Records show Baltimore nonprofit housing provider stopped paying tenants’ rents and hasn’t accounted for the money.

Federal housing officials have requested an investigation of a city nonprofit they believe misused federal grant money meant to subsidize the rents of extremely vulnerable tenants to prevent homelessness.

U.S. Department of Housing and Urban Development spokesperson Sean Callahan said the agency has referred the nonprofit to the U.S. Office of Inspector General of Investigations, which determines if cases get referred for prosecution or civil action.

Housing officials at the Baltimore field office do not know if the investigation into AIDS Interfaith Residential Services and its wholly owned subsidiary, Empire Homes of Maryland, has been initiated, Callahan said. City and federal officials say the nonprofit, which received federal grant money to subsidize tenants’ rent and provide them with case managers and support services, failed to pay several landlords without accounting for what happened to the funds.

The Mayor’s Office of Homeless Services has been scrambling to keep the tenants — many with disabilities and low incomes — in their homes. Deputy Director William Wells has testified in more than a dozen rent court cases, trying to help defend them against landlords facing mounting unpaid debts.

In some cases, city officials said, tenants who were responsible for a portion of their rents paid what they owed, but were delinquent because Empire Homes didn’t pay the federal subsidy. Others were supposed to have their entire rents paid by the nonprofit, but landlords received nothing. In all, more than 140 clients are enrolled in both programs with the office of homeless services; city officials say they’ve been able to stave off the evictions they know about so far.

In one such case, heard in court July 25, Wells told Judge Nicole E. Taylor that the city intends to fully reimburse landlords with back payments and enroll tenants in new housing assistance and case management programs. Part of the difficulty, he said, is verifying with each landlord what’s owed due to problems with AIDS Interfaith Residential Services’ paperwork.

Judge Taylor granted a postponement, saying the tenants weren’t at fault, but also questioned the city’s lack of oversight of the nonprofit. City officials blamed a major administrative shakeup in recent years and said they will be more vigilant to prevent similar crises. The mayor’s homeless services office is under review by the Baltimore HUD office, said Callahan.

Anthony I. Butler, president and CEO of AIDS Interfaith Residential Services and the wholly owned subsidiary Empire Homes, said the city never paid him what he owed to landlords.

City and federal officials have been unreliable communicators, he said, and demanded he produce data and paperwork he wasn’t required to complete before. He said much of the work went digital over the coronavirus pandemic and he didn’t have enough time to convert before the deadline.

“Whatever we received, we paid out for the intended purposes — full stop,” he said. “There was no impropriety.”

In a July interview, Butler also said the Mayor’s Office of Homeless Services, HUD and his organization were short-staffed and still handling the fallout from the coronavirus pandemic, which hit the nonprofit sector hard.

“We’re not completely clean here. We did have our own staffing issues in December that we thought we were working through,” he said. “Again, we can’t pay what we don’t have.”

But public records and emails between city officials and federal officials paint another picture: They say Butler still hasn’t provided adequate documentation or substantiated what he did with the funds he drew.

Unexplained shortfalls

City officials said that while they have been late to pay Butler and his team at times because of administrative delays and delays with HUD, that doesn’t explain missed rental payments to landlords.

For example, a grant owed to Butler in April 2021 didn’t land in the city’s account until three months later, Baltimore spending board records show, but several landlords say they began missing rental payments well after that delay in the fall and winter of that year.

The officials also said the situation with Butler is independent of general city delays in paying many contractors, nonprofits and vendors. The city’s office of homeless services terminated the grant awards with Butler in May.

Documents obtained by The Baltimore Banner in a public records request show that HUD and city officials made an unannounced site visit to the AIDS Interfaith Residential Services’ midtown office in March and reviewed files. The visit followed a landlord’s filing for a tenant’s eviction for missed rental payments, according to the records.

The document review produced 15 problems with those files, including half of them missing lease and month-to-month agreements; income verification and recertification forms; and confidentiality forms, all of which are needed to establish compliance. All of the files were missing documentation of housing inspection performances, and 80% of the files did not include program policies and procedures, records show.

The reviewer also found that AIDS Interfaith Residential Services didn’t substantiate whether federal funds and cost principles were adhered to for the grant; provided incomplete intake forms and rental payment ledgers; and failed to identify how the grant award was received and expended. The reviewer said the amounts budgeted by AIDS Interfaith Residential Services didn’t match the corresponding amount in the original grant award documents.

Emails also show AIDS Interfaith Residential Services had both exhausted city funds while also not servicing as many people as the HUD award allowed. HUD officials said the organization was awarded funds to service 194 households, Callahan said, but had only served about 140.

“We’re really saddled by having a lot of very poor information,” Wells told other nonprofit housing providers during a Monday Zoom call. “We can’t quantify [the number of people affected] because case files and other information from AIRS are incomplete.”

Butler said he wasn’t privy to the complaints federal and city officials had with his performance until it was too late to respond.

By early May, AIDS Interfaith Residential Services had lost access to HUD’s grant disbursement system. HUD official Michelle White, in an email to Butler, said there had been “unauthorized” access to that system and “numerous financial draws” made using a former AIRS employee’s username. White also said AIDS Interfaith Residential Services had not submitted three years of single audits to federal auditors and had not responded to a September 2021 monitoring report that included “numerous findings and concerns.”

