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Citing a slew of issues and a loss of confidence, the LA prosecutor is now recommending that the person she was hired by a judge a few months ago remove control of the troubled Skid Row Housing Trust.
In a memo Friday, prosecutor Hydee Feldstein Soto and the city’s housing director expressed their support for asking the judge to replace Mark Adams as bankruptcy trustee — and for the city to loan up to $10 million to fix housing problems permit.
To motivate the judge to replace him, the city would offer the soft loan on the condition that Adams be replaced. City council members are expected to take up the recommendation at a budget committee meeting on Monday. Committee chairman Bob Blumenfield told LAist Friday afternoon that he supports the move to replace Adams.
“All of these red flags evolve from red flags to flashing red lights that say, ‘Be careful,'” Blumenfield said.
“We really must do everything we can to prevent a human tragedy from getting worse and also look after the public money. Because that’s very much at stake,” he added.
WHAT IS A RECEIVER?
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A liquidator is someone hired by a court to take control of a property and fix problems. You essentially become the landlord, under the supervision of a judge and the city. According to the city attorney, the Skid Row Housing Trust case is by far the largest court-ordered receivership in LA history.
Back in late March, Feldstein Soto had petitioned a court to give Adams control of the trust’s 29 properties, which house about 1,500 formerly homeless people – after the non-profit housing trust fell apart financially and many of its homes were deemed healthy and safe .
But in a shift in confidence, Feldstein Soto, along with LA Housing Department head Ann Sewill, recommended replacing Adams with Receivership Specialists’ Kevin Singer for “some or all” of the properties.
“Disappointing” progress
“[Adams’] “The progress made in addressing serious violations of the regulations, such as B. repairing the fire/life safety systems, fixing plumbing issues in communal toilets, and restoring units cited by HACLA for minor sanitization violations were disappointing,” the memo to the city council said .
“In addition, the property management only placed an order a few weeks ago [Adams] sent out three-day eviction notices to hundreds of tenants, which were then withdrawn, but which should never have been sent out.”
Feldstein Soto previously told the Los Angeles Times that the 451 eviction notices were illegal under the city’s Tenant Protection Act and violated his promise not to evict anyone for rent arrears alone.
The memo also said Adams did not hire enough staff to repair and secure the properties, and he failed to provide the court-ordered reporting and accounting that the city and other agencies require.
“It turned out that the bankruptcy administration could be better served with another bankruptcy administrator,” it says.
Adams did not respond to LAist’s request for comment Friday morning, and a spokesman for the prosecutor said they had not commented.
When he recommended Singer as Adams’ replacement, officials wrote that Singer had worked on nearly 500 bankruptcy administrations nationwide — more than Adams’ approximately 300 — and that San Francisco officials praised his work in the city, which included “a very challenging one.” Bankruptcy Administration’ in the Tenderloin owned district.
When asked if Singer received more prosecution reviews than Adams, Blumenfield said he and others asked and “we were assured there were significantly more reviews.”
What happens next
The motion to extend city loans up to $10 million — assuming the court replaces Adams — will now go to the City Council Budget Committee for a decision. This meeting is scheduled for Monday at 2 p.m
“One way or another, the public is being held accountable,” Blumenfield told LAist, saying he believes if the Housing Trust implodes, many of the residents will end up back on the streets with no other choice.
“An ounce of prevention is worth a pound of cure. We need to be smart about this and get involved as early as possible to prevent a major catastrophe, which will also end up costing us a lot of money – and that’s why we are.” committing your own tax money.”
As part of the loan, Blumenfield said, the city will impose stricter requirements on the new recipient to bring the city up to speed — and consequences if it doesn’t.
Blumenfield said the city cannot require this at this time because receivership is a court-controlled process and the city is not a lender.
Ultimately, it will be up to LA Superior Court Judge Mitchell Beckloff to decide whether to replace Adams. His support for Adams may be waning — last week, during a tense downtown LA court hearing, Beckloff removed seven properties from receivership and questioned Adams’ efforts to improve the properties. Still, the judge expressed his support for Adams, saying he felt he was the right person for the job.
It’s unclear the status of prosecutors’ investigation into Adams’ performance, which it revealed last week. Her spokesman declined to comment on Friday.
The key to the future, Blumenfield said, is for the units to be renovated quickly so that they become financially stable. Currently, hundreds of the housing units are ineligible for federal housing credits because the city has said they violate quality of life standards, including when it comes to issues like fire safety.
Past Issues
The move comes after wrongful eviction orders and reports by the LA Times and LAist of several judges finding problems with his previous receiverships, including significant overcharges for his company’s services.
LAist also reported earlier this month that a company Adams founded to serve as a bankruptcy trustee has been banned by the state from doing business since 2015 for unpaid taxes. Adams told us he was looking into the matter and said his current business is in good shape.
SCHEDULE FOR COMPLETE TOWNHOUSE TRUST
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Skid Row Housing Trust is a non-profit organization founded in the late 1980s and is the largest provider of subsidized housing in Skid Row, LA’s premier community for homeless people. The organization develops, manages and operates 29 buildings in downtown LA that house people who were formerly homeless. In recent years, the nonprofit has completed construction of about 250 housing units with funding from Measure HHH, the $1.2 billion housing bond approved by voters in 2016.
- Feb. 7: The nonprofit’s interim CEO warns of an impending financial meltdown and briefed employees on efforts to persuade other housing providers to take over the 29 buildings, according to the LA Times. The trust has been in financial crisis for years, posting annual deficits of up to $14 million.
- March 30: Los Angeles District Attorney Hydee Feldstein Soto files court documents, citing uncertain conditions, asking a judge to appoint Mark Adams as court-appointed receiver to administer the nonprofit’s properties.
- April 5: According to the Times, three people are found dead in a Skid Row Housing Trust building of suspected drug overdoses.
- April 7: Judge Mitchell Beckloff of the Los Angeles Superior Court approves the prosecutor’s motion and appoints Adams as the bankruptcy trustee. “We see the train falling off the cliff here,” a lawyer in Feldstein Soto’s office told the judge about the urgency of the situation.
- June 2: Unlawful eviction notices were sent to 451 of the trust’s tenants by a property management company hired by Adams, according to the prosecutor. The following Monday, Adams retracted the communications, saying they had been sent in error.
- June 6: City Attorney staff send Adams a letter saying they are “shocked and deeply disappointed” by the eviction notices. In an interview with the Times, Feldstein cited Soto’s other problems, such as a lack of 24-hour security, and said she was losing confidence in Adams.
- June 15: Beckloff relieves Adams of control of seven of the properties after being at times frustrated with Adams’ reactions. Adams said the move could affect its ability to raise much-needed working capital.
- June 23: The city attorney who originally recommended Adams for the job joins a senior city housing official in recommending replacing Adams and giving the city a loan of up to $10 million to redevelop the trust properties to grant. The decision to replace Adams rests with the judge, and the credit decision now rests with the city council.
City officials said the stakes are high at the housing foundation. For decades it has been one of the largest providers of affordable housing for the homeless in LA. But the buildings have fallen into disrepair in recent years as the non-profit owner went bankrupt and faced financial ruin, the memo and Times reporting said.
On April 5, just before Adams took over, three people were found dead in a Skid Row Housing Trust building of suspected drug overdoses.
When Feldstein Soto announced in late March that she would seek receivership, which gave Adams control of the properties, she said the 1,500 people who live in the buildings are extremely vulnerable.
“[These] are among our most marginalized and vulnerable populations,” Feldstein Soto told reporters. “If they lose their homes, there is little doubt that they will spread to our streets.”
LAist reporter David Wagner contributed to this story.
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