Zurik: Housing board member in non-compliance with own loans - FOX 8, WVUE, fox8live.com, weather, app, news, saints

Zurik: Housing board member in non-compliance with own loans

BATON ROUGE, LA (WVUE) -

FOX 8 has uncovered allegations of bullying, threats, harassment by a powerful board member who may owe you half a million dollars.

"I'd almost like to make a joke about his arrogance," says Buddy Spillers, who chairs the board of the Louisiana Housing Corporation. "Yes, it's arrogance."

We approached that board member, businessman and developer Donald Vallee, during his break at a recent Louisiana Housing Corporation board meeting.

"That's my boss," says Keith Cunningham, LHC's executive director.

Vallee is technically Cunningham's boss, one of 10 members of the Housing Corporation board of directors, a voluntary board. Cunningham runs the Housing Corporation and reports to the board, which has hiring and firing power.

We wanted to ask Vallee about federal loans, and a potential conflict that's made for an uncomfortable situation for the person he helps oversee, Keith Cunningham.

"We are the state agency and we're responsible for compliance," the executive director says.

LHC oversees compliance for small rental property program loans. Its funding came from the federal government, post-Katrina, to provide "affordable rental housing" with "reduced rents."

In 2008, Vallee received $70,000 loans on five properties off Downman Road in New Orleans East. Vallee promised to fix up the units, offer reduced rents to low-income applicants and, if he stayed compliant, the loans would be forgiven.

Here's the problem: Vallee has been out of compliance.

Beginning in 2013, state agencies have sent Vallee letters, asking him to comply with the terms of the loan. In a series of letters that cover nearly five years, Vallee is accused of being "non-responsive", having "missing documentation" and failing "to provide access to property."

The main issue is that Vallee hasn't supplied the state with tenant documentation. The Housing Corporation can't verify the income level of his tenants, so cannot determine whether he's properly used the loan funding.

"He's been properly served and notified that he has to bring those into compliance or would be subject to having to pay that money back on those particular, out-of-compliance units," Spillers tells us. "And that's been the case for about the whole time while he's been on this board."

Let's reconnect these dots for you:

  • Vallee is non-compliant on these loans;
  • He's ignored five years of letters;
  • And the agency that is responsible for monitoring these loans is the Louisiana Housing Corporation - the same agency where Vallee serves as a board member.

"The fact is, in my opinion, he serves on this board," Spillers says. "The perception of something wrong is the way ethics rules, you know. And even he said that before, standing here, about other board members before, just the perception... Well, when you're governing those agencies that govern you, it's definitely a conflict."

In the latest letters from loan officers, Vallee is told to respond and become compliant or repay $511,000 in loans and interest.

"We need to make sure that, as we are demonstrating and as we're funding, that we're being proper stewards of funds," Cunningham insists. "And it would be concerning that we're unable to hold our end of the bargain, whether it's board member or this agency."

In a letter to the governor's office, the board chairman said Vallee "made a direct request" to Cunningham, the executive director, "to intercede and have the non-compliance issues resolved favorable for [Vallee]... Mr. Vallee is attempting to use his power to force the LHC and its staff to overlook the noncompliance."

"I think he's been antagonistic, right here to this board, to the executive director many times," the board chairman says. "And other board members have asked me, what's his problem with Keith Cunningham? Well, he expects him to get in compliance with this. He's told our executive lawyer, our counsel, not to send him anymore letters."

We ask Cunningham himself whether it's uncomfortable for him to oversee a non-compliance issue involving his boss. "It does present an issue," he responds, "it does present a concern."

Vallee refused to answer our questions directly but told us to call his attorney, David Culpepper. Culpepper told us by phone the "compliance issue is a bad joke."

Vallee emailed us Tuesday afternoon and forwarded a letter he sent the state. Vallee told them, "I deny all allegations of default," and added, HANO has certified that all his tenants "are and have been income eligible." The state hasn't responded.

So, if Vallee is correct, why has he still been deemed non-compliant after five years of warning letters from state loan officials?

According to LHC, about 4,500 of these similar loans have been handed out since Vallee received his money. Only 452 have been in default, non-compliant.

The speaker of the La. House of Representatives, Taylor Barras, appointed Vallee to the Housing Corporation board. We emailed Barras for a comment. The speaker's attorney says he wasn't aware of a non-compliance issue. When we sent her the documents and asked for a comment, she never responded.

"The speaker hasn't done anything regarding it," Spillers says.

The board chairman tells us the speaker needs to remove Vallee from the board and end an uncomfortable circumstance for the executive director.

"It's difficult," he says. "I don't know how to score it, how difficult it is. But it's difficult because he shouldn't have to deal with it. Our executive director should never have to even discuss this matter. It shouldn't be before us."

As for the call to remove Vallee, Spillers tells us, "That's my opinion. [Vallee's loans are] out of compliance, it's been out of compliance the whole term he's been on here. He's been here two years; that's long enough to get it in compliance."

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