Wednesday, April 20, 2011

Board member one month, recipient of its largesse the next, a local real estate investor maneuvers government regulations for housing the poor into a pending $2.5 million payday for himself. By Leslie Turk

On Dec. 2, 2005, Greg Gachassin notified his fellow Lafayette Public Trust Financing Authority board members that the state’s annual allocation of tax-exempt bonds for low-interest home buying programs was not being fully utilized and that few — if any — of these loans were being originated in Lafayette Parish.

Gachassin, a Lafayette native who had become a successful real estate investor and mortgage company owner, knew this to be the case because he also was chairman of the board of the Louisiana Housing Finance Agency, which decides — based on a scoring system — who gets the federal tax credits. These tax credits were created by Congress to incentivise private investment in low-income housing.

At that same 2005 meeting, Gachassin went on to brief the LPTFA board members, or trustees, about “his investigation” of the need in Lafayette Parish for affordable elderly housing, including information regarding a meeting he had with Walter Guillory, who at the time was executive director of the Lafayette Housing Authority.

In large part convinced by Gachassin, the LPTFA, a trust organized under the laws of the state that holds millions for the benefit of Lafayette government — in March 2010 it had $94 million in total assets and $69 million in total liabilities — decided to pursue the elderly housing project. In 2006 it purchased 8.26 acres at the corner of Moss and Sophie streets for $315,000, according to parish records. The LPTFA had taken a big step toward its first housing development. As more pieces fell into place, including securing federal tax credits and a $1 million loan from the Louisiana Housing Finance Agency, the 72-unit apartment complex, Cypress Trails, was taking shape.

Gachassin would ensure that it was a done deal.

Cypress Trails, a $10 million low-income elderly apartment complex, is under construction at the corner of Sophie and Moss streets in north Lafayette.

At the LPTFA’s Nov. 4, 2009, special meeting, held in the executive conference room of Lafayette Consolidated Government’s University Avenue building, Gachassin, by then LPTFA’s chairman, instructed the public trust’s attorney to prepare a resolution authorizing the officers of the authority and its counsel to “take all actions necessary or advisable to cause the LPTFA tax-credit affordable housing project Cypress Trails to proceed to closing in accordance with the terms and conditions of its application to the Agency,” according to minutes from that 2009 meeting.

Later that month, Gachassin resigned from the LPTFA board.

Then, on Dec. 2, 2009, two weeks after stepping down from the public body’s board, he returned to an LPTFA special board meeting, having metamorphosed into a paid consultant for the apartment development. He proceeded to provide an update on the project — details as precise as a particular hole on a nearby golf course that could potentially damage the development. He said he had met with LCG Public Works Director Tom Carroll and the two preliminarily agreed that LPTFA would handle the curb and gutter improvements on Sophie Street, which was at the time a gravel road, with LCG paying for the base and asphalt improvements. Gachassin presented an overview of the site plan and preliminary floor plans, a time line for closing on the project — the last week of January 2010 — and the expected completion date, early 2011. He’d been hard at work.

Notably, no one — not one of the trustees, John Arceneaux (who replaced Gachassin as chairman), Julius James Stagg IV, Ryan L. Marine and D.E. “Dusty” Dought, or longtime LPTFA attorney Richard Becker — raised any questions about Gachassin returning as a paid consultant, according to the minutes of the meeting. Nor did anyone bother to check with the Louisiana Board of Ethics on whether Gachassin going to work for the LPTFA’s own development would constitute a violation of the state’s ethics laws. Becker declined our request for a copy of that consulting contract, claiming the contract is between Gachassin and Cypress Trails Limited Partnership, which is not a public body.

Gachassin resigned from the LPTFA board Nov. 17, 2009, and returned to a board meeting two weeks later as a paid consultant on the public trust’s apartment project.

The consulting fee on such a project can easily exceed $500,000, based on a similar size project Gachassin is involved with in which the fee has been publicly released. Typically, the consultant collects half of what’s known as the developer fee; the developer or sponsoring agency gets the other half.

