or things like matched savings programs to get people on their way to owning their own homes. The problem is, the eligibility requirements were so loose, it was like backing up a dump truck and spilling out a load of cash."
There were plenty of people ready to scoop it up.
Before the exemption came into being at the start of 1998, only a dozen or so nonprofit groups applied to the state each year to become community housing development organizations, known in housing circles as "chodos." The designation is a federal one--used to dole out certain HUD funds unrelated to apartment houses--and it was this benchmark Texas lawmakers used to define who would be eligible for the property-tax break.
Before the exemption, only Habitat for Humanity and other volunteer-driven charities cared much about becoming chodos. Then suddenly, everyone wanted to become one. The prospect of a perpetual bye on all property taxes--beyond the authority of school boards, city councils, county commissioners and hospital boards--created a nonprofit land rush.
Last year, the state granted 82 organizations chodo status, and that doesn't include an uncounted number of chodos certified by city and county housing agencies, which can also confer that status.
"It turned into a major provision. With no taxes, apartment properties are cash cows. Twenty percent of your operating expenses go to property taxes," says Walter Moreau, director of Foundation Communities, which has been in the low-income housing field since the late 1980s and owns properties in Arlington, Carrollton and Austin. "All of a sudden you had nonprofits from California and Washington, D.C., rushing in to take advantage."
Along with the "FedEx"--or overnight--chodos came newly minted, one-man charities doing eight-figure deals, nonprofits dubbed "rent-a-reverends" working hand in glove with for-profit developers to buy four or five apartment complexes at a clip, with fat fees for everyone standing nearby when the deals closed. Critics call them "one- or two-Lexus" deals.
"There's virtually no oversight of the chodos," Moreau says. "If you fill out the application and check the right boxes, you're a chodo."
Fearing that a measurable loss of local tax revenue--or scandal--would prompt state lawmakers eventually to revoke the exemptions, several established groups pushed to tighten the requirements when the state Legislature met last year.
"We tried to proactively address the issue and make sure these monies would be used for some public benefit," says Moreau, who testified in favor of a reform bill introduced last spring. Adds Ocanas: "The idea was, if we're taking funds from schools and police departments and other city services, we should be putting money into some kind of services beyond housing."
The bill would have required the nonprofit to prove in an annual audit that 50 percent of its property tax exemption is spent on social services for tenants.
Moreau's group, for instance, would have easily met the requirement. It receives about $600,000 annually from the tax break at its eight properties and spends more than $1 million on social services, including a program in which it gives low-income families a 2-for-1 cash match on money they save to buy homes or put their kids in college.
The bill was meant to separate the wolves from the sheep by weeding out those who have been using the break simply for plump salaries or to pay out profits skimmed off the top when the buildings were purchased.
But there was hard-set opposition to reform, much of it coming from self-interested quarters. Among those who fought it were the Texas Apartment Association, representing owners whose properties' values are boosted by the heightened demand, and a collection of nonprofits that favored the no-strings-attached status quo.
At the forefront of that group, several sources agree, was Virginia McGuire. "She's done her projects, including her elderly deal in Richardson where they're going to be charging $1,000 a month, which in my mind is hardly mission-driven," says Moreau, referring to Green Bridge at Buckingham, a McGuire property that is under construction. "She helped organize a bunch of chodos in Dallas to fight any restrictions on the tax break. The argument was that in order to create new housing, you need a source of funds unrestricted. Everybody knows she's Jim Wright's daughter, and that still carries some weight."
During the 2001 session, McGuire had some potent allies, most notably millionaire developer John Condit of San Antonio, and a Fairfax, Virginia-based nonprofit called American Village Communities Inc., which has been on an apartment-buying spree in Austin and Amarillo.
According to its 1999 federal tax form, 75 percent of American Village's $396,000 budget went to pay the salaries of its four officers--two of whom worked only part-time--with much of the rest going to "property pursuit costs." One of its biggest costs last year was the hiring of lobbyists to keep Texas' tax holiday on the books with as few restrictions as possible. American Village Communities reported spending between $55,000 and $125,000 to hire four lobbyists during the 2001 session, state records show.
McGuire, meanwhile, helped the group's president, Brant Baber, make introductions around Austin, according to several sources. Ocanas, whose group was behind the fast-sinking reform plan, says McGuire set up a dinner so the two of them could discuss the issue. "We agreed to disagree," Ocanas says.
By the time the reform measure was passed and signed into law, it was all but gutted by amendments that exempted groups such as Green Bridge and American Village Communities from being forced to provide social services.
