Years before joining the Trump administration, acting Attorney General Matthew Whitaker abandoned a taxpayer-subsidized project he was working on in Iowa, neglecting to pay back more than $151,000 in loans to the city of Des Moines and stiffing a number of private contractors.
The city of Des Moines ultimately yanked an affordable housing loan that Whitaker’s company had been awarded, and another lender began foreclosure proceedings after Whitaker defaulted on a separate loan for nearly $700,000. Several contractors complained they were not paid, and a process server for one could not even find Whitaker or his company to serve him with a lawsuit.
The project, which involved revamping an apartment building, suffered years of cost overruns and other problems, leading to Whitaker simply walking away from the investment.
“He did not complete the project due to cost overruns and a bad general contractor,” Department of Justice spokeswoman Kerri Kupec said late Tuesday.
A company formed by Whitaker and two partners, MEM Investment, was awarded a $166,000 city loan to renovate the vacant three-story complex in 2012, through a Department of Housing and Urban Development grant program to promote affordable housing. A reorganization in 2014 made Whitaker the company’s sole owner.
All but $25,000 of the loan would be forgiven as long as the project was completed by 2017 and half of its 22 units were restricted to low-income tenants for five years. But what was once thought to be a $400,000 project for lead testing and site improvements became more expensive as additional work and damage piled up, records show.
By April 2016, it had become clear to city officials that Whitaker’s company had abandoned the project:
“In addition, more damage had occurred to the building’s interior because of what appears to be a roof leak and missing downspouts on the back of the building,” [city planner Mary Neiderbach wrote to Whitaker], adding that Whitaker’s company “appears to have abandoned the property.”
The letter informed Whitaker that the city was terminating the loan agreement and gave him 30 days to pay back $151,620 that he had been advanced. It noted that the city had to complete the work by the end of 2016 or repay HUD, and that it did not have confidence Whitaker’s company was up to that task.
Whitaker did not reply to the city’s notice. His lender, Lincoln Savings Bank, soon declared Whitaker’s company in default after he ignored demands to pay back a mortgage that had ballooned to $687,000, records show. The bank initiated foreclosure proceedings on the property in July 2016, seeking to be paid back ahead of the city and contractors.