It could very well be that none of his fellow trustees was surprised when Gachassin appeared before them on behalf of the project — Dought was absent — because when LPTFA was awarded the low-income  housing tax credits from the state in October 2009, Gachassin notified the LPTFA that he intended to resign and become a consultant on the project, according to Becker. By the time he appeared as a consultant, Gachassin had filed paperwork with the Louisiana Secretary of State’s office, creating The Cartesian Company at 326 Settlers Trace Blvd. in River Ranch. In January 2010 he announced its creation in a press release, calling it a real estate development and finance solutions company, specializing in development, project management, capital solutions and public-private partnerships.

Legal adviser Becker and the board had to be well aware that in the previous year Louisiana enacted sweeping ethics reforms. The overhaul was so extensive that Gov. Bobby Jindal declared to national audiences that the new laws set the “gold standard.” The board members were all relatively new to the LPTFA, because the 2008 ethics reforms wiped out the public body’s previous board, which is appointed by the Lafayette City-Parish Council; board members at the time believed they were subject to new personal financial disclosures and resigned en masse. (Though it was not clear at the time, Lafayette just missed the population stipulation for these disclosures but is now subject to more financial disclosure requirements as a result of the new census figures).

Becker says because of the 2008 ethics revisions he wanted assurances from Gachassin that — “in [Gachassin’s] opinion” — his serving as a consultant on the project would not violate the law. Becker believes such ethical considerations were Gachassin’s alone, saying he asked that Gachassin perform the necessary due diligence and report back to LPTFA: “In a subsequent conversation with Mr. Gachassin, he advised me as counsel to the LPTFA that he had indeed performed such due diligence and that after consideration and review concluded that the proposed consulting agreement with CTLP was not a violation of the Louisiana Ethics Code.”

In a review of the LPTFA’s minutes, The Independent could find no documentation of this conversation.

While the request for an advisory opinion typically is submitted by the individual seeking to enter into a such contract, says Louisiana Ethics Administrator Kathleen Allen, the board attorney or another trustee could easily have asked for an opinion. “You have to have standing. You have to be affected,” Allen says. “And it’s got to be about something that’s going to happen in the future, not something in the past. Usually it is the individual. Sometimes the attorney or the board will ask. We kind of see a mixture.”

The Ethics Code on this matter appears clear: Gachassin should have waited before getting involved in the project for compensation. “If he’s subject to the Ethics Code, there is a two-year wait,” says Allen, who is not permitted to comment on specific individuals or cases unless an opinion has been rendered.

And — making matters worse for Gachassin — it’s the same post-employment restriction that was on the books long before the 2008 code revisions, according to Allen.

“I’m not going to be able to tell you he’s violating the code or it’s a violation of this section,” Allen says. “What I can tell you, though, is he cannot assist another person, that’s the developer, for compensation in a transaction that involves his former agency. He cannot contract with his former board, he cannot be employed by his former board, he cannot be appointed to any position by that board, he cannot render any services to or for them. So if he’s assisting them for compensation in a transaction that involves his agency, that’s what’s prohibited,” she continues. “And there’s a definition of transaction. ... It’s quite broad. If there is something that the governmental entity is a party [to] or has an interest in, then perhaps it could be a transaction.”

According to the original documents creating the LPTFA in 1979, the public trust is subject to the “Public Contracts Law, Public Records Law, Public Meetings Law, Code of Ethics and the Bond Validation Procedures Law.”

Former and current LPTFA board members contacted for this story declined comment.
 
