HUD suggests Modesto nonprofit broke rules

A federal official released a statement Tuesday suggesting that a Modesto nonprofit agency violated conflict-of-interest rules by allowing family members of employees to live in homes paid for with government money.

The statement by the Department of Housing and Urban Development was its first regarding the controversy over the Stanislaus Community Assistance Project. Auditors are focusing attention on the more than $7 million in taxpayer funds that SCAP used to purchase and improve 21 properties through Modesto's Neighborhood Stabilization Program.

According to the HUD statement, SCAP is considered "a nonprofit developer carrying out NSP activities for the city of Modesto," and the matter of family members residing in housing units is "considered a conflict of interest."

A department spokeswoman was still researching whether employees of a developer are allowed to live in the homes.

Gene Gibson, a regional public affairs officer for HUD, said it is the city's role as a grant recipient to monitor the program and deal with conflicts of interest.

Last week, city officials confirmed that the parents of SCAP Executive Director Denise Gibbs live at 913 Rumble Road, an upscale home that was purchased and improved using taxpayer funds. Records show that SCAP spent $180,000 to buy the foreclosed home and almost $160,000 on improvements.

Officials also will take a harder look at four or five other homes occupied by SCAP employees or family members of employees.

$600K on two homes

The Bee confirmed that a SCAP staff member, about two months ago, moved from a home on Weston Way in northwest Modesto to a home in the La Loma area. SCAP spent close to $600,000 in taxpayer funds to purchase and improve the two houses.

Judith Ray, the city's deputy director of Parks, Recreation and Neighborhoods, said Tuesday the city does not keep information about the tenants in Neighborhood Stabilization homes. But it is concerned about reports of SCAP employees and family members living in the housing, she said.

It's possible for the city to waive the conflict-of-interest rules in special cases, but SCAP has not applied to the city for waivers, Ray said.

"We would need to have a discussion about that in advance and see if a waiver would be granted," Ray said. "In these cases, it's unlikely a waiver would be granted. There is a real perception issue, if nothing else."

Leo Briones, a public relations expert hired by SCAP, said the agency's board recently has identified five cases in which the Neighborhood Stabilization conflict-of-interest rules apply. In a written statement Tuesday, he said the "conflict-of-interest exception guidelines were followed and added to individual case files."

He added, "the city of Modesto has been provided with those cases files and is currently examining them."

Last month, the city notified SCAP that it would cut off funding to the organization until an audit was completed. A city letter said the audit was necessary because SCAP staff provided "inconsistent information and documentation" regarding several files, including the home at 913 Rumble.

Preferential treatment?

Ray, who has directly overseen the city program, said the audit will consider whether people related to SCAP employees were given preferential treatment for the housing and if they met the income qualifications.

The city could ask employees or their relatives to vacate the homes. Officials will wait until after the audit is completed in four weeks before considering other action, Ray said.

Questions have swirled around the nonprofit agency since The Bee reported that SCAP development director Joe Gibbs — the husband of Denise Gibbs — was given huge bonuses for writing successful grant applications.

The Office of Inspector General for HUD also is looking at SCAP files as part of an audit of the Modesto Neighborhood Stabilization program, Gibson said.

Bee staff writer Ken Carlson can be reached at kcarlson@modbee.com or (209) 578-2321.