The deal was forged in 2008 when a fledgling nonprofit group with political connections promised to turn distressed apartment complexes into badly needed homes for troubled young men.
Peaceoholics had never bought or repaired a building. It had never operated affordable housing. It had no construction money from private lenders and less than $27,000 cash on hand.
But the D.C. Department of Housing and Community Development delivered $4.6 million to the organization so it could buy three apartment complexes and launch renovations. Then-Mayor Adrian M. Fenty (D) hailed the project as a way to help at-risk men transitioning out of foster care.
(Read the Q&A with the authors of this story )
Instead, the project became something of a spending free-for-all for developers and contractors who knew redevelopment money was out on the street and in the hands of a novice nonprofit with unchecked authority to spend it, records and interviews show.
The project was overseen at the housing agency by a top manager with real estate interests of his own who, along with other housing officials, often failed to impose fundamental spending rules and regular oversight. Instead of competitive bidding, Peaceoholics did business with friends and associates. Work often wasn’t tracked or documented.
Officials at Peaceoholics said they tried to keep the project on course. “It was our dream,” said co-founder Ron Moten. “We saw a need for housing.”
The ill-fated project, which is now under council scrutiny, underscores the city’s years-long struggle to build and renovate housing for the poor. Time and again, the housing agency has poured millions in local and federal money into affordable housing projects that were delayed, over budget or riddled with undocumented costs.
“We got a call from someone we’ve known for years,” said Edward P. Wilson III of Anne Arundel County, whose company sold one of the three buildings to Peaceoholics. “He said, ‘We’ve got some guys with a bunch of money for this program. . . . I said, ‘Are you kidding? Let’s go.’ ”
When the project faltered in late 2010 without a single unit delivered, top managers at the housing agency quietly changed the course of the deal, records show. Without review or approval from the D.C. Council, they replaced Peaceoholics with a new developer — then invested another $900,000 in local and federal funds.
The project went downhill from there.
The new developer, Richard Hagler of Calvert County, has faced more than a dozen lawsuits in the District and Prince George’s, Calvert and Montgomery counties alleging such problems as shoddy construction and breach of contract. Hagler, 54, who does not have a home improvement license in the District or Maryland, has filed for bankruptcy three times since 2000 and recently lost his house to foreclosure.
Hagler did not return repeated calls seeking comment or answer a letter sent to his home.
Records show Hagler promised to complete the renovations and fill the units with low-income tenants. A year later, one of the buildings is still vacant, and tenants in another list several complaints, including dangerous conditions, a lack of basic maintenance and pricey fees for parking and washing machines. One tenant said she is paying Hagler market-rate rent of nearly $1,000 a month.
Teka Adams, a mother of two who was formerly homeless, struggles with a hole in her ceiling and another in a bedroom closet with exposed electrical wiring. At the building next door, she said tenants use a butter knife to jimmy a front door that is chronically jammed.
“I’ve been here since April. I’ve had to call [Hagler] at least 50 to 60 times,” said Adams, 31, whose $959-a-month rent to Hagler is paid by a nonprofit transitional housing program. “I take care of this apartment. It’s a hazard to my children.”
Two other tenants interviewed by The Post said they were enjoying their new homes.
D.C. Council member Jim Graham (D-Ward 1) has been raising questions and requesting documents from the housing agency since October. On Saturday, Graham and D.C. Council member Michael A. Brown (I-At Large) e-mailed the city’s inspector general and attorney general calling for an investigation.
“D.C. taxpayers were robbed,” Graham said. “No one in the D.C. government was supervising what was going on. As a result, costs ballooned, suspicious if not fraudulent deals were made, the law was ignored, and ultimately the only ones to benefit were those who were out to make a buck.”
John E. Hall, who became director of the housing agency in April, has been trying to sort through the details of the deal, which has so far cost $5.5 million. On Friday, one day after The Post began asking questions about the project in a meeting with city officials, the housing agency moved to terminate its chief program officer and place a project manager on administrative leave.
“I’m trying to assess the best route for the District,” Hall said.