Modesto City Council may seek SCAP probe help

By Ken Carlson - kcarlson@modbee.com


The Modesto City Council on Wednesday could ask the state attorney general and Stanislaus County civil grand jury for help with investigating how a nonprofit housing developer spent federal stimulus dollars.

According to the draft letters asking for assistance, the city wants to know whether the Stanislaus Community Assistance Project misappropriated money intended to assist foreclosure-stricken neighborhoods in Modesto.

A city auditor is investigating whether SCAP violated conflict of interest rules when it placed SCAP employees or their family members in homes, some of which had been lavishly improved with Neighborhood Stabilization Program funds.

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Federal regulators have questions about the $160,000 spent on upgrades for a Rumble Road house that was later occupied by the parents of SCAP Executive Director Denise Gibbs. Others have questioned if SCAP drastically overpaid for an apartment complex on East Coolidge Avenue based on a dubious appraisal.

"If there was criminal conduct, I want the attorney general to be aware of what is going on," said Councilman Garrad Marsh, who wants the city to contact the agencies.

If the council gives its approval, City Manager Greg Nyhoff will notify Attorney General Kamala Harris of the ongoing probes.

"This is a matter of serious concern to the city because of inconsistent documentation that SCAP staff provided to the city," Nyhoff wrote in the draft letter. Nyhoff added that the federal government is responsible for enforcement, but the city wants "to bring this matter to the attention of your office as well as to ensure that available resources are brought to bear on this serious public matter."

Marsh said the grand jury could give an independent appraisal of the city's oversight of the housing program and suggest ways to correct problems. The civil grand jury is able to call city officials to testify at a closed hearing; it has no authority over a nonprofit agency.

Special auditors with the U.S. Department of Housing and Urban Development are investigating how the city managed $25 million in Neighborhood Stabilization money granted to Modesto in February 2010. Depending on what is uncovered, HUD's criminal investigations division could get involved.

Mayor weighing decision

Beside those agencies, the FBI has talked with people who have concerns about SCAP's activities.

Mayor Jim Ridenour said Friday he needed to read the proposed letters before deciding how to vote.

"I don't know if this will help," the mayor said. "I will have to see exactly what (Marsh) is asking for. Anything that helps this come to a close is what I am looking for."

The city has worked with SCAP and nine other developers to buy and renovate 175 foreclosed dwellings to serve as housing for residents with low to moderate incomes. Under an agreement, the 46 housing units developed by SCAP were to be occupied by the disabled, those with special needs or people threatened with homelessness.

In defending their conduct, SCAP officials often cite HUD guidelines that would allow a four-member family earning $73,000 a year to qualify for the housing.

"Everybody who is in those units meets one of those definitions or they meet the guidelines for special needs population," Development Director Joe Gibbs said during a recent interview.

Agency will comply

Gibbs said the nonprofit will comply with the city auditor's decision on whether SCAP employees or their relatives were eligible for a waiver of conflict of interest rules. He declined to comment about his compensation from SCAP and other issues raised in recent Bee stories.

SCAP first came under fire for a deal that allowed Gibbs to earn $627,000 in grant-writing bonuses in the 2009-10 fiscal year. Gibbs, the husband of Denise Gibbs, received $196,000 of that amount. In response to public outrage in June, SCAP announced that he would forgo $431,000 he said was owed him.

On Wednesday, the Modesto council will hear a status report on the Neighborhood Stabilization housing program known as NSP2. City leaders have said they will await the results of the investigations before deciding what to do with $12 million in unspent money.

Modesto has until February 2013 to spend the money or return it to the federal government.

Bee staff writer Ken Carlson can be reached at (209) 578-2321.

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