|HUD No. 12-001
January 4, 2012
HUD SUSPENDS PHILADELPHIA COMPANY AND PRESIDENT
James Grier and Mantua Gardens East, Inc. improperly threatened low-income tenants with eviction
WASHINGTON - The U.S. Department of Housing and Urban Development today announced that it immediately suspended James H. Grier and Mantua Gardens East, Inc. (MGE) of Philadelphia from doing business with the U.S. Government. In addition to the immediate suspension announced today, HUD also proposed their debarments to prevent Grier and the company from participating in government-related business for a period of five years.
HUD's actions are based upon Grier and MGE's improper withdrawal of $325,000 from reserves without HUD approval and submission of false and misleading financial reports to HUD. MGE also failed to provide sufficient notice to tenants of its intention to opt out of the Section 8 project-based program, thereby denying the tenants adequate time to make housing arrangements, and threatening them with eviction.
"As president of this Company, Mr. Grier, through a number of acts and omissions, was responsible for MGE's violations of important HUD requirements," said Helen Kanovsky, HUD's General Counsel. "By failing properly to notify their tenants, Mr. Grier and his company deprived them of an important legal right to make other housing arrangements and to spare them from the possibility of eviction."
In December of 1970, MGE agreed to a $720,000 mortgage loan insured by the Federal Housing Administration (FHA). As an FHA mortgagor, MGE is required to establish and maintain a reserve account to meet emergency needs at the multi-family housing development, which comprises ten buildings located in Philadelphia's University City neighborhood. In 2008, Grier and MGE improperly withdrew $325,000 in reserves without required HUD approval and then refused to restore those funds to the Company's reserve account. Grier and MGE then pledged those funds, along with one of the development's buildings and future rent payments, as collateral for a separate loan from a lending institution. This misappropriation of reserve funds and unauthorized encumbrance of property are serious violations of FHA requirements. Grier and MGE also filed a false and misleading annual financial report to HUD by failing to note this new liability.
For approximately 27 years, MGE received project-based Section 8 subsidies under a Housing Assistance Payment (HAP) Contract with HUD. Under the terms of the Contract, MGE was entitled to opt out of the contract, but was first required to provide one year's advance notice to the tenants. That notice would have allowed tenants sufficient time to make other housing arrangements. In October of 2011, MGE notified HUD that it was opting out of the program, failed to properly notify tenants, and instead threatened them with eviction.
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