18 November 2009

AHF, Happy State Court Case A Tangled Mess

from Amarillo.com

A second attempt by Happy State Bank to collect $1.7 million from an entity affiliated with American Housing Foundation proved just as fruitless as the first.

"After hearing your explanations, it's an even more complicated issue than the complicated one I thought it was," U.S. Bankruptcy Judge Robert Jones told attorneys in the case Monday.

Previously, a Thursday hearing ended when some of the complexity was made clear as attorneys on video feed, speaker phone and in the courtroom started to make their cases. The hearing Monday had all the parties in court, but it ended with Jones saying he'd consider it a preliminary hearing and scheduling a December hearing.

Happy State Bank lent Multi-Family Rehab Partners - it's a partnership consisting of AHF, Catherine Koehler, Mary and Maurice Schooler, Louise Conley and their personal trusts - $2 million in 2008.

The members formed Multi-Family Rehab Partners in 2004 and guaranteed loans for a variety of projects, including Three Fountains and River Falls apartments in Amarillo. The partnership didn't own any properties but would funnel money into ailing projects as a way of keeping them in operation, said John Ben Blanchard, an attorney for Happy State Bank.

AHF founder Steve Sterquell put up $1 million in 30 certificates of deposit as collateral for the $2 million loan. He signed bank agreements as a representative of AHF, which was a minority partner in five partnerships and limited corporations. Those entities funded the CDs with the security deposits of residents of their properties.

The picture is further clouded because Happy State originally lent Multi-Family Rehab $500,000 secured by 13 CDs, many owned by the different entities. In April 2008, AHF used the CDs and other money to create 30 CDs, and Happy State Bank lent Multi-Family Rehab the $2 million in exchange for the CDs as collateral.

The CDs have continued to earn interest, and the bank wants to foreclose on them, but federal laws require it to seek permission because bankruptcy proceedings freeze the collection of debts, and AHF, now in bankruptcy, guaranteed payment of Multi-Family Rehab's loan.

The various partnerships and corporations that funded the CDs object to Happy State's move, claiming the CDs belong to them. The U.S. Department of Housing and Urban Development also objects, because federal housing money that went to the projects are not to be used to benefit other projects. The entities own the Amarillo Bel Aire Apartments and other apartments in Austin, College Station and Waco.

AHF is an Amarillo-based nonprofit that buys, renovates and manages affordable housing projects across the country through hundreds of partnerships and corporations registered with the Texas Secretary of State's Office and in other states.

According to the foundation's Web site, it operates 14,000 units - including Texas apartments, plus housing for university students and senior citizens.

Court records show more than $90 million in claims against AHF by creditors and investors.

Sterquell used some of the $2 million in loan proceeds to pay off notes for other entities and sent $1.3 million to the Wells Fargo account of AHF Development, which court papers have described as a "bank" for various AHF projects.

The loan was due April 1, the same day Sterquell died in an auto wreck investigators have called a suicide.

AHF has filed for bankruptcy, claiming less than $50,000 in assets.

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