MAJOR C.D.C. IN CRISIS! S.W. Philly’s Rainmaker May Be Sinking

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OFFICES of Southwest CDC at 6328 Paschall Avenue has problems inside and outside of its operations. One of its buildings suffers from a damaged roof. Some of its officers, board members, and community leaders charge its internal operations are in shambles as well.

BY TONY WEST/ Bitter dissent has been brewing among the employees and board members of the Southwest Community Development Corp. for the last year over that agency’s management practices. Now it has spilled into the community, even as community activists have stormed its board meetings to demand the opening of its books and the removal of its Executive Director Donna Henry.

Southwest CDC is the chief conduit for grant money to improve the real estate and the lives of Southwest Philadelphia, which is mostly a hardscrabble section of aged working-class housing, troubled by crime and blight – but also includes the popping Eastwick area, with the Airport as well as the adjacent Island Avenue commercial and Bartram Avenue office corridors.

With a budget of $880,000 and a staff of 22, the CDC is the main game in this part of town for whatever technical assistance comes down the pike from outside sources.

Critical residents say they’re not getting the help they need from Southwest CDC, though. They say the CDC is bobbling grants and stiffing applicants. The CDC’s board members who were recruited from its own Neighborhood Advisory Committee complain the books are shaky and the management operates in secrecy.

More disturbing are charges the CDC has been diverting earmarked grant monies – and even an employee’s pay (without that employee’s knowledge) – into its general fund; that it isn’t paying taxes; that its properties may be hazardous; and that top employees are pocketing handsome salaries even while the corporation is kiting checks to survive.

In the sometimes-seedy world of small private businesses in the outer wards, these behaviors might not stand out. But CDCs live off public or charitable grants which are all held strictly accountable.

“It is just a matter of time before you feel the CDC will fail. All the bad financial decisions which were made will drag it down,” said Brice Baker.

Baker is a Siemens supervisor for airport security systems. He has been active in Eastwick public affairs for 22 years. He is one of the three NAC members named to the CDC board. And he is disturbed at what he’s found there.

“When I joined,” Baker related, “Executive Dir. Donna Henry’s cousin Hugh Organ was the Treasurer. There was never an entry on his so-called ‘Treasurer’s Reports’ that told you what was in the bank at the beginning and at the end, what went in and what went out.

“And $700 in bounced-check charges for one year? That tells you something’s going on.”

Henry declined to show a current Treasurer’s Report to the Public Record, saying she would have to clear that with the board. She released an annual audit for 2010 instead.

In October 2010, Organ had to resign when he took a new job which determined his office at Southwest CDC was a conflict of interest. There was no rush to fill his position. One of Baker’s new NAC colleagues on the board, Craig Melidosian, volunteered. He is a modest numberhead with a background in Southwest Philadelphia real estate.

Melidosian became the new Treasurer – and was blown away, both by what he found out, and what he couldn’t find out.

For starters, Henry wouldn’t release the CDC’s books to her Treasurer. An odd policy, to say the least. His every request for root data ran into a stone wall. “I repeatedly requested basic financial information, and was always put off,” said Melidosian.

This is a no-no. A CDC that operates this way would be “very strange,” according to Rick Sauer. He is the executive director of the Philadelphia Association of Community Development Corporations, which represents about 45 CDCs, about two-thirds of all in town. Sauer’s group has national standing as a leader of the CDC movement. Southwest CDC is not a member of PACDC, however.

Melidosian’s job is an unpaid, part-time position. But it’s the mission of a nonprofit board member’s duty to provide impartial oversight for the management of the agency.

Melidosian, Baker and Rev. Christina Williams were fresh blood on the Southwest CDC board from its Neighborhood Advisory Committee. In 2008, OHCD called for interlocking boards between a CDC and an affiliated NAC. Originally separate kinds of bodies, CDCs and NACs have been evolving to work as teams. Prior to then, Southwest CDC’s board had been a quiet club hand-picked by the executive director.

The newcomers found much going on underneath the surface.

THE CASE OF THE GARNISHED PAY

For one thing, the worker who coordinated the NAC for the CDC later discovered her employer had been diverting part of her own pay unbeknownst, for years. We are withholding her name because she still works at the CDC, and there is legal action between her employer and her which neither wishes to comment on. But board members affirm her complaint is true.

Starting in 2007, her wages were garnished to repay an educational loan from the Pennsylvania Dept. of  Education. By her arrangement with the State to repay her loan, her employer withheld $140 biweekly – but never forwarded these funds to the State, funneling them instead into the CDC’s general revenues. This went on for four years. The employee only discovered she had been rooked when she went to buy a car and found her credit was in ruins.

