More Milwaukee groups that bought city-owned homes face questions about their nonprofit status
There are questions surrounding seven more groups that have bought steeply discounted properties from the City of Milwaukee by claiming to be nonprofit organizations.
The news follows a Journal Sentinel report that a sham nonprofit organization purchased — and then flipped — tax-foreclosed homes for just $1,000 from the City of Milwaukee.
More:Lax city oversight allowed sham nonprofit to snag and flip Milwaukee properties
The seven other groups bought a total of 13 properties from the city for prices ranging from $1 to about $1,000, said Amy Turim, the city's real estate development services manager. Those sales occurred before 2015, she said.
"There's no record of the entities with the IRS whatsoever," Turim said of the seven groups.
She did not identify those seven groups.
The problem sales were among the 2,500 city-owned properties sold between 2011 and 2017, she told aldermen Tuesday at a Zoning, Neighborhoods and Development Committee meeting.
Turim added that of those, 300 sales (or 12%) were to nonprofit groups.
Ald. Jim Bohl said staff erred by "accepting the evidence or documentation of nonprofit status on face value" when it was given to them by the applicants.
"Clearly, now we know that is not good enough," said Bohl, the committee chairman.
Ald. Robert Bauman said the issue could be easily resolved just by running online checks to see if a property is listed with the IRS as a nonprofit. Bauman acknowledged making the checks is time-consuming but said he has repeatedly told he department that if it needs more staff it should just ask.
"It is very embarrassing and very problematic and troubling for the neighborhoods" when the city sells properties to a fake nonprofit, Bauman said.
City officials say they now conduct those checks.
The city routinely charges nonprofit organizations $1,000 — or sometimes less — for properties it seized through tax foreclosures with the commitment that the group will fix them up.
Inner City Development Project Inc. — a group that city records show falsely claimed to be certified by the IRS as a nonprofit — sold several of the properties for quick gains, in one case making $44,000 on a north side house it bought one week earlier.
That sale was one of several that occurred after the IRS revoked Inner City Development's tax-exempt status in February 2015.
Gathan Anderson, a disgraced ex-real estate broker, was involved in some of the sales shortly after the city sold the properties to Inner City Development, deeds show.
He was arrested in September but not charged. He remains under criminal investigation.
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More:Disgraced ex-real estate broker Gathan Anderson arrested on suspicion of theft by fraud
Turim said Inner City was the only group city officials have found that had purchased city-owned properties after having their tax-exempt status revoked. She added that the Department of City Development has been working with police and prosecutors since the issue came to light.
"We definitely review all of the offers that come into our office for any program, including the nonprofit program, to ensure that buyers meet our minimum qualifications," Turim told the Journal Sentinel. "Going forward with the nonprofit program, we will be adding additional control measures to ensure that the entities representing themselves as nonprofits have a current and verifiable status."
Kail Decker, an assistant city attorney, said Anderson's case would prove that Inner City's approach is not a good business model.
"It's going to catch up to him very fast," Decker said.
More:Disgraced ex-real estate broker Gathan Anderson arrested on suspicion of theft by fraud
Six Milwaukee aldermen asked the city comptroller to conduct an audit of all city-owned properties sold to nonprofit organizations. That audit is expected in early 2018.
More:Milwaukee aldermen call for full audit of city home sale program following reports of scam