Rent strike money collected from Hispanic tenants at four buildings in the District has been spent for political contributions, a scholarship fund and the salaries of at least seven persons -- all in defiance of a court-appointed bankruptcy trustee, according to the trustee and the strike leaders.
Jesus Sanchez Canete, who is overseeing these expenditures, said he and the tenant associations will continue to withhold money and defy the trustee until the tenants are allowed to purchase the buildings.
Canete's stated goal is to organize Hispanic apartment dwellers, who are among the city's most vulnerable tenants because of their immigration status and their inability to speak English. His tactics have angered several building owners, lawyers and creditors who have a stake in the low-rent, but potentially lucrative, apartment buildings in Adams-Morgan and Mount Pleasant.
The standoff between Canete and the trustee, William D. White, may come to a head during a hearing Monday in U.S. Bankruptcy Court. Judge S. Martin Teel is expected to consider a motion by the trustee to get an accounting of the rent strike money, evict the tenants and shut the buildings until they are sold and the creditors paid.
Canete launched the rent strikes in February in four buildings owned by Ardeskin Investments Inc., at 1419, 1460 and 1464 Columbia Rd. NW, and at 3121 Mount Pleasant St. NW.
The District of Columbia has no rule that specifically regulates what can be done with money withheld as part of a rent strike.
"There is no legal recognition given to rent strikes in the District of Columbia," said an official with the District's Rental Housing Commission. "People take their chances when they do that."
After a landlord begins eviction proceedings, tenants can pay rent money into a court-sanctioned escrow account, said Gottlieb C. Simon, a tenant advocate and member of a Washington advocacy group called the Committee to Save Rental Housing. But the rent strikes organized by Canete were begun before any such proceedings were initiated.
The fact that the buildings are in bankruptcy further complicates the rent strike. The court-appointed trustee has challenged the spending of the rent strike money on that basis.
"The actions are illegal and in clear violation of the bankruptcy code," attorney and building trustee White wrote in his motion to be heard by Teel. The suit says that Canete and the association continue to manage the building and collect rents against the wishes of the trustee.
Canete denies that. "What I'm doing is totally legal," he said. And there's some official support for his contention in regard to the political expenditures.
Michael Simpson, a spokesman for the Office of Campaign Finance, said the use of rent strike money for political purposes is irregular. "However, I don't view it as illegal," Simpson said.
The buildings went into bankruptcy in 1983. At the time, they were occupied mostly by Hispanic tenants, whose rents generated no more that $41,000 annually per building, leaving little money for maintenance costs, according to court papers filed on behalf of the California-based building owners.
In January, the bankruptcy court ordered the buildings from a Chapter 11 reorganization status to a Chapter 7 receivership status, with all assets to be sold to pay off creditors. A month later, White was appointed the trustee and given the job of selling the properties. The timing coincided with Canete's move to organize the tenants.
Under his leadership, tenants in each of the four buildings' tenant associations opened a bank account for depositing rent money. Canete said he has no access to the money and each expenditure is authorized by the officers of the respective tenant associations. Several of the officers said that Canete oversaw the expenditures and they signed the checks.
Among some of the expenditures listed in the tenants' checkbook ledgers, which The Washington Post was allowed to see, were donations totaling $1,500 to Citizens for Mayor Barry; $1,200 in donations to D.C. Council member Frank Smith Jr. (D-Ward 1), including a fund-raising dinner with live music; $500 to a scholarship fund; and weekly payments to seven people who Canete said are cleaning and managing the buildings.
Smith's campaign chairwoman, Dusty McClintock, acknowledged receiving the campaign contributions, but expressed surprise at the source. She added, however, that it would not be necessary to give back the money because the checks were returned from the bank for insufficient funds.
Canete said that all four accounts add up to no more than $10,000. Much of the rent money has gone toward building maintenance, such as trash collection and cleaning. And much of the money that the trustee believes is in bank accounts was never paid because some of the tenants have stopped paying their rents, Canete said. He said his philosophy is to help tenants by giving them housing that they own, and getting that housing by flexing political muscle. The key to that muscle was a rent strike.
Canete said he was a labor organizer in his native Spain. About a year ago, he said, some tenants asked him to intercede on their behalf. He organized them into tenant associations and had the associations join a newly incorporated Latino Federation of Tenants Association, of which he is executive director.
"I love a good fight," he said, adding that he is organizing the tenants at no charge.