Acting AG Whitaker abandoned taxpayer-funded project in Iowa in 2016

Ryan J. Foley and David Pitt
Associated Press
FILE - In this April 24, 2014, file photo, then-Iowa Republican senatorial candidate and former U.S. Attorney Matt Whitaker watches before a live televised debate in Johnston, Iowa. Maryland is challenging the appointment of Matthew Whitaker as the new U.S. acting attorney general. A draft filing obtained Tuesday by The Associated Press argues that President Donald Trump sidestepped the Constitution and normal procedure by naming Whitaker to the position in place of Deputy Attorney General Rod Rosenstein. (AP Photo/Charlie Neibergall, File)

DES MOINES, Iowa – While in private business, acting Attorney General Matthew Whitaker walked away from a taxpayer-subsidized apartment-rehabilitation project in Iowa after years of cost overruns, delays and other problems, public records show.

The city of Des Moines ultimately yanked an affordable housing loan that Whitaker’s company had been awarded, and another lender began foreclosure proceedings after Whitaker defaulted on a separate loan for nearly $700,000. Several contractors complained they were not paid, and a process server for one could not even find Whitaker or his company to serve him with a lawsuit.

After being appointed last week by President Donald Trump to the nation’s top law enforcement job, Whitaker’s history as a former federal prosecutor, Republican Party loyalist and critic of special counsel Robert Mueller’s investigation has come under scrutiny, as have some of his business dealings.

Whitaker is expected to return to his home state Wednesday to speak at a conference at a downtown Des Moines hotel, about two miles from the Ingersoll Avenue apartment building that he once saw as an investment opportunity. After years of rising costs, Whitaker stopped work on the project by early 2016 and sold the building months later.

“He did not complete the project due to cost overruns and a bad general contractor,” Department of Justice spokeswoman Kerri Kupec said late Tuesday.

She didn’t identify the contractor, but a handyman listed in public records as working under Whitaker on the project didn’t return a phone message.

City officials raced to see the project completed to avoid losing federal money, and contractors filed liens seeking compensation for more than $32,000 in unpaid work.

A company formed by Whitaker and two partners, MEM Investment, was awarded a $166,000 city loan to renovate the vacant three-story complex in 2012, through a Department of Housing and Urban Development grant program to promote affordable housing. A reorganization in 2014 made Whitaker the company’s sole owner.

All but $25,000 of the loan would be forgiven as long as the project was completed by 2017 and half of its 22 units were restricted to low-income tenants for five years. But what was once thought to be a $400,000 project for lead testing and site improvements became more expensive as additional work and damage piled up, records show.

More:Trump on new acting AG: ‘I don’t know Matt Whitaker’

More:Future seems uncertain for Trump’s acting attorney general

More:With new Justice official, fate of Russia probe in question

Whitaker refinanced his mortgage on the building to get more funding and put an undisclosed amount of his own money into the project.

Beginning in February 2015, city officials said they repeatedly communicated the urgency of finishing the project to Whitaker during meetings, letters and phone calls. But by March 2016, an inspection showed “there had been minimal, if any, additional rehabilitation work completed since the previous inspection” several months earlier, city planner Mary Neiderbach wrote to Whitaker on April 1, 2016.

“In addition, more damage had occurred to the building’s interior because of what appears to be a roof leak and missing downspouts on the back of the building,” she wrote, adding that Whitaker’s company “appears to have abandoned the property.”

The letter informed Whitaker that the city was terminating the loan agreement and gave him 30 days to pay back $151,620 that he had been advanced. It noted that the city had to complete the work by the end of 2016 or repay HUD, and that it did not have confidence Whitaker’s company was up to that task.

Whitaker did not reply to the city’s notice. His lender, Lincoln Savings Bank, soon declared Whitaker’s company in default after he ignored demands to pay back a mortgage that had ballooned to $687,000, records show. The bank initiated foreclosure proceedings on the property in July 2016, seeking to be paid back ahead of the city and contractors.

The contractors included an electrician who filed a lawsuit seeking to collect more than $14,000 in unpaid invoices. A process server said in a court filing that repeated visits to three addresses listed for Whitaker’s company and his law firm turned up nothing other than dark, locked offices. The lawsuit was eventually dismissed after both Whitaker and the contractor failed to show up to a scheduled court hearing that had been announced in the newspaper.

As part of an exit agreement, Whitaker’s company agreed to sell the building to developer Jeff Young, to “provide a portion of the Lincoln Savings Bank repayment and to settle all contractor liens against the property,” an August 2016 city memo showed. It’s unclear whether the contractors have been repaid in full.

The memo said Young was expected to complete the project by the looming December 2016 HUD deadline.

Kupec said the buyer also assumed Whitaker’s loan, and the city didn’t take any legal action.

Attorney Jeff Courter, who represented Lincoln Savings Bank, said its foreclosure petition had been resolved but declined to comment further.

Whitaker’s company did add value to the building, which it bought for $200,000 in 2012 and sold for $650,000 four years later.