Taylor Housing Authority lost $2 million in property, lawsuit alleges

TAYLOR, Texas (KXAN) – The Taylor Housing Authority is fighting to regain ownership of two affordable housing complexes valued at more than $2 million that the organization alleges vanished from its control in 2008, according to lawsuits filed in Williamson County court.

Taylor Housing Authority (THA) says former executive director Steve Shorts altered the leadership structure of two nonprofits without board consent, effectively taking control of the Mallard Run and Sunset apartment complexes as well as rent cash flows, according to the lawsuit.

THA has sued Shorts, two nonprofits called Mallard Run Housing Development and Taylor Sunset Housing Development, and several former board members of the nonprofits, which own and operate the apartments.

Attorneys for Shorts and the other defendants say THA approved the apartment ownership changes in 2008. In the subsequent seven years, the nonprofits operated the apartment complexes without issue. It wasn’t until a blistering 2014 audit of THA by the U.S. Department of Housing and Urban Development (HUD) that the housing authority filed a lawsuit.

“Mallard Run and Taylor Sunset recently obtained a temporary restraining order and a temporary injunction against THA preventing THA from interfering with their operation,” said TJ Turner, an attorney for the defendants, in a prepared statement. “At trial, we are confident that the judge and jury will prevent THA from taking property from non-profits that are providing necessary low-income housing within the Taylor community.”

The entire issue has Taylor residents, such as Tom Mowdy, wondering how local authorities failed to immediately take action after losing $2 million in assets. Also, Mowdy said, why hasn’t there been a criminal complaint filed, since the THA lawsuits appear to allege crimes, including fraud, occurred.

“They’ve got a lot of old skeletons they don’t want rolled out,” Mowdy said, regarding both THA and local leaders. “Some of the stuff you are seeing are past behaviors that could not be concealed.”

Mowdy runs his own website that includes posts on local issues. He said his posting about the THA “debacle” has had local residents buzzing on social media about the issue.

Were it not for an anonymous complaint to HUD, Mowdy said, the details of the apartment complex property transfer and THA financial loss may never have come to light.

HUD Report

On Oct. 2, 2014, HUD released its audit of THA that detailed a raft of problems:

  • Improper accounting of funds
  • Improper transfer of assets
  • Unsupported salaries to employees
  • A “transfer of funds to lease and purchase a parking lot the Authority already owned”
  • Conflicts of interest

“The authority lost control and possession of a $255,000 property it owned, lost control of two component units with net asset values of more than $1.7 million, and incurred $392,059 in questioned costs,” according to the audit. (The values of those properties have since increased to total more than $2 million, according to THA’s suit.)

THA’s operating income decreased more than $300,000 in 2008, as a result of the apartment complex management change allegedly initiated by Shorts. The federal government increased funding for THA by $574,077, following the drop in income, according to the audit.

Shorts remained executive director of Taylor Housing Authority until 2013, the audit states.

Shorts’ current address is in Arkansas, near Fountain Lake and Diamante Golf Course about 50 miles west of Little Rock, according to the address where he was served the lawsuit.

A complex web of allegations

The amended lawsuit filed by THA on June 5, 2015 details a labyrinth of paperwork and bank transactions that ultimately altered the corporate structure of Mallard Run Housing Development (MRHD) and Taylor Sunset Housing Development (TSHD).

Without the THA board’s permission, Shorts signed a deed transferring the title on the 40-unit Mallard Run apartment complex from THA to nonprofit MRHD on April 2, 2001, according to the lawsuit.

Also on April 2, 2001, Shorts signed a deed of trust pledging the Mallard Run apartment complex as security for a $150,000 loan used to pay MRHD. THA alleges the board did not authorize these actions, according to the suit.

On April 2, 2002, Shorts modified the $150,000 City National Bank loan to purchase real property, and the Mallard apartment complex was used as collateral. Shorts signed the loan modification order without housing board authorization, according to THA’s lawsuit.

From 2001 to June 6, 2008, THA continued to operate, manage and receive rents from Mallard Run apartments. In that seven-year timeframe, THA was unaware of the title transfer, according to THA’s lawsuit.

On June 6, 2008, Shorts prepared a resolution that would release control of Mallard Run apartments and donate it to nonprofit MRHD. The THA board alleges it voted to table that resolution; however, months later Shorts amended the MRHD articles by deleting the requirement that all of the nonprofit’s directors be board members of THA. That change was made without board consent and took control of the nonprofit away from THA, according to the lawsuit.

The 2015 lawsuit also alleges Shorts initiated similar changes that put nonprofit Taylor Sunset Housing Development in control of the Sunset Apartments, which are now called Heritage Apartments.

It is not clear who currently runs the nonprofits. In a 2013 financial disclosure, MRHD listed Steve Shorts as its only paid executive director. He received $111,036 for an average of 10 hours of work per week. Ed Komandosky is listed as chairman of MRHD, according to the nonprofit’s 990 filing. Online nonprofit database Guidestar had no records of TSHD.

Shorts could not be reached for comment. A man who answered the phone at MRHD hung up when KXAN called.

The defendants argue in an answer to THA’s lawsuits that the THA board willingly signed over control of the apartment complexes, at least in part, because of a HUD rule change. Due to the rule, if THA owned a property it could only collect 20 percent of the administrative fee from that property. The administrative fee loss would be $2,969 per month, according to the court filing.

“In January 2015, in response to a HUD audit criticizing its practices, Taylor Housing Authority sued Taylor Sunset and Mallard Run seeking take control and ownership of the properties,” Turner wrote in the prepared statement on behalf of the defendants. “There have never been any allegations that Mallard Run or Taylor Sunset have done anything illegal or mismanaged the properties.”

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