Ocanas and others say they are gearing up for a new round of debate next year, and they expect to have a few more allies. Properties have been going off the tax rolls in large enough numbers over the past two years that local jurisdictions are beginning to complain, says state Representative Bill Carter, chairman of the House Urban Affairs Committee, who is gathering facts for a hearing in June.
The break is costing schools and cities in Harris County about $5 million this year, Carter says. In Dallas County, 261 properties valued at $132 million have been granted the exemption, tax officials say. That is about $3.5 million in local taxes waived this year. Green Bridge's two projects--Williams Run and the Richardson apartments--would be paying about $800,000 a year in taxes were they not exempt.
Carter, a Republican from Haltom City, says he suspects some of the chodos that formed in the last few years are not in it for charity, and he is pushing for an emergency rule this year that would stem the flood of applicants until the Legislature has a chance to act.
In Carter's view, reputable chodos offering services to tenants "are the backbone of our affordable housing program, and we don't want to hurt them in any way." The problem is the abundant tax breaks have allowed profit-seekers to take over. Between tax-free bond financing and total abatement of property taxes, groups can "double-dip" the tax structure and be made to give little in return.
"We've opened this up," Carter says. "And greed has walked through."
At the time, her father, Jim Wright of Fort Worth, was ascending to the top Democratic leadership of the U.S. House of Representatives. His daughter, meanwhile, embarked on what was to become a long career in housing, working as a lobbyist for the National Association of Home Builders and, later, a prestigious New York law firm.
In 1991, McGuire returned to Texas when former Governor Ann Richards appointed her deputy executive director of the Texas Department of Housing and Community Affairs. The same year, Scott McGuire became the director of the department's housing finance division--reporting to Virginia, whom he married in 1995. Together, they oversaw the very same bond-financing program they would eventually tap to purchase Williams Run.
The couple later worked together in Dallas for the Enterprise Foundation, a Maryland-based nonprofit that metes out money to rebuild impoverished neighborhoods. A major force at the national level, its board includes Kweisi Mfume, president of the National Association for the Advancement of Colored People, and former U.S. Housing and Urban Development Secretary Henry Cisneros.
In 1999, Virginia McGuire left her position as the foundation's southwest regional director to create Green Bridge Development, becoming the company's president and only paid officer.
Its first deal was Williams Run.
On May 23, 2000, five days before Green Bridge signed the sales contract to buy the complex for $11.3 million, Virginia and Scott McGuire sat down and hammered out a handsome arrangement for themselves.
McGuire agreed to pay her husband's company, Elsinore Group, $400,000 and reimburse all its expenses for being the "developer" of the deal. A copy of the document shows the couple signed on behalf of their respective organizations, she as the president of her one-man outfit, he as the vice president of Elsinore, which was formed in 1998 and has an office in Dallas and headquarters in a Washington suburb.
Besides her husband, two other Elsinore executives have close ties to Virginia McGuire going back years. The web of relationships is so thick that, legal divisions aside, it is a bit difficult telling where Elsinore ends and Green Bridge begins.
For instance, Elsinore officer Mark Culwell was chairman of Green Bridge's three-member board of directors and helped found the group. Elsinore's president, Jim Edmondson, worked closely with Virginia McGuire during her time at the Enterprise Foundation, where at one point the McGuires, Edmondson and Culwell all were employed. "This is not a group of strangers," Edmondson concedes.
The contract McGuire signed with her husband specified Elsinore's duties in the purchase--the preparation of surveys, the hiring of lawyers, the lining up of financing, plus a long list of duties related to rehabilitating the complex. In all, Elsinore put out--and put at risk--about $103,000 in earning its fee, according to copies of the closing documents.
Rather than going to a bank, Elsinore and Green Bridge tapped a federal housing program--what are known as multifamily mortgage revenue bonds--to finance the purchase.
The bond program, which saw increasing use in the 1990s, is designed to help nonprofits build or rehab apartment buildings, a portion of which must be set aside for low- and moderate-income tenants. It lets the nonprofits, which often have no capital, borrow 100 percent of the purchase price, plus closing costs, and shift all the financial risks to the buyers of the bonds. The bond-buying investors are rewarded with high, tax-exempt returns. (The tax exemption is the subsidy that drives the program, coaxing investors into the low-income housing market with the promise of 7.6 percent tax-free annual returns.)
The bonds, which are a promise to repay the purchase price, plus interest, are issued through state housing departments, which make certain all federal requirements are met.
