The Mobile Housing Board will take a $1.2 million hit after U.S. Department of Housing and Urban Development officials found a conflict of interest did exist between the board’s nonprofit arm, Mobile Development Enterprises, and a contractor hired to make apartments ready to rent.

The conflict occurred when the board hired Superior Masonry to do work on some of the agency’s apartments, MHB Commission Chairwoman Kimberly Pettway said. Superior Masonry is owned by Frank Seltzer, the half-brother of MDE vice president and State Rep. Adline Clarke. The conflict was mentioned in detail in a scathing HUD Office of Inspector General report issued last summer.

In a statement released late last Thursday morning, Pettway said the relationship was disclosed, but according to OIG the board should have obtained a waiver.

In a phone interview, Pettway said she would prefer the board not hire contractors who are related to employees.

Since at least a portion of the money paid to Superior Masonry came from HUD funds, the agency’s Birmingham field office is asking that $1.24 million of MHB’s non-federal funds be transferred to an internal capital fund, according to the statement. Lagniappe has previously reported that MHB paid Superior Masonry a total of $3 million from 2011 to 2015.

“The $1.24 million transferred will be used to make additional repairs to housing units or reposition communities,” the statement read. “MHB must submit a repayment plan to the HUD field office by Friday, Feb. 10.”

Additionally, MHB must provide a copy of its “Conflict of Interest Policy” to the field office, along with a resolution acknowledging that Superior Masonry will not be hired to do any additional work for MHB as long as a conflict of interest exists. The board had already stopped using the contractor upon learning of the OIG concern last year, the statement read.

MHB must also change MDE’s bylaws to identify MDE as an instrumentality, according to the statement. MHB has previously maintained that MDE was a subsidiary of the agency, not an instrumentality.

The change would make MDE a part of the housing authority rather than an affiliate. Even with the change it does not appear that Clarke, who is a Democrat in the state House of Representatives, would be in violation of the Hatch Act, which is a federal law designed to limit federal employees’ participation in partisan elections.

Pettway confirmed that despite the change in bylaws, Clarke’s salary is not paid through federal funds. An official with the U.S. Office of General Counsel has previously told Lagniappe that 100 percent of her salary would have to come from federal funds in order for a violation to occur.

Further, Clarke received an advisory opinion from the Office of General Counsel in 2013 that stated the Hatch Act did not prohibit her candidacy because it was determined that her salary “is not wholly financed with federal funds.”

MHB attorney Raymond Bell did not return a number of calls to his office for this story. Clarke did not respond to an email sent to her MDE office or an email to her office at the State House of Representatives on Friday. Nor did Clarke return phone calls made to MHB and MDE headquarters. When reached Monday, a receptionist said Clarke was in a meeting. MHB Executive Director and CEO Dwayne Vaughn also failed to respond to an email message.

The HUD field office will also require MHB to meet occupancy goals outlined in a plan the field office established. MHB is required to submit monthly reports that will be monitored by HUD, according to the statement.

Interim executive director
After a somewhat brief executive session, the board unanimously picked Senior Vice President and CFO Lori Shackelford as interim executive director.

Pettway said Shackelford was chosen because she worked closely with Vaughn, is respected by the employees and has a “long-term history” with the authority.

“She’s the perfect fit,” Pettway said.

When he announced his resignation earlier this month, Vaughn told commissioners he would serve as executive director until Feb. 28. Pettway mentioned following Wednesday’s meeting that Vaughn would serve until the end of January. When asked the reason for the change, Pettway said there was no reason from the board’s perspective.

When asked why he decided to leave early, Vaughn couldn’t give a date and said he would serve at the pleasure of the board.

In other business from the Jan. 25 board meeting, Vaughn told commissioners that HUD officials would be in Mobile next week to tour some of the housing complexes. During his last executive director’s report, Vaughn told commissioners that closing for the Downtown Renaissance properties under the Rental Assistance Demonstration program would be delayed until at least March.

The closing would be the first step in a portfolio-wide conversion to RAD for the authority. RAD, which converts public housing to Section 8 housing, means the authority would be guaranteed steady funding at 2014 levels regardless of changes to HUD funding. The program, which allows private partners to get involved in public housing, could threaten employment levels at MHB.