#community reporting

By Michael Phillips, MDBayNews Annapolis Ward 6 has elected a new alderperson, Diesha Contee, a well-known community navigator and advocate whose work has centered on food security, housing access, and neighborhood support. Contee’s win is celebrated by many who have followed her grassroots involvement since 2017. However, recent examination of public court records shows that Contee has…

Surveying the financial mess left behind by Joseph Forte is still painful for Dr. Michael Weiss, even six months later.

“There is a real shock,” he said. “We’re just trying to pull together.”

Weiss is the vice chairman of the board of trustees at Hill Top Preparatory School in Rosemont. In January, the private school for students with learning disabilities discovered it was one of at least 80 investors swindled by Forte’s $50 million Ponzi scheme.

Perhaps even more painful, though, is the knowledge that one phone call could have prevented everything.

Charismatic and armed with the promise of incredibly lucrative returns, Broomall’s Joseph Forte worked his way through his community, persuading friends and business partners to invest money in his firm, Joe Forte LP.

He told his clients, which included a church, a nonprofit and an unknown number of individuals, that their money went into S&P 500 stock futures and foreign currency futures. He guaranteed returns ranging from 18 to 38 percent.

In reality, Forte invested little of it. He bought a beach house, donated to charities and spent millions on himself. What money he did put into the markets was quickly lost.

Like all of the others, Weiss said that Hill Top never suspected Forte was stealing their investment.

“He was sincere, and seemed like he wanted to do the best for the school,” Weiss said. “On whatever reports we got, it looked like good earnings.”

Like his other investors, however, Hill Top missed a major red flag: Forte was never licensed to sell these securities.

By law, all financial professionals who want to sell investments in Pennsylvania must first register with the Pennsylvania Securities Commission. The PSC is a branch of the state government dedicated solely to monitoring stockbrokers and investment advisers. It is also the first and best resource for investors wary of frauds like Joseph Forte.

Through the PSC, investors can run background checks on companies or individuals before parting with any money. The free checks provide everything from a firm’s address to its disciplinary history.

Paul Schwartz, the PSC’s licensing director, said that some requests can yield extremely detailed information.

“People make a request, and we can provide multiple pages of paper on virtually anything that’s in our system,” he said.

What is in the system is a catalog of forms, reports and filings submitted by every registered securities vendor and updated by various state and national regulatory organizations. The database is national, meaning that all activities outside of the state are also documented.

Depending on a firm’s disciplinary history, it may even be required to submit quarterly reports or its brokers’ fingerprints.

“We’ve been doing it for years,” he said. “This is how we process applications for anyone who wants to do business in Pennsylvania.”

But unfortunately, Schwartz said, few people know about the service before they invest. Though certainly the largest, Forte’s Ponzi scheme is just one of eight scams of $65,000 or more successfully prosecuted by the PSC in the past year-and-a-half.

Mike Byrne, the Securities Commission’s chief counsel, said that an unknown number are still active in the state.

“Pardon my cynicism, but we’ve always had them, and we always will,” he said.

Schwartz said that people can request a background check by calling the Securities Commission at 717-787-8061 or visitingwww.psc.state.pa.us. Request forms are found on the web site by clicking the “online research requests” link.

The report is provided by mail or electronically within 48 hours.

Schwartz said that there are a few specific areas that can serve as red flags for investors.

“Definitely look at how long [the company] has been in business,” he said. “Also look at the disciplinary history, or any customer complaints.”

Schwartz warned against trusting those, especially individuals, who are new in the business, as they have little to guarantee their legitimacy. He encouraged anybody confused or concerned by the information they receive to contact him.

“When you get the report, if you don’t understand the information, we’ll walk you through it,” he said.

Though it is the most exhaustive resource, background checks are not the only investigative service offered to potential investors.

The “enforcement actions database, also available on the PSC’s Web site, compiles all of the cease and desist actions taken by the commission. These actions order unregistered vendors to stop selling securities investments.

Investors can access the database and search for specific companies, or by year, for violations.

For Hill Top Prep, knowledge of these resources came too late. It is now in the middle of what Weiss described as a long, drawn out recovery process. He said that the school’s operating budget remains safe, but that a portion of its endowment may be lost.

Neither Weiss nor Tom Needham, the school’s headmaster, could confirm the total amount invested with Forte, but Hill Top’s latest tax filing showed nearly $1.4 million invested in a limited partnership as of June 30, 2008.

Byrne urged investors to learn from this latest string of scams and not let greed overshadow prudence. He characterized financial schemes as bad investments “surrounded by chocolate.”

“The idea is to make them look appealing, but sell them [nothing],” he said.

Hill Top, like countless others, learned that the hard way.