Because Elsinore and Green Bridge already had lined up someone to buy the bonds for Williams Run, all the McGuires needed was for their old employer, the Texas Department of Housing and Community Affairs, or TDHCA, to approve the deal.
And in the course of the state's review--which went through TDHCA, the Texas Bond Review Board and lawyers for all the parties--nobody objected to the fact that McGuire had hired her husband for a significant fee.
"The state has no regulations that prohibit a for-profit husband and a nonprofit wife from doing a real estate transaction under the [tax-exempt] bond program," says Michael Lyttle, a TDHCA spokesman. Lyttle says his agency deemed the fee acceptable, as did lawyers hired by McGuire's company and an "independent third-party developer." The developer was picked and paid by the McGuires.
The McGuire-McGuire contract was followed up with an addendum stating that Scott McGuire was being paid $175 an hour for his time, and Jim Edmondson $250 per hour.
As for Green Bridge, Virginia McGuire worked out her own fee beyond the one paid her husband's company: $100,000 plus reimbursement of all costs.
So when the deal closed in December, McGuire had enough money in her nonprofit account to pay her own salary. She reported making $83,647 that year, her group's Internal Revenue Service form shows.
Developer fees paid to closely tied entities and big director salaries at the nonprofits are easy, legal ways to make a tidy sum in the nonprofit housing world, says John Henneberger, the Austin-based housing advocate. A harsh critic of Virginia McGuire, he says, "I see her as someone operating on the ethical edge."
And she is not alone, he says. "Through these complicated transactions, you see the benefits flowing to the people who put them together, plus the brokers, the lawyers, the investment advisers. A property flows to a nonprofit, and in many cases, there is nothing enhanced from a public policy standpoint."
Green Bridge did one more deal during 2000.
For a $75,000 fee, it lent its name and nonprofit status to a for-profit developer, M. Meyers Development Co., so it could build a new $20 million apartment complex for retirees in Richardson. Meyers will receive the total property tax abatement, worth about $500,000 a year, and is not precluded from managing the complex, called Green Bridge at Buckingham, when construction is completed this summer.
A sales representative described the property as a luxury community where two-bedroom apartments will rent for $1,093 and up. Most of the apartments set aside as affordable housing will be small, one-bedroom units, measuring an average of 603 square feet, state documents show. Those will start at $553, the sales rep said.
By mid-2001, with two deals under its belt and more in the works, Virginia McGuire's company appeared to be moving up in the world.
She rented a five-room suite in a Lakewood Village office tower, a smart building popular with stockbrokers and real estate lawyers. It was convenient, too, just a few blocks away from her home on well-to-do Lakewood Boulevard.
These hearings, known as TEFRA hearings, are designed to give the public a chance to learn about proposed transactions and express their views. McGuire herself explains how a project's fate can hinge on these hearings.
"I know plenty of developers who put up some risk money and lost it because the TEFRA hearing didn't go through," McGuire says. "If people show up and say we don't want this project, TDHCA doesn't do it."
At that time in 2000, rumors were floating around Williams Run that the complex was going to be sold and converted to low-income housing, according to several tenants, who say they asked the on-site property managers to confirm the rumors and were repeatedly told they weren't true. If they had known about the hearing, the tenants say they certainly would have attended.
Despite the hearing's importance, state rules did not require notice to be posted in plain view for everyone to see, such as signs tacked up in common areas at Williams Run or even at the nearby Samuell Grand Recreation Center, where the hearing was supposed to take place on September 7, 2000. Instead, a notice was posted five miles away from Williams Run, at the Casa View branch library, as well as in a fine-print advertisement placed in the Texas Register and The Dallas Morning News.
When the hearing started, there were only four people in attendance: Virginia and Scott McGuire, along with state Representative Harryette Ehrhardt and a TDHCA representative. An aide to U.S. Representative Pete Sessions arrived just minutes after the hearing was scheduled to begin, only to discover that it was already over.
"The meeting, to the best of our knowledge, did not occur," Sessions says, adding, "For anyone to say that the process was fair or even followed, they would not be telling the truth."
Nonetheless, Virginia McGuire showed up in Austin five days later and assured members of the Bond Review Board that the hearing took place and there was no opposition to the project.
"It was a very calm TEFRA hearing," said McGuire, who can be heard laughing as she addressed the board, according to an audiotape recording of the meeting.
The truth was, Williams Run residents didn't know there was any proposal on the table, and McGuire confirms she did nothing to ensure that the tenants heard about the hearing. When asked why not, she asks why she should have.