“Initially, she had owed $14,000,” said Baker. “But the CDC garnished $18,000. It stuck her with penalties accrued because it had failed to forward her payments as legally required.”

Neighborhood Sherlocks began to home in on the CDC’s payroll practices. Marsha Wall, a veteran block captain who is president of the Southwest Community Advisory Group, was blunt about her findings. “Payments to employees were not being paid on time. Employees were getting paid late, not going through the payroll system. Deductions were not taken but just paper checks were issued. This was common knowledge,” she said.

Grant money was also not being spent on its required purpose. Small regular yearly grants from the Grandom Institution, a Quaker charity, were earmarked to aid low-income people with heating costs as a bridge until their LIHEAP payments kicked in. But by spring 2012, Melidosian suspected these grants had been poorly advertised and found much of the money had gone into the general fund instead – $9,000 of this restricted money had sat unused for fuel oil for at least the last three years, according to audits. Director of Operations Lorraine Thomas told Melidosian and Board Chairman Paul Moore some suitable applicants for the program had been turned away, Melidosian attested.

Carol Walz, director of grantmaking for the Grandom Institution, declined to comment on the issue but said her own board will discuss it at its meeting this month.

Henry denied any Grandom money had been allocated elsewhere: “That is restricted income which must be spent on oil. In the 2010 audit there is money from this grant reported as unspent.”

The CDC owns two parcels of land with three buildings on them. Melidosian stated it is not meeting mortgage payments on these properties. One of the buildings, 6330 Paschall Avenue, had a severe roofing failure earlier this year. The organization has budgeted no money for repairs or capital improvements, he said; this creates a liability risk and threatens to invalidate its insurance coverage.

Henry declined to say if the CDC’s mortgage was in arrears, saying she would have to clear that with the board.

After buying the properties, Henry, who had handled the transaction, failed to file for tax-exempt status as a nonprofit, Melidosian said. As a result, it owes property taxes – which it also has not been paying. Now, he reported, there are multiple liens on one parcel and one has been referred to a collection agency.

Henry said the CDC is seeking property exemption as a nonprofit. “We have been approved for 2012 and forward; we are now working on 2009-2011,” she advised.

Southwest CDC also operates a biweekly newspaper, the Southwest Globe-Times – or does it? Its publisher, Ted Behr, works out of the damaged building. The CDC’s website states it “took over operations” of that newspaper in 2005. In practice, the newspaper is 70% owned by a for-profit corporation which in turn is 100% owned by the CDC. But no such asset is listed on the CDC’s IRS Form 990 for the year 2010 (which was filed Oct. 3, 2011), the latest information which is publicly available. The 990 does not list revenue or expenses from the Globe-Times entity, although the 2010 audit refers obliquely to its ownership arrangement. Behr claimed the newspaper pays the city business-privilege tax but declined to produce evidence.

Melidosian could see no firewall between the newspaper’s operations and those of the CDC. He pushed to have it reported on a unified basis. Henry declined, telling him the newspaper’s books were a mess, according to Melidosian.

These problems pose headaches for board members. Southwest Philadelphia residents, however, are more concerned about what they’re getting from the CDC – or not getting.

THE STREET THAT MISSED THE BUS

For instance, a $130,000 Commerce Dept. grant to rehabilitate the Woodland Avenue commercial corridor. Tyrone Beverly, an Eastwick activist of long standing, charged because Henry missed a meeting with the Commerce Dept., Southwest CDC missed snagging this grant.

“They do not want to be accountable for the amount of money they’re taking in and how they service the community. So they’re not fulfilling their mission statement,” Beverly said.

Henry admitted the grant opportunity was lost. The staffer in charge of the business corridor quit abruptly during the grant window, she said.

Sandra DuBose bought a rehabbed house through Southwest CDC near 57th & Chester in 2005, with a one-year warranty. Like much of Southwest Philadelphia, it is an area with a high water table. Within the year, moisture-related mildew problems triggered asthma in her son. DuBose reported the problem to the CDC; it arranged for a cheap repair which soon failed.

DuBose persisted in looking for help. In 2010, an agent at OHCD told her he had found funding for the $15,000 repair she needed. It targeted her precise neighborhood. But the request had to come through the CDC, she was told. And there was a time window.

DuBose went to Southwest CDC and asked them to apply for grants for her. But the two-year period passed without the CDC’s applying for the grant. “They blew it,” said DuBose. Her house still has mildew and her son is still sick.

