Weitzman’s audit finds exec director of troubled Hempstead development group wrote himself check for $400,000

An audit released today by Nassau County Comptroller Howard Weitzman of the development group that owned the former bus terminal at 100 Main Street in Hempstead revealed the financially troubled organization had such loose controls that the Executive Director of the group wrote himself a $400,000 check from the group’s funds, without any approval. Now local non-profit groups in Hempstead are suffering from the financial fallout of the deal, as the Village of Hempstead’s and the County’s Community Development grants are being used to pay off the mortgage. Weitzman's audit finds exec director wrote himself a check for $400,000

"This wrongful act was just one symptom of the lack of oversight for a critical development project that was troubled from the start,” said Weitzman.

"It is outrageous that the Executive Director would obtain funds in such an inappropriate manner and this act highlights the complete lack of oversight in this area," said Village of Hempstead Mayor Wayne Hall. "I would like to commend County Comptroller Howard Weitzman for conducting such a thorough audit. The Village of Hempstead will work aggressively to put preventive measures in place to ensure this does not happen again."

The development group, 100 Black Men of Long Island Development Group, Inc., is a subsidiary organization of the 100 Black Men of Long Island, Inc. The audit was jointly requested by Hempstead Mayor Hall and Hempstead Community Development Agency Commissioner Claude Gooding.

"I would like to thank the County Comptroller and his office for a thorough job in this audit process which we had requested,” said Claude Gooding, Commissioner of the Village of Hempstead Community Development Agency. “It was our concern for the financial viability of the 100 Main Street building project and the potential loss of our Community Development Block Grant dollars, that prompted us to fully understand the operating modus of the 100 Black Men Development Group.”

Executive Director’s payment to self was inappropriate

Weitzman’s auditors found that Executive Director Clarence Little wrote himself a $400,000 check from the group’s funds, without approval from the group’s Board of Directors. The check was signed by Mr. Little and had an illegible second signature.

Auditors found that the Executive Director purchased four certificates of deposit (CDs) between April and October 2007, totaling $400,000, using development group funds. The auditors were not provided with the Board minutes for that period and so could not determine if the Board approved the purchase of the CDs. Mr. Little redeemed the four CDs on November 7, 2007 and the following day, deposited the entire amount into a second bank account. He then moved the funds again 27 days later into a third bank account. Two days later on December 7, 2007 he wrote himself the check for $400,000. The documentation in support of the payment was a handwritten note indicating that the Executive Director was owed $835,422 and the Assistant Director was owed $218,388. The group’s records indicate that no payment was made to the estate of the Assistant Director, who had passed away months earlier in May 2007.

In 2003 the Board discussed the possibility of paying reasonable compensation to “managers and consultants” responsible for running the day-to-day operations of the office building. Mr. Little advised the Board that the external auditor and counsel to the development group had both ruled that Board members could not be compensated.

Five months later, both Mr. Little and Roland Davis, the Board’s Secretary, resigned as Board members and took new titles of “Executive Director” and “Assistant Director”, respectively. The audit found no evidence that the Board had approved any compensation agreement for either the Executive Director or Assistant Director, and the development group’s federal income tax filings did not list any hours worked, any payments made or monies due to either man. The Executive Director also filed a lien against the building claiming entitlement to $530,130.

The improper actions of the Executive Director are just one element of the development group’s troubles.

100 Main Street on shaky financial ground from the start

The development group owned the 100 Main Street building, which it purchased in October 2001 with the help of a federally funded $10 million mortgage. The mortgage was guaranteed by the Village of Hempstead Community Development Agency (CDA).

“From day one the building’s financials could not work,” said Weitzman. “The group’s revenues were never able to sustain its mortgage payments, taxes and operating expenses.”

As of October 2007 the building had an annual rent roll of $1,097,662, annual operating expenses of $990,153, real estate taxes of approximately $500,000 and mortgage interest and principal of $1,188,000. The County Department of Assessment recently assessed the property at approximately $5.6 million, far below the $10 million mortgage.

Auditors found that the development group failed to make even one principal payment on the mortgage from August 2005 to date, or interest payments from February 2007 to date, nor did the group pay any property taxes on the building from 2003 forward. The County began a mortgage foreclosure proceeding in December 2006. The building is currently in receivership and subject to a court-ordered sale.

Hempstead nonprofits suffer due to mismanagement

When the mortgage went unpaid, the Village of Hempstead’s CDA became responsible for the mortgage. The funds used to pay the mortgage now come out of Community Development Block Grant (CDBG) money that would otherwise be used to fund a wide variety of non-profit programs in the community including Hempstead Boys and Girls Club, the Girl Scouts, Safe Horizon Day Care, Operation Get Ahead, Hispanic Counseling Center, EOC Community Action Program and several dozens of others. Currently, the Village CDA is paying the mortgage principal and the County is paying the interest out of its discretionary CDBG funds. The Village must absorb the unpaid village real estate taxes, and County taxpayers pay the building’s unpaid real estate taxes to the school district, town and County.

" Because CDBG monies must go to pay off the mortgage, many nonprofit agencies that provide important services to our residents have been short-changed,” Weitzman explained. “The people most hurt by the 2001 decision of the Village CDA to guarantee the mortgage are those who use the vital services normally funded through the County’s and the Village’s CDBG program.”

Nassau County Legislator Roger Corbin (D-Westbury) said: “While I am still awaiting more facts regarding the possible mishandling of funds, it is shameful that these nonprofit organizations have to suffer the double blow of a tough economy and less funding from their sources.”

Gooding added “The Community Development Agency, all the non-profit organizations we fund, and the residents of the Village have suffered a great loss of funding due to this debacle which unfortunately, can continue to adversely impact us into the future.”

Poor record keeping and oversight

The 24-page audit revealed that the development group lacked oversight and control over most financial matters, kept poor financial records and even failed to file financial statements for two years running, as was required by their mortgage agreement. Auditors stated that the Board never established controls for check-writing and signature authority.

Furthermore, tenant security deposits of $201,816 were co-mingled with operating funds and not segregated in a separate escrow account. As of December 31, 2007, the group’s operating bank account balance was only $52,251.

Weitzman’s auditors also found problems with:

36 transactions to the Executive Director and the Assistant Director, totaling $17,207;
61 transactions to other vendors, totaling $179,092;
32 transactions, totaling $148,071 to the group’s security firm;
19 transfers between the development group’s bank accounts and/or its parent totaling $46,741; and
29 uncorroborated transactions totaling $65,681 due to missing bank statements.

“These are all poor business practices that should have been corrected years ago,” Weitzman said.

All audit findings have been shared with the Nassau County District Attorney’s office.

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