"If you go out and buy the apartment complex right down here," she says, pointing out her window, "do you notify all the tenants that you're thinking about buying that apartment complex?"
When the residents finally realized what was happening--an understanding that came after the state approved the project and too late for them to have any impact--they were very much opposed. Some were outraged that they'd been kept in the dark about the nature and timing of the project. Worse, they say, their further attempts to get straight answers about how the sale would affect them were met with accusations that they were elitist.
"It was just absolute bullshit," says former resident Paul Hall, a federal criminal investigator who had lived at Williams Run for three years. Hall, who spent several years working for the Peace Corps in Guatemala, says he was especially offended by the suggestion he didn't want to live near poor people. "It is just an avenue they're pursuing to divert attention away from the real problem, which was them."
Hall is one of several former tenants who signed sworn affidavits attesting to the chain of events that took place at Williams Run that summer and fall. Those affidavits, combined with tenant interviews and documents the Dallas Observerhas obtained, appear to support the tenants' complaints that they were deceived--a pattern that gained momentum shortly after the state formally approved the bonds on September 21, 2000.
As part of the bond requirements, McGuire had to demonstrate to the state that 40 percent of the complex's tenants earned 60 percent of the median income for the area or less. (For a single person, that translates to an annual income of $27,060 or less, or, for a couple, a combined annual income of $30,900.) To do that, McGuire had to submit "tenant income certification" forms, signed by the tenants, to the state by December 6, 2000, the day the sale closed. The easiest way to do this would have been to give the tenants a copy of the three-page form, along with a letter explaining why the information was needed. But that isn't what happened.
That fall, tenants received two curious fliers. In the first, they were told a representative would be contacting them to see if they qualified for a "concession" on their current lease. The concession was based on a "tax credit," the flier stated.
Weeks later, the residents got another, more tantalizing offer.
"'Win' Everyone Likes to WIN!!!" the second flier announced. It went on to say that Williams Run had begun a "new program" that could benefit some residents based on their income. The flier offered residents free rent or Dallas Cowboys tickets; all they had to do was fill out the attached form. It turned out to be the first page of the state's three-page income certification form.
"The reason we are requesting this information is to update our resident files," the flier stated.
The residents were not told Williams Run was in the process of being sold or that the new owners were required to gather and submit the tenants' personal financial information to a third party, in this case, the state. To former resident Ted Barker, who lived at Williams Run in an apartment near his younger brother Hal, the offer of a rent break was too good to pass up.
"Would you take that deal?" Barker says. "Where in Dallas have you ever been offered a rent reduction?"
Ted Barker says he was more than happy to cooperate when one of the complex's property managers asked him to spread word of the rent offer to his friends. Barker did not know it then, but he and his brother Hal were about to begin a nasty feud with the McGuires that continues to this day. Even now, Ted Barker is angry that he was so easily duped.
"They destroyed a marvelous community," Ted Barker says. "They screwed my friends."
Virginia McGuire has a similarly testy reaction when the subject of the Barkers comes up.
"I wish I could silence them as critics," she says.
Single and 56, Ted was the complex's self-anointed watchdog. During the day, he would lounge around the pool, and at night, he kept his eyes open for any suspicious behavior, which he frequently reported to the police. Hal, 54 and also single, could usually be found at his home computer, where he operates the Korean War Project--a Web site he created that has become the primary tool Korean War veterans use to communicate with each other.
The nonprofit venture, which Ted also works on, has attracted favorable national press, but Hal's best-known project is the Korean War Memorial--a monument he helped get erected on the Mall in Washington, D.C., on July 27, 1995. Over in the celebrity columns, Hal also made news when he publicly challenged Clint Eastwood about a historically inaccurate element of his 1986 movie Heartbreak Ridge. The story is one small example of the extreme lengths to which Hal will go when he is drawn into an issue.
Seated on his living room floor, encircled by a pile of Green Bridge-related documents, Hal explains that Eastwood's character was originally cast as a Marinewho had won the Medal of Honor at Heartbreak Ridge--a Korean War battle that was fought by the Army. When he heard about the error, Hal, whose father won a medal for his bravery during that battle, began a campaign that ended in Eastwood agreeing to reshoot portions of the film.
A stocky man whose blue eyes hide behind a pair of large, outdated glasses, Hal explains that he suffers from occasional bouts of obsessive-compulsive behavior, which are triggered when he comes across a perceived injustice. He says he has learned to prevent these episodes by living as a hermit. He might have been isolated, but he heard about the promise of a rent break--something the Barker brothers could have used, given their lack of full-time jobs.
