Story Grows In Texas Bribery Case

DALLAS — A couple indicted Monday in an alleged scheme to bribe state and local officials in Dallas for approval of bond-funded, low-income housing deals is also under investigation in San Antonio. Brian Potashnik, founder and president of Southwest Housing Development Corp., and his wife Cheryl Potashnik, the company’s chief operating officer, were cited as instigators of the bribery scheme in a 166-page indictment.The couple was among 14 people indicted on an array of charges that included extortion, money laundering, fraud, and tax evasion. Former Dallas Mayor pro tempore Don Hill and former Dallas planning director D’Angelo Lee were also indicted, along with state Rep. Terri Hodge, D-Dallas. All three have pleaded not guilty and denied wrongdoing.The Potashniks are accused of bribing Hill and Lee to secure tax credits and bond financing for low-income housing projects and of bribing Hodge in exchange for her influence with the Texas Department of Housing and Community Affairs.Southwest Housing, which ranked as the largest low-income housing developer in the state and the 16th largest in the nation, divested all 54 apartment projects it owned in Texas just days before the indictment came down. The properties are to be sold to Seattle-based Cascade Affordable Housing, according to letters to San Antonio housing officials.While the Dallas indictments focus on local projects, an FBI spokesman in San Antonio said the couple and their company are also under investigation there for dealings with housing authorities in Bexar County.The FBI is investigating allegations that Southwest Housing provided contract work to Bexar County Housing Authority board member Carlos Madrid and work to board member and lawyer Ken Brown. Brown and Madrid have denied any wrongdoing.An audit by the Bexar County Housing Authority revealed that Madrid’s construction company received more than $25,000 from Southwest for work on housing projects he voted for.Rudy Rodriguez, chairman of the Bexar authority, said the audit revealed other problems involving board members, ranging from nepotism to improper purchases of gifts. None of the board members who were involved with Southwest Housing are currently serving, Rodriguez said.“All we’ve done for the past two years is clean up the mess these board members have left behind,” he said. “We have a good, reputable board now.”Rodriguez said investigators from the U.S. Department of Housing and Urban Development and the FBI responded immediately to the audit. Documentation used in the audit is now in the FBI’s possession, Rodriguez said.Meanwhile, Rodriguez and the Bexar board will meet with officials from Cascade today to discuss the new owners’ qualifications to operate the two apartment complexes developed by Southwest. In Dallas, the Dallas Housing Authority is also preparing to qualify Cascade as the new property owner for the four properties in question there. “There would have to be some kind of written agreement as to how we would work together,” said DHA spokeswoman Michelle Raglon.Since the Potashniks formed Southwest Housing in 1996, the company has closed more than $1 billion in combined debt and equity investments. From its Dallas base, the company has expanded to Arizona, Colorado, and Nevada and had been planning single-family communities and retail properties, as a new line of business.Serving both as president of both Southwest Housing and another company known as Affordable Housing Construction, Brian Potashnik received nearly $26 million in tax credits from the Texas Department of Housing and Community Affairs in 2004. TDHCA has placed a hold on Potashnik’s applications for future low-income housing tax credits until the criminal charges are resolved.In exchange for writing letters and appearing before the TDHCA supporting Southwest Housing’s bid for tax credits, Rep. Hodge lived rent-free at Rosemont at Arlington Park, a Southwest Housing low-income apartment complex, according to the indictment. The Potashniks also paid Hodge’s electric bill and provided other incentives, the document says.Mike Gerber, executive director of the TDHCA, said no sale of the Southwest Housing properties could take place without approval from his agency.“We are going to be very tough in our scrutiny of the properties,” he said. “They [Cascade] can state their intention to buy these properties, but they can’t buy them until the department approves. When you are awarded tax credits, you are held to a 30-year land-use restriction.”The agency held up approval of tax credits for a Southwest Housing deal in 2005 and did not release the credit until the property was sold to another developer, Gerber said. The agency’s caution was prompted by FBI raids of Southwest Housing’s offices and FBI contacts with the agency, Gerber said.