By Derek Kravitz
Washington Post Staff Writer
Saturday, July 10, 2010; B01
More than 100 low-income Northern Virginia families are at risk of losing their taxpayer-subsidized housing as one of the Washington region's largest nonprofit groups struggles financially after fraud allegations, according to the nonprofit and government officials.
In March, the former executive director of the Robert Pierre Johnson Housing Development Corp. of the National Capital Area resigned after Fairfax County officials accused him of forging a zoning document.
The document had been used to secure $700,000 in local and state housing contracts, and Herbert J. Cooper-Levy, the organization's chief since 2001, was forced out. No charges have been filed against Cooper-Levy.
Since Cooper-Levy's resignation, Alexandria-based RPJ Housing has lost all of its public funding in Fairfax, which amounted to about $578,000 last fiscal year. Fairfax officials banned the group from receiving county contracts for up to three years and conducted an audit in June that found the group was in dire financial straits and on the brink of shutting down in the county.
"It's great they're restructuring, but we need to make sure they're going to be effective in that restructuring and a sound partner," said Cathy Muse, Fairfax's purchasing director.
The audit did not find any irregularities similar to the alleged forgery. But it uncovered unusual credit swaps performed by the nonprofit and found that RPJ had over-leveraged itself by buying more than a dozen houses and apartment buildings in the mid-2000s, according to a summary of findings provided to county officials.
Several years ago, RPJ began expanding in Alexandria, buying properties in need of rehabilitation for which it hoped to get low-income housing tax credits from Virginia, said Martha Paschal, an affordable-housing finance agent who has served on RPJ's board of directors for five years. But as expenses related to maintaining the properties climbed and the amount of state financing fell, RPJ's reserves began to dwindle.
"There was a frenzy by housing directors to get this housing stock, which was quickly going out the door," Paschal said. "This is what housing nonprofits did. But none of this helped the organization in the long run."An annual loss
RPJ received about $3.85 million in government grants, contracts and private donations in 2008, the last year for which data are on file with the Internal Revenue Service. The nonprofit recorded about $4.23 million in expenses that year, for a loss of about $379,000. Meanwhile, it had about $1.24 million in cash and savings and about $35.8 million worth of mortgages and other outstanding loans.
To cut costs, RPJ -- formed in 1978 by the National Capital Presbytery, an organization of the Presbyterian Church (USA) -- reduced its staff from 17 to 10 people, and the acting executive director, Eric Bonetti, took a pay cut.
Two of RPJ's signature programs -- transitional housing for six families in Fairfax and a volunteer home-rebuilding program -- are at immediate risk of being discontinued. Bonetti said RPJ is "concerned about any funding decision that reduces our ability to provide services."
The volunteer home-improvement program has been one of RPJ's most notable successes and is used in the organization's promotional literature and highlighted by government officials.
Samir Ghosh, 79, who became legally blind last year because of glaucoma, enlisted RPJ volunteers to help him paint white strips on steps inside his Arlington County house and fix lights in his kitchen. Since then, the nonprofit has performed routine maintenance on Ghosh's home.
"It made my life a whole lot more livable," he said. "They are very helpful, and if they didn't come over whenever I asked, I don't know what I'd do."Also in jeopardy
According to Fairfax court documents filed by RPJ, also in jeopardy are housing for 104 low-income families at Orrington Court Apartments, Mount Vernon Gardens and Belvoir Plaza Apartments; group homes for 16 people, including the Bath Street House in Springfield and Dequincey in Fairfax; and housing for five low-income families in the Alexandria area and Lorton.
RPJ's cash-flow issues could force it out of Fairfax altogether, officials said. The group's efforts would then be focused on a much-reduced set of properties in Alexandria and Arlington.
It is possible that another nonprofit would take over RPJ's holdings and manage them to avoid displacing families.
Shelley S. Murphy, chief executive of Wesley Housing Development, an affordable-housing developer in Alexandria, said leasing and financing agreements between housing nonprofits and localities typically include a "workout process" to ensure that the properties will be used for affordable housing even after the nonprofits are gone.
But when money used to manage a property disappears, she said, it can be difficult to fill the void.
"If the nonprofits aren't funded, then the services lapse," Murphy said. "Fairfax has really stepped up in their monitoring of nonprofits, which is appropriate, but it's really tough to see a fellow nonprofit go through what they're going through. At the end of the day, you need to have a clean fiscal house."
Court documents show that RPJ did not find any evidence that Cooper-Levy benefited personally from the alleged forgery, but they accuse him of deceiving "an RPJ staff member who was familiar with financing paperwork but unfamiliar with zoning issues and procedures."
Cooper-Levy, 60, has repeatedly declined to comment. He resigned in March after being placed on administrative leave, and he is now self-employed at a consulting firm he created, Herbert J. Cooper-Levy & Associates, according to an online résumé. The firm is not on file with the District, Maryland or Virginia, but some small businesses can avoid such registration.
Staff researcher Meg Smith contributed to this report.