Hal says he believed there was truth to the rumors that Williams Run was for sale, despite the reassurances otherwise. So he logged onto his computer and began searching the Internet for any references to Williams Run. It wasn't long before he found out who was buying the property and how. The minutes of the state bond review panel's meetings are posted on the Web.
The information sparked one of Hal's episodes, and before long, he was filing dozens of requests for public documents relating to the bond transaction.
"Once I found out what was going on, it was impossible to stop," Hal says.
Together, the Barker brothers decided to act. They formed a tenants association and began sharing with neighbors the information Hal was collecting.
Back then, Williams Run was made up of middle-income singles and childless couples who liked living there for its modest rents--about $650 for a one-bedroom apartment. It was one of the most reasonable rentals near White Rock Lake, a choice neighborhood increasingly dominated by new, high-end apartment complexes.
"When I went there to rent, they told me this is mostly a singles apartment complex. We hung out by the pool and the hot tub," says former resident Debra Heffelfinger, who was making $12 an hour when she moved there in June 1998. "My apartment was great. The rent was $605 a month, and it was perfect for me. It was affordable housing."
Heffelfinger, like most of her neighbors, had never heard of chodos, much less the arcane requirements of tax-exempt bond financing. To her and others, the gossip conjured up nasty images of failed public housing projects. As news of the sale spread, some tenants decided to move.
If the tenants' fears were exaggerated, Green Bridge has only itself to blame: The first written notice tenants received confirming the property's sale was contained in a brief memo inviting them to a "meet and greet" session with Green Bridge representatives on October 21, 2000.
By the time the meeting started, the tenants were highly suspicious of Virginia McGuire, who appeared along with a few of her associates. The tenants wanted specific answers to their questions, chiefly, whether the property was being turned into public housing. Instead, they got a presentation about how they would benefit from lower rents and a new array of social service programs, particularly after-school programs for kids. The presentation only cemented the residents' fears.
"It sounded like they were going to move a bunch of families into these one- and two-bedroom apartments," Heffelfinger says. "It's not that we're against children, but we're single people. We didn't want to live in an apartment complex with a whole bunch of kids."
The residents interrupted the presentation and started firing off questions. Former resident Gina Cotroneo didn't mask her feelings. "I said, 'No offense to anyone, but I've been poor in my life before. I'm not poor now, and I don't want to live near poor people. I want out of my lease,'" Cotroneo says.
A rape victim, Cotroneo says she liked Williams Run because, unlike most apartment complexes, the neighbors knew each other, and she felt safe. She wondered how she could trust the new owners to keep the place orderly if they weren't willing to level with anyone about their plans for the complex.
"I really don't feel that they treated the residents fairly," Cotroneo says. "Just tell the residents the truth and let them make their own decision."
Tensions thickened, and when the meeting was over, the tenants say they remained in the dark.
Today, McGuire says she never intentionally deceived the residents. "I was not buying something that I understood would radically change the makeup of that apartment complex," she says.
But that is not the story McGuire gave state officials.
When she appeared before the Bond Review Board in September--a month before she met with the residents--McGuire said she already was having trouble meeting the requirement that 40 percent of the tenants earn 60 percent of the area's median income or less.
"We have already run across several families that we are going to have to boot out because their incomes are too high," McGuire told the board. "So we're going to be moving the income level of the whole project down significantly by removing some of the higher-income individuals and couples that are there already and then adding some at the 60 percent level."
In fact, just before the tenants' meeting took place, Green Bridge had begun moving tenants out by sending them notice that their leases would not be renewed. It was a policy Green Bridge and the property's Chicago-based owner, CAMCO, tried to conceal from the other tenants.
"Not all of the residents know that non-renewal notices were sent out to some residents, and CAMCO did not want to publicize that info on their behalf," McGuire said in an October 16, 2000, handwritten note she faxed to Brent Stewart, the state housing department official who was overseeing the transaction.
Why the secrecy? Morgan Lindsay, CAMCO's property manager who handled the non-renewal notices, says she was trying to help Green Bridge make the changeover without scaring off any tenants who were qualified to stay under the bond program.
McGuire would not say exactly how many tenants were "booted out," but she notes that the non-renewal notices were properly given 30 days in advance. If the tenants believe they were misled, McGuire says, CAMCO's property manager is to blame.
"Have we made all the right decisions with tenants? Probably not. Have we attempted to? Yeah," McGuire says. "Am I unhappy with some of the decisions the management companies have made? You bet. You bet I am."
