06/24/2009

By CHRIS BLANK  / Associated Press

An audit released Wednesday raises concerns about conflicts of interest at Missouri's low-income housing agency and calls for a tougher ethics policy.

State Auditor Susan Montee's review brings additional scrutiny to the Missouri Housing Development Commission. On Tuesday, the commission's new chairman outlined a proposed new ethics policy. And the housing agency's executive director told The Associated Press Friday that the FBI interviewed him as part of an investigation on low-income housing projects.

The housing agency uses tax credits and tax-free bonds to help finance the construction of affordable houses and apartments. Its oversight commission includes the governor, lieutenant governor, attorney general, state treasurer and six gubernatorial appointees.

Montee's audit criticized the agency for seeking donations from developers to pay for conferences and not requiring commissioners to recuse themselves from decisions affecting those with whom they have relationships, whether in business or politics.

In its formal response, the housing agency said it is developing a new ethics and conflicts-of-interest policy.

Montee's audit said two commissioners had taken part in discussions that affected people with whom the commissioners had financial ties. From 2006 through 2008, the housing agency awarded $30 million to the developer with ties to one commissioner and $80 million to the other.

The audit does not name the businesses or the commissioners, who left the housing agency in December 2008 and January 2009. But it does note news coverage about one of the conflicts.

In 2006, then-commissioner Bill Luetkenhaus, a St. Charles County real estate broker, bought a 20-acre parcel of land for $931,794 in September 2006 and sold it two months later to Columbia developer Jeff Smith for more than $1.7 million. Luetkenhaus also voted on other development projects Smith submitted. But Smith did not seek state aid to develop the property he bought from Luetkenhaus. The housing commission determined the sale didn't violate any state statutes.

Luetkenhaus disclosed the potential for a conflict to the commission chairman.

But the incident prompted the housing commission to propose new conflicts-of-interest policies in 2007. Those changes have not been enacted.

Montee also found campaign donations to the four statewide elected officials on the commission. But it was difficult to match specific donations to developers. The audit recommends that politicians recuse themselves in such cases.

The review also criticized the housing agency for soliciting $42,000 from companies to help pay for the 2006 Governor's Housing Conference and the 2007 Governor's Conference on Economic Development. Many of those donors had business ties with the commission.