Wait. But there’s more. About two weeks before Gachassin resigned from the LPTFA, on Nov. 1, 2009, he signed on as a consultant for Villa Gardens Housing Corp., which is developing Villa Gardens, a federal tax-credit subdivision on Patterson Street. The LPTFA also participated in that development, having loaned the Lafayette Housing Authority $400,000 for Villa Gardens in 2006. Becker is also counsel for the Villa Gardens partnership and the LHA — a beleaguered agency now under investigation by the FBI — and would have been well aware of this potential ethics predicament for Gachassin as well. In July 2010, Becker noted on his website that he, as counsel to the LHA, closed a $6.5 million loan with Capital One for the 43-unit development, which remains under construction.

The value of Gachassin’s Villa Gardens contract? A half million dollars.

Gachassin did not return a message left on his cell phone last week or email requests for an interview. Kacee Thompson, vice president of business development for The Cartesian Company, responded via email that Gachassin was not in the office last week. When we asked if he was out of the country and thus unavailable to address specific questions about the ethical implications of his actions, Thompson responded: “I’m sorry, but he is out of state and has limited access to email and cell, so you will not be able to get in touch with him until early next week.”

By press time Monday afternoon, he had not responded to our repeated requests for an interview.

Riddled with problems pointed out in a 2009 independent audit, St. Antoine Gardens, at the corner of N. St. Antoine and W. Gilman Road, was the LHA’s first tax-credit subdivision designed for renters to eventually own their homes.

But The Independent did speak with him by phone in October of last year, after the LHA directed our request for a sample lease agreement on the controversial St. Antoine Gardens development, the LHA’s first tax-credit funded subdivision, to him. At that time, Gachassin said the lease agreements for St. Antoine are produced by the management company of the development, a private company, not the LHA. He maintained that a blank lease agreement was not a public record and also said he did not understand why the LHA would refer our inquiry to him.

Like the 4-year-old St. Antoine Gardens development, whose gross financial mismanagement and shoddy construction were brought to light in large part due to an independent audit of the LHA — the same blistering audit that led to the resignation of Walter Guillory and ongoing state and federal investigations into the housing authority — Villa Gardens consists of single-family homes. Most are occupied by local residents who qualify for Section 8 assistance, but both St. Antoine and Villa Gardens were initially touted by the LHA as home-ownership programs, with the residents having the option of purchasing the homes after renting them for 15 years. Two residents, however, told this newspaper they had no information about the option of purchasing the home down the road.

Each of these LHA-sponsored projects involves the creation of a partnership that enters into an agreement with an investor, a limited partner — or tax-credit syndicator — with 99.99 percent interest in the single-family home developments. There is always a need for a “consultant” to bring the deals to fruition.

Consultant Gachassin has developed a very lucrative specialty, as he stands to earn at least $2.5 million on four projects that are ongoing or about to get under way. Clearly these north Lafayette projects meant to help the poor access housing are lining the pockets of wealthy Lafayette professionals, but determining just how rewarding they are for all the parties involved is next to impossible. These tax-credit projects can involve any number of undisclosed individuals and partnerships, some of which are not open to public scrutiny due to an exemption in the Louisiana Public Records Act for affiliates of housing authorities. Becker defined those exempt affiliates as partnerships in which the housing authority has a less than majority interest. LHA has a .01 percent interest in both St. Antoine and Villa Gardens. That means the public has no way of knowing the makeup of those partnerships and who is profiting from the deals to ensure conflicts of interest do not exist.

Construction is under way at Villas at Angel Point, which also involves Gachassin’s The Cartesian Company and was approved for Go Zone low-income housing tax credits in February of this year.

“You have private investors in these deals, and they don’t want all their stuff out there,” Gachassin said last year. “They don’t want all their partnership agreements. They don’t want all their equity contribution payments. Those are anti-competitive type pieces, too. They don’t want to let all their competitors know what they do and how they do it,” he added. He said these groups have to report to the federal government and the state government each year, “what they’re doing and how they’re structured.”

Because of the controversy with the LHA and questions about who is involved in these deals, state Rep. Rickey Hardy is trying to have the sunshine law apply to all of these arrangements. He has prefiled a bill in the upcoming session that would eliminate the public records exemption for affiliates of housing authorities.

