JACKSONVILLE, Fla. – The owner of Eureka Gardens has been stripped of management authority at two other subsidized housing communities it owns.
As the I-TEAM reported earlier this week, a New York bank is suing the Rev. Richard Hamlet's Global Ministries Foundation.
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The bank of New York Mellon is accusing Hamlet and the foundation of fraud and breach of contract in connection with $11 million in financing for two complexes in Memphis.
A federal judge stripped Hamlet and GMF of any management power and gave it to a third party management group, Foresite Realty.
GMF consented to the order. The realty company will restore the properties to "decent, safe, and sanitary condition" so that they can be sold to help recoup some of the bank's money.
The I-TEAM traveled to Memphis last fall and saw firsthand the filthy living conditions at the Memphis properties. HUD canceled federal funding for the properties because of those conditions.
Mellon Bank has told the court that Foresite Realty has a history of rescuing distressed properties like these.
The I-TEAM first reported last month that the Memphis housing bonds were downgraded to junk bond status -- or triple Cs -- when HUD vacated its housing contract with Global Ministries, taking millions of taxpayer dollars from rent subsidies away from GMF.
The bond values tanked to 21 cents on the dollar.
In the lawsuit, the bank outlines how GMF breached its contract with investors by not telling them about a serious warning letter from HUD, which came nine months before the Memphis contract was voided. The letter detailed deplorable conditions like bug infestations, leaking sewage, broken windows and broken glass on the ground, and even squatters living in vacant units.
The bank also accuses GMF of fraud for misappropriating a check for more than $625,000 in insurance money from a fire last June.
The lawsuit claims the money was stuffed in GMF's pockets instead of going in the proper financial account.
The bank also says GMF has missed critical payments owed to its investors.
Hamlet is now trying to sell 11 troubled properties, including the Tennessee properties that are the focus of the lawsuit. All of GMF's Jacksonville complexes, including the troubled Eureka Gardens and Washington Heights, are also up for sale.
GMF released a statement Monday about the lawsuit:
“While we disagree with many of the allegations in the complaint and will respond accordingly when we file our answer, we are supporting the appointment of the receiver because it is in the best interest of the properties and the residents. GMF has invested millions of dollars in these historically troubled properties but unfortunately we were not successful. Going forward, GMF will continue to work closely with HUD and the Trustee to market these properties and find a new owner who is willing and able to rehabilitate the properties for the benefit of the residents and their neighboring communities.”