The Mobile Housing Board will take a $1.2 million hit, after U.S. Department of Housing and Urban Development officials found that 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, Pettway said. Superior Masonry is owned by Frank Seltzer, the half-brother of MDE President and State Rep. Adline Clarke. The conflict was mentioned in detail, as part of a scathing HUD Office of Inspector General report issued last summer.

In a statement released late Thursday morning, MHB Chairwoman Kimberly Pettway said the relationship was disclosed, but according to OIG, the board should’ve obtained a waiver.

In a phone interview, Pettway said she would prefer the board not hire contractors 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 of concern 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 HUD Field Office will also require MHB to meet occupancy goals outlined in a plan established with the Field Office. MHB is required to submit monthly reports that will be monitored by HUD, according to the statement.

Mayor Sandy Stimpson released the following statement regarding the situation.

“We are working closely with the U.S. Department of Housing and Urban Development and the Mobile Housing Board to ensure that the Mobile Housing Authority is taking corrective steps on its management of federal funds,” he said. “We are confident that with the recently announced management changes, the board will successfully implement long-needed reforms on behalf of our citizens. I am grateful for the board’s willingness to serve at such a critical time and place of need for our community. We share a responsibility and a commitment to making sure our low-income families have access to quality, affordable housing.”