A D.C. municipal auditor's report recommended yesterday that the D.C. Department of Human Resources be stripped of its leasing authority and that a $5.6 million lease DHR negotiated with developer Dominic F. Antonelli Jr. be re-examined to determine if its rental terms are higher than city regulations permit.
The report said DHR lacks the proper experience and expertise to use its leasing authority efficiently. The auditor said authority should be returned to the Department of General Services, which leases property for most other city agencies.
The report came in response to a series of articles in The Washington Post which said suspended DHR Director Joseph P. Yeldell had used his newly granted leasing authority to sign a controversial 20-year lease on a vacant building at 60 Florida Ave, NE owned by Antonelli, a millionaire developer and parking lot magnate.
Yeldell signed the lease despite warnings from other city leasing officials that the rental terms were too high. Antonelli had purchased the building for $800,000 shortly before the lease was signed.
The report also disclosed that Antonelli recommended the consultant who was hired by DHR to help the agency evaluate terms of the lease Antonelli was offering. The consultant said he was "absolutely positive" Yeldell knew he was recommended by Antonelli.
Presentation of yesterday's report set the stage for a decision Monday by Mayor Walter E. Washington on whether Yeldell should be reinstated as DHR director.
The mayor suspended Yeldell from the position for 120 days on Dec. 3, saying he wanted time to examine published allegations that Yeldell had not only abused his leasing authority but had also hired relatives and friends in violation of city personnel rules. Yesterday's report was the eighth and final city report on the allegations. Yeldell's suspension expires Monday.
The mayor said, he has found nothing in the previous reports that would prohibit Yeldell's reinstatement. But Washington has withheld his decision until receipt of the report that was made public yesterday.
The final report makes no conclusions on one of the "most serious" aspects of the Yeldell-Antonelli relationship, audit director David Legge acknowledged yesterday. Legge said his investigators were unable to report whether there was a conflict of interest by Yeldell in the Florida Avenue lease.
The lease was signed about the same time Yeldell received a $33,000 personal loan from Lawrence A. Sinclitico, a friend of Antonelli.
Neither Sinclitico nor Antonelli would appear for an interview during the Audit and Inspection Office investigation, Legge said, and his office has no power to subpoena them. Legge said he is hoping aby allegations of conflict of interest will be resolved in an investigation by the U.S. Attorney's Office here, which is probing Yeldell-Antonelli ties.
The report also failed to establish clearly any role in the leasing discussions that may have been played by city administrator Julian Dugas, the mayor's closest political confidant and an acquaintance of Antonelli.
DHR has signed three leases under authority granted by Mayor Washington Dec. 19, 1975. Two of the three buildings involved are owned by Antonelli. The other two leases were virtually ignored in yesterday's report, which focused on the Florida Avenue lease.
The controversial Florida Avenue lease was first disclosed in a Nov. 19 Post article that reported the city was paying $24,906 a month to rent an old, unoccupied two-story office building in Northeast Washington.
Since it signed the rental agreement in June, 1976, the District has spent more than $300,000 during the past nine months in rental and renovation of the building. DHR expects to open the facility this week as a community service center.
Legge said yesterday DHR has more recently been negotiating with Antonelli to obtain an agreement that would give the city credit for rent paid while the building has been vacant. The credit could be applied to future rent on the lease.
According to land records, Legge's report and other documents obtained by The Post, an agent for Antonelli began leasing negotiations on the property in September, 1975, with Sam Starobin, director of the D.C. Department of General Services. At the time the millionaire parking lot magnate had not purchased the property. He later bought it for $800,000, making settlement on the property the same month the city agreed to rent it.
Starobin has said he rejected the proposed leasing agreement with a partnership headed by Antonelli because the DGS director thought it was too expensive.
A month later Starobin's office received a proposal from another businessman, Emanuel L. Logan Jr., to lease the property to the city at a cheaper rate. At this point, however, Starobin said DHR officials dropped plans to lease the building, saying they could not afford it. Yeldell has also said he questioned Logan's financial standing.
In December, 1975, Yeldell's agency was given leasing authority by the mayor. That same month Antonelli signed a contract to buy the Florida Avenue property and contacted DHR with a new offer. The building was the first property leased by Yeldell once his agency received leasing powers.
The Legge report said it "found no evidence" Yeldell rejected Logan's rental proposal in order to lease the building from Antonelli. But the auditor said Yeldel 'did not follow the proper course of action' when he questioned the financial stability of Logan - a determination that at that time rested solely with Starobin's office.
According to the report, a private consultant named Justin Hinders was asked by Antonelli in February, 1976, to act as a leasing consultant to DHR. Hinders said he agreed to take the job and was called by Yeldell and given an appointment that same afternoon.
Hinders subsequently supported Antonelli's desire to negotiate a long-term lease on Florida Avenue and told DHR Antonelli's price was fair. Hinders told Legge he was "absolutely positive" Yeldell knew Antonelli had recommended him as a consultant.
An attorney for Yeldell denied yesterday his client was aware of Antonelli's involvement in selecting Hinders.
Discussing previous news accounts linking Dugas with the Flrida Avenue Lease, Legge said his investigation had found insufficient evidence "to arrive at teh conclusion that Mr. Dugas was involved in it in anyway."
But in his report, Legge quoted Starobin as saying he was called by Dugas at one point and urged to negotiate the lease with Antonelli because it was "politically important."
In addition, Starobin told Legge he once felt so "uneasy" about the proposed lease he called Dugas and asked: "Do we (the District) owe Antonelli anything?" He said Dugas answered in the negative.
Dugas, according to Legge, said he does not recall either of the telephone conversations.
Federal investigators have interviewed several key District government officials, including Dugas, as part of their probe into the leasing and financial activities of Yeldell and Antonelli.