Callahan said a HUD monitoring of the organization in 2019 produced three findings, all unresolved. The 2021 monitoring revealed two additional findings that are not resolved, he said, adding that the organization owes HUD $537.

But of upmost concern, White said, AIDS Interfaith Residential Services had been drawing grant funds from the grant disbursement system and several landlords were missing their contracted rental payments, in some cases for months.

Butler replied in an email to White that he had not known of any complaints from landlords until April and was working to get into compliance with federal standards. He had until mid-May to submit more documentation but failed to do so by the required date, records show.

‘It’s just been a mess’

Mark Owens, a landlord who has three tenants enrolled in the Mayor’s Office of Homeless Services program with the nonprofit, said the city finally reimbursed about $15,000 of the $30,000 in back rent he says he is owed. For two tenants, he said he has received payments through July but is still missing August rent. For the other tenant, he said, he has not been paid any rent since last year.

“I don’t want to put a vulnerable population on the street, but at the same time I can’t afford this,” said Owens, who said he dropped an eviction case against one of the tenants once it became clear what had happened. “If we don’t [get the rental payments], we don’t have the incentive to deal with these rental programs.”

Another landlord, Leo Hersh, has one tenant enrolled in the program and said he is missing at least six months’ rent, amounting to more than $5,000. The tenant lives in Better Waverly, and Hersh said he had also applied to raise the unit’s rent earlier this year to better match the market rate. He submitted paperwork to the nonprofit that never amounted to a rent increase, he said.

“No one picks up the phone anymore,” said Hersh, who has been working with the tenant since about 2017. “They weren’t always on time, but they would communicate. It’s just been a mess.

“And the tenant is nervous,” Hersh added. “She’s got four kids, it’s tough for her. I feel worse for her than I do for me.”

Court records and other public filings reveal that AIDS Interfaith Residential Services and Empire Homes have been ensnared in financial problems since at least the start of this year. In January, the Harbor Bank of Maryland sent Butler and the organization a notice of default for a $1 million loan obtained in 2014, demanding they comply with the loan’s terms within seven days. No action was taken, according to court filings. The bank then “accelerated” the loan, demanding repayment.

In April, a judge sided with the bank in a confessed-judgment case — one that allows a creditor to obtain a judgment against the debtor, often without advance notice or a hearing — against the nonprofit for more than $985,000. Records show the organization failed to provide the bank with certain financial information and did not provide proof of insurance on its collateral as required by the loan.

Butler said that case is unrelated to the situation with HUD and the office of homeless services; he blamed it on the pandemic. “They had to file that,” he said. An attorney for Harbor Bank did not respond to requests for comment.

Meanwhile, the nonprofit received federal loans during the pandemic to blunt it from the effects of the public health crisis.

Both AIDS Interfaith Residential Services and Empire Homes received federal money through the Paycheck Protection Program in 2020, according to an online database, created to buoy small businesses during the first months of the pandemic. AIDS Interfaith Residential Services received $325,200 and had $329,644 forgiven, including interest, according to the database. Empire Homes, meanwhile, obtained $69,800 and had $65,489 forgiven. Both loans were said to be going toward payroll.

According to Empire Homes’ latest IRS disclosure forms, the organization had been losing grant money, program service revenue and other revenue through the fiscal year that ended in June 2020. Despite these losses, expenses increased, including salaries, employee benefits and other compensation, from the year prior. Empire Homes ended fiscal year 2020 with $1.9 million in revenue and more than $8.2 million in net assets; Butler reported a salary of over $165,000 that year.

Final notice given

Meanwhile, the last audit submitted to federal auditors, covering 2017 to June 2018, shows that AIDS Interfaith Residential Services also runs at least three limited liability companies — Lakeview Properties Inc., Charles North Housing Inc., and D.M. Inc. — that acquire, rehabilitate, lease and manage housing for low-income earners, older adults, people living with HIV and their families and people with disabilities. The housing units are heavily subsidized with HUD funds, according to the audit. All told, there are nearly 50 such units among the three companies.

Some of these companies appear to have financial problems as well. At least two residents of D.M. Inc. properties told The Banner that they have received final notice from Baltimore Gas and Electric Co. this year, alerting them that their service would be shut off if the account holder didn’t pay what was owed. A July turn-off notice shows that the account was $905 short.

Butler said staffing shortfalls at the organization had been causing disruption for some tenants, but that particular problem had been fully resolved. He said AIRS is no longer able to provide case management services due to the grants being terminated.

Brit Ferguson, who has been living in her Bolton Hill unit since 2015, said in addition to having her power briefly shut off during intense heat, she and her children, ages 6 and 3, have been exposed to mold in the bathroom. Another D.M. Inc. tenant, who asked not to be identified to avoid retribution from the landlord, said maintenance has failed to address several problems inside the building, including mold, rodent infestations; floor and ceiling repairs and broken locks; she also has two small children and worries about their health and safety.

Ferguson said she has considered moving, but she and her kids love their neighborhood, she said, and are reluctant to leave so soon to the start of the school year.

“I’m tired of it; there’s children involved,” said Ferguson. “The neighborhood is perfect, the people are friendly, my kids go to school around here. If we’re next [to get evicted], I’ll have to change all of that.”

Baltimore Banner reporter Sophie Kasakove contributed to this article.

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