Lindsay, however, says she was only following orders.
"The only person that was really guiding us was Ginger McGuire," she says.
In its lawsuit, Green Bridge claimed that the Barkers had maliciously interfered with its operations, in part, by driving off income-generating tenants, causing it financial harm and seriously injuring its "business reputation, good name and standing in the community."
The lawsuit is not the first time the McGuires and their partners have had to defend their business reputation. And the Barkers are not the first tenants who have risen up against them.
Sheila Dixon sits on the tiny balcony of Catherine Warren's apartment inside the Cascade Park apartment complex in Mesquite. The women say the conditions here are drastically better than what they were when Cornerstone Housing Corp. owned the place in the mid-1990s. At the time, Cornerstone's top officers were Jim Edmondson, Mark Culwell and Scott McGuire. Virginia McGuire was a founding director of a subsidiary company Cornerstone created specifically to buy the complex.
"This is excellent compared to what we had. There were cockroaches all around," Dixon says. Warren nods her head in agreement and adds, "We had rats."
The future looked promising to Dixon when she moved to Cascade Park in 1996, shortly after the U.S. Department of Housing and Urban Development gave Cornerstone the deteriorating property for $10. As part of the giveaway, Cornerstone agreed to reserve a portion of the complex's units for low-income tenants affected by the landmark Walker class-action desegregation lawsuit.
The lawsuit is named for lead plaintiff Debra Walker, who successfully argued that the squalid conditions at public housing projects in Dallas, occupied primarily by African-Americans, constituted racial discrimination. A federal judge ordered Dallas to correct the problem, in part, by finding desegregated housing for the residents in suburbs such as Mesquite.
Within two years after Cornerstone acquired Cascade Park, Dixon says, a lack of property maintenance spawned conditions that were worse than the housing project she had fled. "In the project, at least I had hot water," Dixon says. "I had heat. I had air conditioning. It was a lot better."
Anything that could go wrong at an apartment complex went wrong at Cascade Park. Sewers backed up. Ceilings caved in. Vermin arrived, followed by drug dealers. Because the thermostats were broken, the residents had to keep their air conditioners running on high day and night. All that did was generate enormous electricity bills that were heaped on the residents.
The residents asked the property manager to make repairs and increase security, but their requests were routinely ignored. So they complained to their representatives at the Walker Project, an agency created to carry out the desegregation decree, which in turn contacted Cornerstone. The residents were promptly given promises.
"This is the first I have heard of such problems and it is of great concern to me," wrote Scott McGuire, then Cornerstone's vice president, in a February 6, 1998, letter. McGuire instructed his property manager to make immediate repairs, telling him that the backlog was "just not acceptable."
Nothing happened, so Dixon decided to act. She formed a tenants organization called the Knights of Cascade and started circulating a petition among her neighbors. The petition included a detailed list of problems at the property, which was described as "unlivable." More than 100 residents signed. Cornerstone quickly tried to block the effort, Dixon says.
"They tried to discourage people, telling them if they signed the petition they were going to be evicted," Dixon says. "At one point they retaliated against me. They raised questions that I had been working and not reporting my income to them. That was not true. That was just another way of striking back."
But Dixon was not intimidated. She turned to Dallas attorney Mike Daniel, who litigated the Walker class-action suit, and he took the matter to court. In May 1998, Daniel filed a false-claims complaint against Cornerstone, arguing that it had broken its agreement with HUD to provide "decent, safe and sanitary" housing.
As the case progressed, Cornerstone began blaming the tenants for the maintenance problems at Cascade. In court filings, it blamed the roach problem on "housekeeping practices" and the sewage problem on the "improper introduction by tenants of grease and other substances into the sanitary lines of the complex."
As part of an offer to settle the matter, Cornerstone promised to "educate" tenants about proper housekeeping practices and stated that it would begin charging tenants for damage they caused. Cornerstone even suggested that the Walker Project pay them to educate the tenants.
Daniel says the offer was preposterous. When it acquired the project, Cornerstone agreed to repair the property and spend tens of thousands of dollars on social service programs, namely after-school programs, English classes and a computer lab. It was the same promise later made about Williams Run. But Daniel saw no evidence that Cornerstone paid for any social services or significant repair work at Cascade Park.
"They weren't spending any money for maintenance, and they were taking a lot out for maintenance fees. That was one of the things that made us so mad; this was not a struggling operation," Daniel says. "I thought they were making money just hand over fist when we were going through the books."