“The [PSC] is certainly something that could have been used years ago,” said Needham. “But I’m sure a lot of people are saying that now.”

The R.E. Lee Building’s deterioration has forced many tenants to live in substandard conditions

During a volunteering shift last winter at the R.E. Lee Building, Morten Wendelbo helped a resident carry some packages up to her apartment. What he saw there worried him.

“I asked her why her oven was on,” said Wendelbo, a Washington and Lee University student who volunteers regularly with the school’s Campus Kitchens Project. “Putting her oven on 350 degrees and keeping the door open was the only way, she said, the apartment would stay warm enough so she could go to sleep at night.”

Living in less than ideal conditions is not out of the ordinary for many low-income residents at the R.E. Lee Building. Though it provides crucial affordable housing within the city, the 86-year-old building has seen few renovations through the years, meaning residents must deal daily with issues like water damage, crumbling ceilings and deteriorating insulation.

“I am concerned,” Wendelbo said. “From the outside it looks fine … but there are some things to be worried about.”

Owner William McClung said he believes the building meets the residents’ needs.

“Any time that you have a number of people, there are going to be some that are dissatisfied,” he said. “We think we do a good job of providing very affordable housing in a convenient location for the folks that live there.”

McClung owns the building in partnership with W. Lowrie Tucker and Walter Joe Mynes, but he is the only partner who lives locally.

Under Virginia’s inspection code, the owners are not required to make major renovations. They are required only to adhere to the code that existed at the time of construction or the most recent upgrade. Because there have been no major upgrades since the building was converted from a hotel into apartments, McClung is in compliance with the law.

“Though we would like to see the building brought up to code, there is really not anything that the city can do,” said Steve Paulk, Lexington’s code enforcement officer.

A city inspector assesses the building annually, but the past two years have yielded violations no more serious than a burnt-out exit sign.

The building’s deterioration is due to a number of factors. But mostly, it is old. Built in 1924 as the Lexington Hotel, it was renovated two years later when it became the Robert E. Lee Hotel.

Residents say that, while problems are fixed relatively quickly, it is often just a matter of time before the same issues arise again.

“I have a hardwood floor and it gets kind of soggy here and there,” said Jimmy Noonan, who has lived in the building for two years. “So it’s not holding up too well.”

Mark Groah, who has lived in the building for 19 years, said his floor has needed repair at least once a year.

“The living room they fix every year and it busts [after] every snow or rain,” he said.

While some residents are unhappy with the conditions of their apartments, they acknowledge that there are few affordable housing options within the city. Rent in the R.E. Lee Building is generally between $300 and $400 a month including utilities.

“I have a small room,” said Noonan. “But I like it and it’s cheap.”

McClung said any tenant unhappy with his or her apartment can move to another.

“If somebody has a particular problem, there is always a vacant apartment to move them in to,” he said. “[They] can make that move any day.”

There are currently 42 residents in the R.E. Lee Building. But McClung said there have always been vacant apartments.

The building’s condition can be especially trying for residents with disabilities. Both Wendelbo and fellow Campus Kitchens volunteer Joe Landry recalled an instance where the six-story building’s elevator broke, stranding disabled residents in their apartments.

The building used to house only disabled tenants because of a contract with the Virginia Housing Development Authority that paid McClung directly as a rent subsidy. However, Vicky Agnor, director of Rockbridge County’s rental assistance program, said resident complaints and a string of federal inspection violations resulted in the termination of that contract in 2006. The residents were given vouchers and the option of staying or moving out, and the R.E. Lee Building became available to citizens who did not receive rental assistance. The remaining 18 people who do receive assistance are now subsidized directly, providing them the opportunity to find other housing if they want to.

“There were a lot of problems with the Robert E. Lee as far as our inspections,” Agnor said. “There was a lot of chipping, peeling, bubbling-looking paint, and that appeared to be coming from some sort of moisture in the walls.”

McClung said he cooperated fully with VHDA’s inspectors and does not know why the contract was pulled.

“We hired two contractors and repainted the interior of the building, spent $40,000 repainting the interior, and 30 days after that we received notice that they were canceling the program for the whole building,” he said. “There was nothing that they asked us to do that we didn’t do.”

But Agnor said McClung was aware of the building’s inspection violations and why the contract was terminated. One of the owners walked through the building with a VHDA inspector, she said. Since 2006, though, Agnor said, conditions have improved.

“The most pressing issue was the paint,” she said. “You very seldom see that now … . We might find an apartment when we do our annual inspection that fails, but we don’t get complaints like we did in the beginning.”

VHDA inspects only the apartments occupied by voucher recipients. And though Wendelbo, who has become close with many of the residents, still worries for their well-being, he said there are few alternatives.