A former developer of the District-sponsored Bates Street housing redevelopment pleaded guilty in federal court yesterday to a charge of failing to report more than $90,000 of income from the project, while another former project executive was indicted on charges of evading taxes on more than $400,000 he received from the venture.
The proceedings surrounding the guilty plea of Jack W. White, the Bates Street executive with prime responsibility for working with the city, and the tax evasion indictment of Lawrence J. Brailsford provided new insight into a city-financed project that one prosecutor called a "managerial disaster from top to bottom."
The Bates Street project, once touted as the showpiece of Mayor Marion Barry's housing program but for years beset by serious financial and construction problems, is near North Capitol Street and Florida Avenue NW. A series of articles early last year by The Washington Post, detailing mismanagement of the project, led to resumption of a federal grand jury investigation that produced the conviction and indictment.
A third Bates Street principal, George Holmes Jr., pleaded guilty in August to failing to report $122,000 of income from the project during 1980. In addition, prosecutors said in U.S. District Court yesterday that White had diverted $30,000 worth of project labor and materials to do remodeling work on his own home.
Holmes and White have agreed to tell prosecutors what they know about the project, which received $13 million in mostly federal funds from the city, as part of agreements they negotiated with the U.S. attorney's office. In return, they were allowed to plead guilty to filing a false tax return, a felony that carries a maximum sentence of three years in prison and a $5,000 fine, rather than the more serious charge of tax evasion.
Brailsford, who has not worked out an agreement with prosecutors, could be sentenced to up to five years in prison and fined $10,000 on each of the two tax evasion counts in his indictment.
U.S. Attorney Joseph E. diGenova said yesterday that "aspects" of the investigation are continuing. However, he declined to comment when asked if the conduct of city officials who were responsible for overseeing the redevelopment is under scrutiny.
"I'm very satisfied with where we are," diGenova said.
Holmes, White and Brailsford, who were partners in the firm retained by the city to create a 163-unit model community out of what had once been the city's worst slum, received more than $600,000 of unreported income from the project between 1979 and 1980, according to prosecutors and yesterday's indictment of Brailsford.
During that period, city housing officials pumped most of the more than $4 million in interest-free loans into the long-stalled project as part of a Barry campaign pledge to "take the boards off" abandoned inner-city housing.
White and his attorney, Gerald A. Feffer, declined to comment after they left the courtroom yesterday. R. Kenneth Mundy, a lawyer representing Brailsford, also declined to comment.
Echoing criticism by D.C. Auditor Otis Troupe of the city's handling of the project, diGenova said that federal investigators found that the city had given the developers "a checkbook with no controls on it."
DiGenova and Brian M. Murtagh, the assistant U.S. attorney who directed the investigation, said in interviews that the city's failure to supervise adequately the disbursement of project funds afforded "an opportunity for a rip-off."
"Where were the managers at the city's Department of Housing and Community Development?" Murtagh said.
DiGenova and Murtagh said the grand jury investigation was slowed in part because it took District government officials a long time to provide the grand jury with government project records.
For example, Murtagh said city housing officials took nearly a year to find and turn over all the canceled checks covering the federal funds disbursed to the developers. Murtagh said the delay in finding the checks resulted from "poor record-keeping" by the city.
He said city housing officials "weren't obstructing justice," but "they weren't terribly helpful."
City auditor Troupe and others have criticized Barry's administration for failing to fully account for how the Bates Street project funds were spent.
Barry has said it was up to diGenova's office, not the mayor, to investigate possible criminal wrongdoing and his administration is cooperating fully with diGenova's office.
City Administrator Thomas M. Downs said yesterday that the "city provided everything we could as fast as we could" and that city officials helped prosecutors analyze stacks of Bates Street records.
According to Murtagh, the investigation raised questions about the adequacy of the process used by the city housing department to select Holmes, White and Brailsford to lead the development of the project.
Holmes was a member of the original development team, which was selected in January 1978, before Barry became mayor.
When the project failed to get off the ground by the time Barry took office in January 1979, the new administration brought in Brailsford, who at the time was head of an Arlington-based consulting firm that later filed for bankruptcy, and White, a former New York City manpower official and executive in Brailsford's firm.
"Why in God's face was Brailsford hired?" said Murtagh. He said Brailsford had virtually no development or construction experience.
According to Brailsford's indictment, he received $275,885 in income in 1979 and $207,192 in 1980. On his tax returns, Brailsford reported income totaling $68,800 for both years.
White, as part of his arrangement with prosecutors, waived indictment and prosecutors filed a charge, known as an information, against him.
Murtagh told U.S. District Judge Oliver Gasch that White reported an income of $62,911 on his 1980 tax return, but actually received an additional $60,410 in checks from the Bates Street project and also had project workmen do about $30,000 in remodeling work on his residence at 7200 Alaska Ave. NW.
White and his attorney said in court that they are still negotiating with prosecutors over the value of the remodeling work. CAPTION: Picture, Jack W. White . . . failed to report $90,000.