Even Cypress Trails Limited Partnership, which dropped the controversial LHA from its project and thus no longer would be considered an affiliate of a housing agency, would not open its records for us.

In response to The Independent Weekly’s assertion that the Cypress Trails Limited Partnership was formed for the sole purpose of developing a public project and should be subject to the public records law, Becker asked the state attorney general for an opinion. That opinion, which potentially could open up records on all of the individuals involved in Cypress Trails, had not been released by press time.
 
While the LPTFA has been involved in numerous transactions, including the issuance of tax exempt bonds, this particular project required that it form an affiliate non-profit entity, Cypress Trails Corp., to served as the general partner in a limited partnership, which was created to own and develop the low-income housing tax-credit project. That partnership, Cypress Trails Limited Partnership, got a $1 million HUD loan and also received $800,000 in federal low-income housing tax credits each year for 10 years from the state (the sale of those tax credits will generate a total of $8 million to fund the project). That funding allowed CTLP to bring in the tax-credit syndicator that acquired 99.99 percent interest in the limited partnership by putting up the equity to fund the project. As general partner in CTLP, the LPTFA affiliate has .01 percent ownership interest but stands to get full ownership of the property once the credit syndicator withdraws — typically after the 15-year rental restriction period, then-chairman Gachassin informed the board at the November 2009 meeting.

Ironically, it was Gachassin’s own actions that initially cast suspicion on his role in these housing developments. Gachassin said he did not have a financial relationship with St. Antoine, but in September of last year — at the height of the LHA controversy and while he was involved in an uproar over another apartment development in downtown Lafayette, the $16.5 million Joie de Vivre (in which he will earn about a $1 million fee) — he personally removed a computer, furniture and files from the office of St. Antoine’s former on-site manager, Tiffany Singleton. “They asked me to come in and assist in the transition to make sure they did things properly because I have a lot of experience in it,” Gachassin said at the time. “I didn’t charge them anything for it.”

Gachassin said he was asked to assist Latter & Blum, which assumed management of St. Antoine Oct. 1. “A lot of things that happened at St. Antoine wouldn’t have happened if I had been involved,” he said. “I would never have set it up that way. On behalf of Latter & Blum, with the authority of Walter Guillory, we went and picked up all the tenant files so they could put them in their system. I assisted with that process because I felt it was important for the development to get on the right track.

“We did it out of the kindness of our heart ... just as I volunteered for many other services in our state and our community. I volunteer many of times to do a lot of things that help a lot of people. There’s nothing inappropriate about that.”

It is worth noting that Gachassin was on the state housing board when St. Antoine Gardens, the LHA’s first home-ownership subdivision, was awarded its tax credits; around that time, he did ask for an ethics advisory opinion on whether he could serve on two boards when one, the LPTFA, is seeking tax credits from a program administered by another. Noting in its opinion, dated May 16, 2006, that Gachassin stated he had “no interest in any development applying for a tax credit,” the Ethics Board greenlighted his dual service.

Former LHA commissioners, who came under severe criticism for being asleep at the wheel while the mismanagement of the LHA and St. Antoine Gardens took place, are now demanding answers about two new projects involving Gachassin. While they did, as a board, approve St. Antoine and Villa Gardens, they have since become outraged that they knew nothing about LHA’s involvement in either Cypress Trails or Villas at Angel Point, another Patterson Street affordable housing project that’s only recently come to the public’s attention. Former commissioners don’t understand how these projects were set up with legal subsidiaries of the LHA, in particular the Lafayette Low Income Housing Management Corp., that used their names without their knowledge.
While board members are now convinced Guill ory intentionally kept them in the dark, they’re also wondering if Gachassin was aware of or aided in the deceit. “He was the point man,” former LHA commissioner Donald Fuselier, an attorney, says. “He was the one who was knowledgeable and had the skills to see these deals through, the guy who was putting all of this together. He’s smart enough to know the rules, what you are, and are not, supposed to do.”