An OHCD spokesperson, Paul Chrystie, could not provide any details about this grant. But he stated, “There was no involvement of Southwest CDC besides pre-purchase counseling before Ms. DuBose bought her house.” Chrystie did not provide any information on the missed remediation grant, which other residents also tried in vain to get through the CDC.

Tracey Gordon, president of Southwest Concerned Citizens, said she has been “privy to information” about Southwest CDC’s missteps for years – rumors, but nothing she could substantiate. Reports from the new board members began to clarify the rumors for her, she said. Gordon is a Deputy City Commissioner with an outreach mission; she gets around town a lot. “I’m looking at other CDCs around the city and I’m seeing how things are working,” she said. “We may need a new direction here.”

Beverly, a former Democrat ward leader in Oak Lane, moved to Eastwick 32 years ago. For decades he was active in Eastwick Project Action Committee, a group that provided neighbors’ input on all major developments in Eastwick – the post office, the airport runway, the Family ShopRite supermarket.

Five years ago, though, EPAC blew a deadline for a funding application. Not wanting to see Eastwick go without community input, OHCD asked Southwest CDC to extend its coverage area southward to take it in.

That didn’t work well, Beverly said. Beverly lives in the Town Gardens development. When a church wanted to build in its area, Town Gardens residents opposed it and Beverly conveyed their disapproval to the CDC. He was surprised when Southwest CDC later recommended the project to the Zoning Board of Adjustment anyway.

“All the big commercial deals are now with the CDC,” Beverly said. “The community is shut out.”

Beverly began attending CDC board meetings and asking questions. “I was told I couldn’t get any answers or see the books,” he related. He began to get calls from other neighbors who’d had similar experiences.“The impression you get when you go there as a neighbor, is they really don’t want you there,” Beverly said. “You’re considered trouble.”

NEIGHBORHOOD IN THE GRIP OF CHANGE

Southwest CDC was founded in 1986, when the CDC movement was starting to take root in distressed urban areas across the nation. Southwest Philadelphia in that period was a stronghold of long-established Irish American and Italian American leaders. Today, it is largely Black American, with important African immigrant communities.

Henry is related by marriage to the politically influential Glancey clan, whose members include former Democrat City Committee Chairman David Glancey and former Common Pleas President Judge Joseph Glancey. She is paid $85,000 a year.

For a tight circle of managers, Southwest CDC is a good deal.  But newcomers find it hard to break in.

The agency is unused to professional employees or board members, commented Regina Young. A Master’s student in community development at Eastern University, Young interned at Southwest CDC and was hired as a community organizer in October 2010. She was fired by Director of Operations Lorraine Thomas in May 2011.

Thomas “doesn’t like to have a challenge,” said Young. “She’s used to supervising people who are not qualified or have a certain level of education. It caused her to be faced with her own limitations.” Young said Thomas had trouble interpreting the language of contracts – and didn’t like to hear about it.

Young called the CDC’s management “top-heavy,” noting there are three managers who make $150,000 combined. That wouldn’t make them stand out at a Romney fundraiser, but it’s a lot of money on the Southwest’s gritty streets.

There is nothing unusual about an individual job that doesn’t work out. But high turnover seems to plague Southwest CDC and may lie at the root of many of its snafus. Gordon recounted the story of a woman she met who had tried to utilize the agency’s job bank. “She told me she had to go into the office three times – and had five different counselors,” Gordon said. “Each time she saw a new face, she had to start all over.”

Funny paychecks, high turnover and shoddy work often run together.

THE BOARD MEETING THAT EXPLODED

Southwest CDC board meetings are usually cozy affairs. For the February 2012 meeting, however, dozens of community members showed up unannounced. They were angry about the employee whose garnished wages hadn’t been paid. And they came with other grievances as well.

Wall was among them. She has attended every board meeting since – uninvited. “I see a lack of transparency,” she said. “I don’t know where the funding is coming from, but it isn’t going into the community. A number of questionable issues have been going on for a long time. This agency should be providing better services for us.”

Relations between Henry and Melidosian turned sourer this spring. As of June, the agency was still in arrears on paying the garnished employee’s deductions to the Dept. of Education. But the agency was struggling to pay its other bills. Melidosian asked Henry to reduce her compensation and those of other managers. She did so by furloughing herself and them – and by working less. More crucial filings fell behind deadline, more grants were imperiled.

Melidosian went to Sovereign Bank and asked to see the corporation’s account information. It is an account on which he is signator. They grudgingly released one month’s statements; he is awaiting two years’ worth.

When the CDC’s auditor Haefele Flanagan released a preliminary, sunny, nothing-to-look-at-here-move-along-folks audit for 2011, in July 2012. Melidosian hunkered down. He refused to sign off on a Client’s Management Representation letter which, among other things, testifies the numbers are truthful and free of fraud or other legal taint.