In the end, the residents prevailed. On July 23, 1998, U.S. District Judge Jerry Buchmeyer appointed a receiver to take control of the property, a rare decision that effectively yanked the property out of Cornerstone's hands. In a separate action, Cornerstone agreed to pay Cascade Park's residents $175,000 to settle a claim in which they accused the company of improperly billing them for utility usage.
"We rang their bell," Daniel says. "That doesn't happen very often."
Jim Edmondson, who was Cornerstone's president at the time, insists today that Cascade Park was "very low-priced and reasonably maintained." He blames the tenants' complaints on "a series of lousy luck and bad timing" such as a stretch of 90-degree weather that "hindered our attempt to repair the air conditioning system and aggravated everything we were trying to do."
The year of the Cascade Park fiasco, Cornerstone dissolved and re-formed as a for-profit limited partnership named Elsinore Group.
Edmondson, Scott McGuire and Culwell moved over to the for-profit, becoming its executives and principal employees. Over the next several years, Virginia McGuire says, she and these fellow affordable housing advocates would attempt to do four apartment deals together. Only one made it to closing: Williams Run.
Ordinarily, eviction cases are minor affairs. But when Green Bridge began its efforts to evict Ted Barker in December 2000, the small-claims case quickly mushroomed.
Green Bridge argued that it had a right to evict Ted because he refused to leave his apartment 30 days after he was notified that his lease wouldn't be renewed. Ted, who defended himself with Hal's help, argued that the eviction was retaliation for his and Hal's criticism of the McGuires. Improbably, Ted's defense got an unexpected boost when Green Bridge sued the Barkers for libel in state court.
Justice of the Peace Cleo Steele lost his patience when, midway through the eviction case, he heard about the state suit. Steele forced a settlement in which Green Bridge agreed to drop its libel case and gave Ted six months to find a new apartment. In return, the Barkers promised to cease making any "comments, threats, allegations or accusations" about Green Bridge.
The allegations of elitism that Williams Run tenants say they heard during the October tenants meeting with Green Bridge's representatives took written form in the corporation's libel complaint.
The Barkers, the lawsuit states, "have exhibited their own selfish viewpoint that just because they are fortunate enough to be able to afford to live at Williams Run without any assistance, those who are less fortunate or elderly should not be given an opportunity to live there as well."
Although the lawsuit didn't go anywhere, McGuire says it was a "very serious" effort to end what she calls a malicious campaign designed to drive off her income-generating tenants.
"They told the residents that we were turning it into public housing, which we were not. The intent...is to have mixed-income people living with people of moderate income, living next to poor people," McGuire says. "And if they don't want to live next to poor people, that's too bad."
But Williams Run is beginning to take on the characteristics typically associated with trouble-plagued public housing projects. The complex has lost many tenants at the higher end of the income mix and filled at least 20 apartments with tenants who receive government housing assistance. Overall, the occupancy rate has dropped from 98 percent to 75 percent.
McGuire blames the Barkers for the high vacancy rate, but some current residents blame McGuire. Under her ownership, they say, there has been a noticeable decline in maintenance and an increase in violent crime.
Their fears are supported by Dallas Police Department data, which show that the number of violent offenses reported at the complex has spiked under Green Bridge's ownership. In 1999 and 2000, for example, police logged one and five assaults, respectively. In 2001, the first full year under Green Bridge's ownership, the number of assaults jumped to 23. Worse, the number of reported robberies jumped from zero in 1999 and 2000 to a hair-raising 21 last year.
Further, McGuire has not installed the after-school programs, the computer lab or any of the other social services she promised to create. Instead, the only programs she could highlight were a new crime-watch group, where manpower expenses are provided by Dallas police, and a collection drive in which the tenants themselves donated school supplies.
When asked to explain why she is not funding social services, McGuire says that the complex is not generating enough revenue for that.
"The property first needs to return some money," McGuire says. "Until we get the occupancy up, then we don't have cash flow. We're doing what we can without the cash flow."
That McGuire is already having a cash shortage is remarkable, given the financial breaks she got from the state when she sealed the deal.
The state law governing the bonds program used in this case clearly indicates that the program is designed for new construction or rehabilitating older structures. For existing apartments, the law states, "at least 15 percent of the costs of acquisition shall be utilized for rehabilitation expenditures."
But Michael Lyttle, the TDHCA spokesman, says the agency waived that requirement for the Green Bridge deal--just as it has for all other bond deals of this kind.
Today, the Barker brothers do not deny McGuire's claim that they are intent on disrupting her business. In fact, they freely admit they are doing whatever they can to shine light on Green Bridge.
