April 10, 1995 in Nation/World

Brown Hid Investment In Slums Commerce Secretary Has Concealed His Interest In Apartments Considered ‘Unfit For Humans’

Los Angeles Times
 

For more than two years in office, Commerce Secretary Ronald H. Brown effectively has concealed his personal investment in a trouble-plagued low-income apartment complex that is part of the rental empire of a Los Angeles businessman federal officials consider a notorious slumlord.

The two financial disclosure reports that Brown has filed since he was nominated by President Clinton in January 1993 list an interest in a residential rental property in the upscale Washington suburb of Potomac, Md.

But a Los Angeles Times investigation has found that the apartment complex actually is located on the opposite side of town in one of the area’s poorer communities: Landover, Md.

Known as Belle Haven Apartments, it is a dismal, druginfested complex where some units periodically are declared “unfit for human habitation.”

Belle Haven Apartments investors are part of a partnership with ties to A. Bruce Rozet, a Los Angeles millionaire who, officials say, has cost the government millions of dollars by abusing a federal program that helped him and his partners acquire low-income housing, collect subsidized rents and tax breaks and yet avoid maintaining the property.

Last October, Housing and Urban Development Secretary Henry G. Cisneros charged that Rozet “got filthy rich off this program, and he left filthy places behind him for people to live in.”

Rozet strongly denies the charge and says that the vast majority of his rentals have worked out well.

Like many of Brown’s other business associates, Rozet is a generous contributor to the Democratic Party, which Brown headed before becoming commerce secretary. Rozet helped fund the 1988 presidential campaign of Jesse Jackson, which Brown managed at the end.

Asked about the discrepancy on Brown’s reports, his press secretary, Carol Hamilton, said Brown is a passive investor in Belle Haven Apartments and has no knowledge of its whereabouts. She offered no explanation of why he inaccurately described it as property in Potomac.

“As a limited partner,” Hamilton noted, “Secretary Brown does not now nor has he ever had any management or operating responsibilities.”

Whether inadvertent or not, the erroneous report no doubt spared Brown embarrassing questions during his confirmation hearings. The required disclosure statements are intended to bring to light any possible conflicts of interest for top government officials or any private holdings or associations that might be considered inappropriate.

If Brown had declared an ownership interest in a troubled low-income property on his report, it likely would have attracted attention and controversy in Congress.

Others involved in Belle Haven question how Brown could not have been well informed about the property and its location - after he bought into the partnership in 1983.

All investors were required to receive a prospectus describing the property before they invested and periodic reports afterward. Other investors said they are familiar with the location of Belle Haven.

“There would be no reason for him not to know the property he invested in,” Rozet told The Times. “He would know what the investment was. He would not know day-to-day details. He certainly would know he was invested in the property.”

Belle Haven is not the only part of Brown’s financial affairs that is in question.

At present, a committee in Congress and the Justice Department are looking into several of his business relationships, including income he received from a company that defaulted on a $24 million federally guaranteed loan. Public integrity advocates have complained about the vagueness and lack of detail he has furnished about his holdings.

Attorney General Janet Reno is considering whether to call for an independent counsel’s investigation of Brown’s finances.

Brown’s disclosure documents, said Gregory S. Walden, a Washington attorney and ethics law specialist who has examined them, are “one of the sloppiest reports I’ve ever seen.”

For his part, Brown has said he never knowingly violated the ethics laws. Knowingly putting false information on a financial disclosure report is a felony that carries a maximum civil penalty of $10,000 and a maximum criminal penalty of five years in prison and a $250,000 fine.

Recently, former Rep. Mary Rose Oakar, D-Ohio, was indicted for falsifying information on her annual report, and former District of Columbia delegate Walter Fauntroy pleaded guilty to a similar crime.

Like most investors in low-income property, Brown put money into the project and reaped generous tax benefits under a federal law designed to stimulate development of housing for the poor.

Before the 1986 Tax Reform Act, investors were allowed to deduct all of their losses or depreciation on such projects from their total taxable income. In many cases, the tax write offs could far exceed the total investment. On average, experts say, those who invested in the early 1980s enjoyed a three-to-one return.

Brown’s lawyer, Reid Weingarten, described it as “a typical 1980s investment” in which a small investment promised a high return. “Everyone was doing it,” Weingarten said.

In all, Brown invested in four low-income housing projects originally syndicated by Stephen D. Moses, a Rozet business associate and a political ally of former Democratic National Committee Chairman Charles T. Manatt. Several years later, Rozet’s firm bought the company that manages the partnerships.

Moses estimated that Brown reaped about $175,000 in tax write-offs from the partnership for Belle Haven, based on an investment in 1983 of $71,000. Brown, who owned about 3 percent of the property, was one of about two dozen limited partners.

In its sad history, Belle Haven demonstrates why these tax breaks have become so controversial in recent years. Critics say the partnerships that bought into low-income housing were structured so that very little money was spent on maintenance.

Not only has Belle Haven fallen into disrepair, but the project has defaulted on a $6.1-million loan from the Maryland Housing Fund that was used to renovate the buildings more than a decade ago. In addition, local police officials say they have made frequent drug arrests in and around the complex.

Although the limited partners own nearly 98 percent of the project, they are not legally liable for the debts.

MEMO: Cut in the SPOKANE EDITION

Cut in the SPOKANE EDITION


Thoughts and opinions on this story? Click here to comment >>

Get stories like this in a free daily email