BRADENTON, Fla. – Memphis, Tenn.-based Global Ministries Foundation is under investigation by the Securities and Exchange Commission after one of its bond-financed housing projects defaulted on the debt.
Notice of the SEC probe was disclosed in court filings Wednesday in the United States District Court for the Western District of Tennessee, Memphis Division.
Foresite Realty Management LLC, the receiver for two dilapidated low-income apartments in Memphis, said that it was ordered by the SEC to maintain records related to the Global Ministries Foundation.
"We believe you may possess documents and data that are relevant to an ongoing investigation being conducted by the staff of the United States Securities and Exchange Commission," Atlanta-based SEC attorney Michael Adler wrote in a July 18 letter. "Accordingly, we hereby provide notice that such evidence should be reasonably preserved and retained until further notice."
The letter pertains to $11.8 million of tax-exempt bonds and $485,000 of taxable bonds issued by the Health, Educational and Housing Facility Board of the City of Memphis in 2011.
Proceeds of the bonds, secured by Housing and Urban Development housing assistance payments, were used by GMF to acquire 448 units in the Warren and Tulane Apartment complexes in Memphis.
Adler also ordered Foresite to maintain documents "created, modified or accessed" by Reverend Richard L. Hamlet, Natalie Metcalf, Nancy Hall, Alan Swafford, and Dr. Thomas Stovall.
Hamlet is the founder of Global Ministries, and his daughter, Metcalf, is listed as corporate secretary on GMF's website. Hall is controller and chief financial officer. Swafford and Stovall are GMF board members.
On May 6, the bond trustee, Bank of New York Mellon, filed a complaint in federal court to have a receiver appointed for the Memphis apartment complexes after a default on the bonds.
The default occurred because HUD stopped housing assistance payments after notifying Hamlet twice that GMF failed to maintain the complexes in a "decent, safe, and sanitary" manner, according to notices on the Municipal Securities Rulemaking Board's EMMA filing system.
Foresite Realty was appointed receiver on May 17 to maintain and potentially sell the properties in Memphis.
S&P Global Ratings assigns a D – its lowest junk rating – to the bonds issued for the Warren and Tulane complexes in Memphis.
On Thursday, S&P placed 23 GMF projects on CreditWatch with negative implications because of an inquiry by HUD into 15 properties supported by Section 8 subsidized affordable multifamily rental housing project payments.
The bonds were sold by different conduit issuers for the projects in various states, including Alabama, Florida, Indiana, Louisiana, New York, North Carolina, and Tennessee.
With the exception of Memphis, S&P's ratings on other GMF properties range from A-minus to BB.