The boardroom air turned poisonous. Chairman Paul Moore, a minister and peace activist, moved to dismiss Melidosian as Treasurer. Nothing came of that. Haefele Flanagan tweaked its audit but Melidosian still didn’t budge. Dozens of community residents, among them Wall and Beverly, stormed the September board meeting. Moore tried to turn them away, saying, “This is a private meeting.” That didn’t stick.

Gordon, who has been attending some of these meetings, called the crowd “very volatile.” She commented afterwards, “You might have had to call the police.”

Beverly called for Henry’s resignation – a suggestion she did not take him up on. “The board said they couldn’t fire her because she might sue them,” Beverly reported.

Southwest CDC may have learned a lesson from these unruly meetings. October’s board meeting was hastily rescheduled to a new location on Monday night, which few community members found out about.

October is a busy month for many CDCs. It is the time when a NAC election is normally held. But this year’s Southwest NAC election has been delayed, at OHCD’s request, so that the CDC can form a nominating committee, to vet potential candidates for the NAC. It’s part of a citywide effort to seat NACs firmly beneath CDCs as subcommittees, rather than as independent bodies.

Henry warned that raising questions about Southwest CDC could prove harmful to a community with many needs. “All this has the potential of damaging the funding, damaging the people who need the services the most: people in foreclosure, people with utilities turned off and businesses needing support,” she said. She stated people who complain about the agency “cannot be working for the good of the community if they are working to stop the programs we provide.”

Southwest Philadelphia is the pivot of State Sen. Anthony Williams’ district. His office is investigating the woes of Southwest CDC. “I am concerned about the way its finances have been handled,” said Williams. “They raise questions about the fiscal responsibility of this agency, and also about its sustainability.” He denied any personal animus against Henry: “This is all about the needs of the community.”

Sustainability. That’s the boogeyman haunting everyone on all sides of this mess. While many people would like to see Southwest CDC get fixed, nobody wants to put it out of business. Southwest Philadelphia has far too many problems and far too few resources to be throwing away any arrow in its quiver, no matter how bent or how blunt. So all the fixers are trying to figure out how to save it and put it on a viable new path. It’s a path that may need some new shoes on it, though.

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4 Responses to MAJOR C.D.C. IN CRISIS! S.W. Philly’s Rainmaker May Be Sinking

  1. Wow! This article about SW CDC is truly appalling. Where in the United States can someone regardless of if it is private, public, non-profit, or for profit misappropriate funds and still hold their title and their job? What in the heck is the police, the DA and even the mayor doing while this organization is being run in the ground……literally? For the good of CDC, Ms Henry needs to step down like yesterday. How can they have someone at the helm that is playing with everyone elses money? Almost one million dollars just about up in smoke. Its a sin and a shame cause the community is most certainly being short changed and robbed of grants that were put in place for their benefit. SW CDC is a wonderful place and l plead with city to save it from a certain death. Lets not let one BAD apple spoil the whole tree or organization. I feel sorry for the employees and all the atrocities that they have had to endure during this reign of terror. This is a sad day for the old Southwest citizens, young and old. Someone read this and please SAVE SW CDC.

    Elishama Albany
    October 25, 2012 at 12:30 am

  2. I specifically want to know why this is the SECOND TIME that a CDC is near imploding, and OHCD and PACDC have dropped the ball. Anyone go look up Germantown Settlement or Google for “The Man Who Duped City Hall” and read what happened to Germantown Settlement.

    Why are the bookkeeping controls not in place and why didn’t PACDC raise alarm bells?

    Christopher Sawyer
    November 14, 2012 at 2:18 pm

  3. I read this and the other article and I wonder how if all of this were true, why there isn’t legal action? My guess is because you can’t. You can’t fire anyone why? You are afraid of being sued? Your stories don’t add up. Sounds like the writer of this article is biased. As the Executive Director or a non-profit, none of this adds up especially on the board side. They are legally responsible. Why would you allow this to continue unless you are making it up…..

    Clara Granderson
    February 6, 2013 at 4:28 pm

  4. I am the author of these articles. I cited 15 persons whom I interviewed for the first article. They said what they said.

    Several Board Members are worried about their legal liability. That is partly why they spoke to me. They are also worried that a precipitous action against their Executive Director could lead to a costly lawsuit.

    Legal action is indeed underway, which I omitted from the article so as not to be too inflammatory over delicate personnel matters.

    editor @pr
    February 6, 2013 at 9:54 pm

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