Members of the Metropolitan Development Commission were outraged late last year to learn that the Indy Land Bank had allowed numerous investors to circumvent a public bidding process for real estate by working through a not-for-profit entity.
Yet they continued to approve Indy Land Bank’s transactions with not-for-profits, including two whose officers were charged May 21 in an alleged kickback and bribery scheme involving two city employees. As recently as May 15, the nine-member commission OK’d two sales to the Indiana Minority AIDS Coalition and six to New Day Residential Development Inc.
Federal prosecutors have accused officers of both organizations—David Johnson, executive director of the AIDS Coalition, and Randall Shepard of New Day—of participating in the scheme. It is alleged to have benefitted two city employees: land bank director Reginald T. Walton and John Hawkins, an administrator in the Department of Metropolitan Development.
MDC President Ed Mahern said Walton and Metropolitan Development Director Adam Thies previously assured the commission that not-for-profits were being thoroughly vetted. Commissioners questioned Thies and Walton after a November IBJ article revealed that a charity called Homeless and Re-Entry Helpers had served as a straw buyer for dozens of real estate investors.
"This was a situation I thought had been addressed enough,” said Mahern, a Democrat.
MDC member Dorothy Jones, a mayoral appointee to the commission, said that after Homeless and Re-Entry Helpers’ dealings were revealed, she questioned any transaction that wasn’t with a well-known community development corporation.
Walton even made a presentation on New Day and other not-for-profits working with the land bank at an MDC pre-meeting session on Nov. 7. The presentation listed 501(c)3 status, incorporation dates, mission and slides of past rehab work.
“The principal from New Day Residential Development was there at the meeting and introduced to us,” Jones said. “I really don’t like it when people deceive me.”
Commissioner Bruce Schumacher said the message to city staff last fall was that the land bank shouldn’t be facilitating back-door transactions with investors. According to the land bank’s rules, real estate investors and the general public are to go through a bidding process and at least meet a minimum appraised value.
“If there’s going to be a profit made on the city’s properties, I’d like to see the city profit,” said Schumacher, another mayoral appointee.
Republican Mayor Greg Ballard had a different reaction. In an interview late last year, he angrily denied that he had any tie to Homeless and Re-Entry Helpers, which acquired 154 properties from the land bank in late 2011. (The group's founder had served on mayoral advisory groups on veterans and ex-offenders.) Ballard said he didn’t see anything wrong with the deal. In the end, he said, “Properties seem to be back on the tax rolls.”
Thies ordered an end to bulk transactions with not-for-profits, which under land bank rules were to receive no more than three properties in a six-month period.
Thies said in an e-mail that he didn't know Walton was coordinating the sales to other charities for his own benefit. Thies said he's been working on a new policy with the private, not-for-profit Land Bank of Indianapolis.
The MDC let more than a dozen properties go to the AIDS coalition in one January transaction, members said, because Walton relayed that Johnson was helping him place the houses in the hands of people who’d been duped by fraudster Shela Amos.
Amos was sentenced on May 9 to 34 years in jail for a scheme in which she used official-looking documents to persuade mostly Hispanic residents to pay her for vacant houses she didn’t own.
“Because of that whole scam, our understanding was the city was doing everything it could to help them,” MDC member Lena Hackett said. Walton was the city’s “go-to guy” on that front, she said.
The AIDS coalition sold 12 of the 13 properties it received in January to people who told the Marion County Prosecutor’s office they thought they’d been duped by Amos. The AIDS coalition did not mark up its prices, according to state sales disclosures.
Johnson’s group sold one property, 334 S. Emerson Ave., to an individual who had nothing to do with the Amos case for $10,000.
Marion County Prosecutor Terry Curry’s office interviewed 37 people who came forward after Amos was charged last August. Many were still living in the houses and had made improvements, Curry said. No additional charges were filed, but deputies researched the properties involved and found that six belonged to the city of Indianapolis.
“We reached out to the city to see if there was some way [the victims] could remain in the properties,” Curry said.
Three of the six properties still belong to city, land records show. The land bank sold three others to the AIDS coalition, which held onto one and sold two others.
The AIDS coalition sold one of the houses, 814 Lincoln St., to a woman who was not involved in the Amos case for $1,156, the same price the charity had paid, a sales disclosure shows.
The other property that passed through the AIDS coalition, 3516 Salem St., was resold twice on the same day, March 6, to people not involved in the Amos case. The first transaction was for $8,000, and the second was for $38,000, sales disclosures show.
Federal prosecutors allege that Johnson accepted money from Walton and his partner, Aaron Reed, for allowing the AIDS coalition to serve as a vehicle for deals. Sargent, meanwhile, shared the proceeds of New Day’s profit with Walton, according to the indictment.
Attorneys for Johnson and Sargent declined to comment. Lawyers representing Walton, Hawkins and Reed didn’t return phone calls.