Although the LHA was originally involved in Angel Point, HUD, which has since taken over the troubled housing agency, pulled out of the development earlier this year, leaving The Cartesian Company as project consultant and John S. Ford of Angel Manor PCS-LLC, which owns the property at 323 Patterson St., in an undisclosed role. The LHFA’s records show that The Cartesian Company’s Thompson submitted a tax-credit application to the state in September 2010. In February the $6.8 million elderly housing project was conditionally awarded $734,000 in Go Zone tax-credit funding for each of the next 10 years. The general partner is Angel Point Development LLC, which did not file with the Secretary of State until March 14 of this year, listing Becker as its registered agent and Angel Manor PCS-LLC as an officer.

That brings to four the number of known low-income housing developments Gachassin has going in Lafayette. Along with Gachassin and attorney Becker, architect Glenn Angelle is another common denominator in these deals, just as he was on St. Antoine, which had a number of construction deficiencies the LHA inappropriately paid to repair. Also, Bennett Builders LLC, a Baton Rouge-based company with a Lafayette office, is the general contractor on three of the four developments (see related sidebar).

Attorney Richard Becker

The Lafayette Parish Democratic Committee — which in February called for the federal investigation of the LHA to include an inquiry into the LPTFA to determine if there were any conflicts of interest and whether the money paid to fund, develop and operate these tax-credit projects was appropriate — has joined former LHA board members in pushing for answers.

A source within the LHA says the FBI has been asking questions about these low-income housing deals and the people involved with them.
Out of what he says was mere curiosity about a project that is nearly complete, former LHA board member Buddy Webb drove into the Villa Gardens neighborhood a few weeks ago. As he was exiting the development, Webb was stopped by a man who identified himself as an employee for the contractor.

The man informed Webb that it was a private development and asked him what he was doing there. “He said he felt it was unusual for a white guy to be in that neighborhood,” Webb recalls. When Webb told the man he had approved the project as an LHA board member and wanted to see its progress, the worker responded: “Well, you know there’s a lot of controversy with Mr. Gachassin.”

Accusations that there was anything untoward about the partnerships or that they had been structured in such a complex manner to hide who was benefitting wasn’t sitting well with Gachassin when The Independent talked to him in October. “There is such an accusatory process going on right now that’s very frustrating to me,” he said in October. “That’s why I’m defensive.”

Gachassin also insisted that much of the criticism stems from the fact that very few people understand this specialized field. “When you guys are ready to go to law school and you guys are ready to go get financial degrees and to understand what the federal government requires to do these deals, then y’all can poke holes in it,” he said. “I am like beside myself right now to hear someone try to make a statement that because it’s complex it must be wrong. That’s the most ridiculous thing I’ve ever heard in my life. Do you think that government contracting is simple? The federal government requires it to be this difficult.

It’s one of the most complex transactions I have ever been involved in, and I’ve been involved in a lot.”

---

How Low Income Housing Tax Credits Work

The Low Income Housing Tax Credit Program is an indirect federal subsidy used to finance the development of affordable rental housing for low-income households. On its website, HUD notes that while the program may seem complicated, many local housing and community development agencies are effectively using these tax credits to increase the supply of affordable housing in their communities. Once an entity receives tax credits, developers have two years to complete construction and move residents into the homes or apartments. For now, the Go Zone tax credits, like those awarded in February to Villas at Angel Point, have a deadline of December 2011.

The LIHTC Program was enacted by Congress in 1986 to provide the private market with an incentive to invest in affordable rental housing. Federal housing tax credits are awarded to developers of qualified projects. Developers then sell these credits to investors to raise capital (or equity) for their projects, which reduces the amount of money the developer would otherwise have to borrow. Because the debt is lower, a tax credit property can in turn offer lower, more affordable rents.

