NEW YORK - A major developer of affordable housing in New York City is linked to a nonprofit that was named in a federal conspiracy case in which former City Council member Miguel Martinez plead guilty Thursday, according to bond documents.
The Arker Cos. partnered with affiliates of the nonprofit Upper Manhattan Council Assisting Neighbors Inc. on at least three affordable housing projects that were financed with bonds sold by the New York City Housing Development Corp., according to bonds documents and public records.
Martinez plead guilty to two counts of mail fraud and one count of money-laundering for illegally diverting $106,000 of public and private funds to himself. He abruptly resigned from the City Council on Tuesday.
Martinez was president of UCAN when it was incorporated in 1998 and since 2002, when he was elected to the City Council, he has directed $1.7 million of city funds to the nonprofit, which worked to preserve affordable housing.
According to the federal complaint, an unnamed developer received $35 million of loans from the HDC in 2004 and 2005 to construct low-income housing in the part of the Bronx represented by Martinez. By affiliating with a nonprofit, the developer would be able to qualify for city property-tax credits worth millions, the complaint said.
Martinez and an unnamed co-conspirator met with the developer to arrange an association between with UCAN that would allow the developer to receive those credits. From about August 2004 through December 2005, the developer paid UCAN $96,000. The co-conspirator diverted those funds to non-UCAN bank accounts at Martinez’s direction.
Martinez ultimately received $40,000 of the funds for his personal benefit, according to the complaint. The complaint did not allege wrongdoing on the part of the developer.
Martinez faces between 57 to 71 months in prison under a plea agreement for charges related to the tax-credit scheme as well as another scheme in which he profited from taxpayer money directed to an arts center.
The diverted funds were related to negotiable 421-a certificates and not bond proceeds, said HDC spokeswoman Catie Marshall who declined to name the developer. The 421-a program, which is no longer issuing new certificates, awarded property tax abatements to developers of affordable housing. Developers of affordable housing can sell the certificates to market-rate developers in order to help finance their projects. If they partner with a nonprofit the for-profit developer can take advantage of the nonprofit’s tax-exempt status to sell the credits without incurring the taxes that would apply to the for-profit developer.
In December 2004, the HDC sold $10.5 million of tax-exempt bonds on behalf of an affiliate of the Arker Cos. to finance the Ogden Avenue project, a 130-unit development in the Bronx. The project was leased for 99 years to UCAN Ogden Housing Development Corp., according to the official statement. At the same time, HDC sold $9 million of tax-exempt bonds to finance the construction of the 100-unit Nagle Courtyard project, which was also developed by an affiliate of the Arker Cos. and partnered with UCAN Nagle Housing Development Fund Corp. which also had a 99-year lease on the project.
A similar deal priced in August 2005 when HDC sold $5.3 million of bonds on behalf of an affiliate of Arker Cos. for the Ogden Avenue Apartments II, a 59-unit multifamily housing project in the Bronx. UCAN-Little Ogden Housing Development Fund Corp., an affiliate of UCAN, leased that site for 99 years.
The Arker Cos. is a frequent borrower through the HDC, identifying 11 out of 31 affordable housing developments and renovation projects on its Web site as using tax-exempt bonds sold by the agency to finance 1,314 units. Asked whether the Arker Cos. had engaged in a quid pro quo with Martinez’s nonprofit in order to funnel money to Martinez, Arker principal Allan Arker said, “That’s confidential information I can’t share with you” and hung up the phone.
