Liens against property involved in a $12.5 million Shaw land deal have been paid off, according to real estate documents supplied yesterday that contradict a report by the D.C. auditor that charged the liens endangered the city's investment.
"It appears to be that I was wrong on this one," Auditor Otis H. Troupe said after he received copies of canceled checks showing that the liens had been paid off by the title insurance company that handled the purchase of land controlled by developer Jeffrey N. Cohen, a close friend of Mayor Marion Barry.
Troupe's report, released Monday, 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 . . . . "
The key to that allegation was Troupe's finding that as of last month about $6.8 million in liens remained unpaid. Yesterday, however, the canceled checks and interviews with the lien holders -- who said the liens had been paid in full -- contradicted that finding.
Cohen's attorneys provided Troupe and The Washington Post with copies of the canceled checks, and in a letter to Troupe, asserted that the facts showed "there was no intent to provide 'indirect funding' to a 'close friend and political ally of the mayor . . . .' " The lawyers branded as "preposterous" the report's allegation that the deal allowed Cohen "to enrich himself by applying taxpayers' money to alternative investments . . . . ." All the proceeds from the deal "were properly applied," the letter said.
According to the canceled checks, the liens were paid off within days of the Feb. 1, 1985, settlement. The largest lien in question had been paid off in August 1984, six months before the settlement, according to the documents.
Yesterday, Cohen's attorneys asserted in their letter that Troupe could have verified through several sources that the liens had been paid.
However, Troupe yesterday blamed the report's findings on lack of cooperation from Curtis McClinton Jr., deputy mayor for economic development, who was the city's primary negotiator in the deal. "Doing sensitive audits and making critical findings are always dependent upon the quality of hard information available," Troupe said. "The quality I got was extremely poor and operated as a confusing influence . . . . "
Troupe said he still wants to see "a statement of satisfaction from the creditors," adding that if he does, "it would of course support a modification and updating of the auditor's report . . . . "
Troupe said he had been seeking information from McClinton since April to determine the status of the liens, after auditors were unable to locate documents in the D.C. Recorder of Deeds office showing that the $6.8 million in old liens had been paid off. Such documents are normally filed with the recorder's office. However, industry sources said that often the recording does not take place until months after the payment is made.
Troupe said that answers from McClinton's office "did not address the substance of the questions. He simply talked around the questions."
McClinton responded, "To the best of my knowledge we responded to all the questions." When told that Troupe found the answers unsatisfactory, he said, "I can't go to what his satisfaction is. That's his benchmark."
Troupe said he could not judge whether the Shaw report will affect his credibility. "That will be a value judgment that you make," said Troupe, who has been in the spotlight in recent months with highly publicized audit reports stinging the Barry administration and the University of the District of Columbia.
Barry and others have criticized his role in the controversy that has enveloped UDC since Troupe alleged in a report that the UDC president misspent university funds for consulting, travel, catering and household items. Troupe has struck back, accusing UDC officials and Barry of using "stonewalling tactics" that made it difficult for him to determine whether there had been improprieties.
Troupe began looking into the Shaw land deal at the request of City Council member Frank A. Smith Jr. (D- Ward 1), whose ward includes the Shaw area, after it was revealed that the city closed the deal without first conducting its own appraisal of the properties. Instead, it relied on an appraisal prepared for Cohen's partnership by a private real estate appraiser.
The city, in an effort to spur development in the rundown Shaw neighborhood, worked out a deal for a consortium of banks to pay $11 million to a Cohen partnership to purchase the properties. 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 properties, which include the old Children's Hospital site.
The liens questioned in Troupe's report included a $4.4 million lien held by Children's Hospital National Medical Center and a $700,000 lien held by Second National Building and Loan, in Annapolis. Three other smaller liens were held by Independence Federal Savings Bank in the District, Su-Bas Associates, and Samuel L. Bullock. Spokesmen for the lien holders or their trustees yesterday said the liens had been paid in full.