Provided the property maintains compliance with the program requirements, and passes regular inspections, investors receive a dollar-for-dollar credit against their federal tax liability each year over a period of 10 years. The amount of the annual credit is based on the amount invested in the affordable housing.

Credits vs. deductions: Tax credits are subtracted directly from a person’s tax liability. They reduce tax liability dollar-for-dollar. Tax deductions are subtracted from a taxpayer’s total income to compute his or her tax base. Deductions reduce tax liability by the amount of the deduction times the tax rate.


Greg Gachassin’s Public Service:
Lafayette Public Trust Financing Authority
Appointed by Lafayette City-Parish Council November 2003
Elected chairman April 2007
Resigned Nov. 17, 2009

Louisiana Housing Finance Agency
Gov. Kathleen Blanco appointee (through Louisiana Mortgage Bankers Association) January 2005-October 2007
Interim chairman February 2005
Chairman April 2005-April 2006

Gachassin Projects:
Villa Gardens
Cost of project $8.4 million*
Developer fee $1.03 million*
500 Patterson St.
Developer - LHA
Consultant - Greg Gachassin, The Cartesian Co.
Contractor - Bennett Builders (app to state lists Southern Contractors of LA)
Architect - Glenn Angelle

Cypress Trails Apartments
Cost of project $10 million*
Developer fee: $1.2 million*
401 Sophie St.
Developer - LPTFA
Consultant - Greg Gachassin, The Cartesian Co.
Contractor - Bennett Builders (original app to state lists Southern Contractors of LA)
Architect - Glenn Angelle

Villas at Angel Point
Cost of project $6.8 million*
Developer fee $846,000*
323 Patterson St.
Developer - Greg Gachassin, The Cartesian Co.**
Contractor - Bennett Builders
Architect - Glenn Angelle

Joie de Vivre
Cost of project $16.5 million*
Developer fee $1.9 million*
519 S. Pierce St.
Developer - Acadiana Outreach Center
Consultant - Greg Gachassin, The Cartesian Co.
Contractor - The Lemoine Co. (original app to state lists Bennett Builders)
Architect - Glenn Angelle
*estimated total cost of project and developer fee provided by Louisiana Housing Finance Agency
** Lafayette Consolidated Government records

Breaking the Code?
The Louisiana Code of Ethics, available online, defines a public servant as a public employee or elected official and includes anyone who is appointed by an elected official to a position serving the government or government agency. According to the law: “No legal entity in which the former public servant is an officer, director, trustee, partner or employee shall, for a period of two years following the termination of the public servant’s service, assist another person, for compensation, in a transaction, or in an appearance in connection with a transaction in which the former public servant participated at any time during his public service and which involves the agency with which he was formerly employed or in which he formerly held office.”

A transaction involving the governmental entity means any proceeding, application, submission, request for a ruling or other determination, contract, claim, case, or other such particular matter that the public servant or former public servant of the governmental entity in question knows or should know is the subject of action by the governmental entity or is one to which the governmental entity is or will be a party.

The Lafayette Public Trust Financing Authority, according to the original documents creating the trust, is subject to the Ethics Code.

The Board of Ethics can initiate an investigation into a potential violation of the code by a two-thirds vote of its membership (eight votes). A copy of the vote, and a detailed explanation of the matter is sent to the complainant and the respondent. Additionally, the board must consider any signed sworn complaint.

The Ethics Board has the authority to censure an elected official or other person and to impose a fine of not more than $10,000 per violation. It has the authority to impose restrictions on a former public servant to prohibit him from entering into business relationships with the former agency, and can rescind contracts, permits and licenses — without contractual liability to the public — whenever it finds that a violation has influenced the making of such contract, permit or license, and that such recision is in the best interest of the public.

The board can levy penalties if an investigation reveals that any public servant or other person has violated the code to his economic advantage; penalties can include the amount of such economic advantage plus one half.

The board also is authorized to order the forfeiture of any payments made in violation of the code.

Source: www.ethics.state.la.us