"I have an understanding of altruism. I have spent my whole life doing altruistic things," Hal says. "They can do this stuff and make a million and then look me in the face and tell me, 'We're doing good work?'"
In recent months, the Barkers have filed a variety of complaints about the Williams Run transaction with state and county agencies. More recently, Hal spent two hours meeting with officials at the IRS. In their eyes, the McGuires have taken a well-intended program and used it for personal gain.
While the Barkers are convinced the McGuires have violated numerous rules and regulations, there does not appear to be anything illegal about the Williams Run transaction. But the Barkers raise some interesting questions about the way Virginia McGuire reported her business relationships to the IRS on her most recent corporate tax form.
Seated at a conference table inside her sixth-floor Lakewood office suite, she lays her palms on the table and tries to keep them still, but eventually she begins twisting her wedding ring, an emerald the size of a sweet pea.
McGuire is not accustomed to being asked a lot of impertinent questions, particularly ones about her business dealings with her husband.
"I can see you're trying real hard to make something bad go on here, and it's not," McGuire protests.
The issue at hand rests on the table. It is a copy of the 2000 IRS tax return McGuire filed on behalf of Green Bridge.
As a general rule, the IRS wants nonprofit organizations to conduct business transactions at an "arm's length" distance from for-profit companies. To ensure that happens, the IRS tax form requires nonprofits to report their highest-paid contractors. It also requires nonprofits to answer "yes" or "no" to a series of questions designed to determine whether board members and/or key employees have any personal or corporate relationships with the for-profits with which they are doing business.
On her 2000 tax form for Green Bridge, McGuire made no mention of the fact that she paid her husband's company, Elsinore, $400,000 as part of her acquisition of Williams Run. In fact, in the section of the form asking her to report her top contractors, she reported "none." What is more, she answered "no" to the series of questions about whether she has conducted any business transactions with any relatives.
The questions about key employees would pertain to Mark Culwell, an officer of Elsinore, who appeared on Green Bridge's tax form as its president. McGuire, who says she has always been Green Bridge's president, says her accountant must have made a mistake when she listed Culwell as its top officer last year.
McGuire confirmed Culwell was on her board of directors but says he resigned before Green Bridge hired Elsinore. As evidence, she slides a copy of a one-page letter in which Culwell announced his resignation on May 22, 2000--the same day her board voted to hire Elsinore for the six-figure deal.
On this afternoon, McGuire says she cannot answer any other questions about the tax form and, instead, refers the Observer to her accountant, Karen Smelcer, for an explanation. Later, however, McGuire instructed the newspaper to leave Smelcer alone.
"Please do not call them again," wrote McGuire in response to the Observer's numerous efforts to contact Smelcer, who did not return phone calls or reply to faxes.
In a separate written response, McGuire argued that she had properly reported her business dealings with her husband to the IRS. "Scott McGuire's involvement was not a required disclosure on my 990 form even though he is my spouse, because he had no ownership interest in Elsinore," McGuire wrote.
The IRS questions, however, are not limited solely to corporate owners, according to IRS officials. In fact, they are written broadly to include any "officers, directors, trustees, majority owner or principal beneficiary." Scott McGuire, who declined to comment, has been an officer of Elsinore since 1998 and is currently a part-owner.
As a matter of policy, the IRS would not answer any specific questions about Green Bridge's tax forms nor would it confirm the Barkers' claim that the agency has initiated an investigation into Green Bridge. Phil Beasley, an IRS spokesman, did confirm that the IRS has received a complaint about the corporation.
"We do take these complaints very seriously, and we do follow up on them," Beasley says.
Back inside her Lakewood office, McGuire wondered whether she was being singled out for criticism because she happens to be Jim Wright's daughter.
"Does the Speaker's name have something to do with [this]?" McGuire bristled, referring to the Observer's interest in her company.
It is interesting that McGuire, like her father before her, is being asked to explain how a member of her immediate family is profiting from dealings in the public realm.
Jim Wright resigned in 1989 after the House ethics committee charged him with violating a series of House rules. Over Wright's denials, the committee prosecutor alleged that a Fort Worth real estate developer gave him gifts in the form of an $18,000 "sham" job for his wife, as well as the use of a condo and a car.
Like her father, McGuire says she has done nothing wrong. She says she can carry out her mission to help people on the low end of the income scale and hire her husband, too. "Does it make a difference that he's my husband?" McGuire says. "I certainly know who I'm working with. I know what his strengths are.
"Is there a conflict? I don't think so."
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