A District official and a lawyer for developer Jeffrey N. Cohen branded as totally inaccurate yesterday a scathing D.C. auditor's report that charged that the city's investment in a complex $12.5 million Shaw area land deal could be endangered by millions of dollars worth of prior liens against the properties.
Curtis McClinton Jr., the deputy mayor for economic development who was the city's primary negotiator in the deal, charged that the report is "rife with factual inaccuracies and unsupportable conclusions." A lawyer for Cohen, who controlled the property and is handling its development, asserted that the report "in every material respect . . . is inaccurate."
McClinton said in an interview that the "city is not at risk" in the transaction because all previous monetary liens on the properties have been paid off and because the District has insurance that protects it against such claims.
A partnership controlled by Cohen, a close friend of Mayor Marion Barry, was paid $11 million in the deal. According to the report released Monday by D.C. Auditor Otis H. Troupe, the liens against the property totaled nearly $11.6 million. Less than half of that amount had been paid off as of last month, the report said.
According to the report, if the remaining debts are not paid off, the D.C. government, which purchased six properties in an effort to spur development in the run-down neighborhood, "could lose several project parcels valued at $6.2 million."
The report also charged that the District's "failure to require discharge of all liens against its property at settlement Feb. 1, 1985, suggests the possibility that the District deliberately intended to provide indirect funding to a close friend and political ally of the mayor . . . . "
Yesterday, Barry Levine, an attorney for Cohen, said the transaction was handled "routinely," with the purchase funds going to a title company, which in turn, "was to pay the liens and did pay the liens. Jeff Cohen never had control of the funds. There was no impropriety by Jeff Cohen or anyone of any kind whatsoever."
Samuel R. Gillman, chairman and president of District-Realty Title Insurance Corp., which handled the transaction, said yesterday that at settlement Feb. 1, his company "paid off every one of those deeds of trust," which constituted the liens against the properties. His company also issued a title insurance policy for $12.5 million that protects the District against any such claims in the future.
Troupe responded to the denials, saying, "Until I see some proof that the liens have been removed, the auditor's report stands."
Troupe based his report, in part, on a study of documents filed with the D.C. Recorder of Deeds, where releases of liens are filed after the debts have been paid. The report states that the audit team, as of Aug. 22, was "unable to locate any other records" in that office indicating that the remaining $6.8 million in liens has been paid off.
Yesterday, Gillman and Levine both said that there may be a lag between the time a debt is paid and the release is filed. Sources in the industry confirmed that it is common practice to pay off prior liens at settlement, while the recording does not take place until months later.
However, Troupe said yesterday that he has been asking McClinton's office for "proof of the removal of liens . . . since last April. If he has proof, why didn't he just send it?"
Yesterday, McClinton provided reporters with a copy of the title insurance policy, which appears to insure the city against all prior liens. He said he will provide further documentation within "two working days" that the liens have been paid off.
A consortium of banks provided the $11 million for the deal. In February 1986 the city will be required to repay the banks, with interest expected to total $1.5 million.
Meanwhile, Cohen and a nonprofit community group are to develop the parcels, which include the sites of the former Children's Hospital, Manhattan Laundry, Lincoln Theatre and Thompson's Dairy.