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Sue Ehrlich

© Santa Maria Times

Sue Ehrlich

Grand Jury Investigates Demise of Lompoc Community Housing

Finds That Chronic Lack of Oversight Killed North County Agency

Thursday, June 21, 2012
By Nick Welsh (Contact)

The Santa Barbara Grand Jury issued a blandly blistering indictment on this year’s collapse of the Lompoc Housing and Community Development Corporation ​— ​the biggest provider by far of affordable housing in the county’s most impoverished city ​— ​blaming a chronic lack of oversight by the County Housing and Community Development Department, the City of Lompoc, and the Lompoc Redevelopment Agency, in part, for its demise. Because these agencies were the governmental entities through which millions of dollars in federal grants and loans were funneled, the grand jury declared, they were charged with the responsibility of ensuring that Lompoc Housing was operated in a prudent and responsible fashion.

But the grand jury found these three agencies repeatedly dropped the ball, failing to insist that Lompoc Housing provide basic financial reports that would have given a clear indication of the nonprofit agency’s fiscal well-being. The grand jury found instances of contract noncompliance by Lompoc Housing dating back to 2003 and later accelerating in 2007, well before the stock market crashed. Citing the report’s appendix summarizing 66 troubled communications between Lompoc Housing and the three government oversight agencies, the grand jury concluded, “There were ample signs of trouble. Initiative was not taken and too many opportunities were missed.” The Department of Housing and Community Development, the grand jury concluded, “didn’t do its job in seizing the opportunities.

Because these agencies failed to exercise oversight, the grand jury found, they didn’t grasp the depth of financial mismanagement exerted by Lompoc Housing’s executive Sue Ehrlich until it was too late. As a result, the two homeless shelters operated by Lompoc Housing closed their doors this January with no advance notice given to other care providers to fill the breach. In addition, 255 units of affordable housing were lost, and 30 of Lompoc Housing’s 42 properties were either foreclosed upon, sold, repossessed, or placed in receivership. “In the end, neither the interests of the people in need of low-income housing nor the interests of the taxpayers were served by the agencies exercising discretion in the enforcement of regulations,” the report concluded. “If attention had been paid and Lompoc Housing had been forced to better manage its affairs in a timely fashion, low-income renters in Lompoc would have been much better served, and taxpayers would have been saved millions.”

Since Lompoc Housing’s inception in the early 1990s, government entities poured at least $6 million into it. The County of Santa Barbara could find itself on the hook to repay the federal government $1.4 million, and the grand jury estimated the Lompoc RDA invested at least $1.8 million into the failed enterprise. Problems started to surface in 2003, when Lompoc Housing started failing to provide legally mandated financial reports on its properties and investments. Failure to prove such documentation is grounds for initiating foreclosure action. But the problem wasn’t merely one of slipshod paperwork.

It turns out that Lompoc Housing was charging higher rents than they were legally entitled under the terms of the governmental loan agreements. Upkeep suffered. Some units lacked smoke detectors. There were holes in walls and screen doors, and trash accumulated. The grand jury used the term “blight” to describe the conditions. And management stubbornly resisted entreaties to schedule inspections, likewise resisting efforts to get paperwork showing that the tenants occupying the units qualified for government-assisted housing. If 2003 was the year that problems at Lompoc Housing first became apparent, it was also the year the nonprofit agency started buying up commercial real estate ​— ​including an old abandoned movie theater ​— ​as part of a grand, if utterly unsuccessful, scheme to revitalize downtown Lompoc.

Left conspicuously unanswered ​— ​and never even asked ​— ​were the questions why or how. When Lompoc Housing collapsed earlier this year, other affordable housing providers expressed bitter bewilderment at the immunity and impunity with which Lompoc Housing shrugged off government requests. Appropriately, the grand jury report noted that no one from Lompoc Housing cooperated with their investigation. Also notably absent from the report was any acknowledgement that Supervisor Joni Gray’s husband, George Wittenburg, had been the attorney of record for Lompoc Housing for many years.

Gray herself had been a partner in her husband’s law firm beginning in 2006. Even so, she never saw fit to recuse herself from any board deliberations over Lompoc Housing ​— ​even when significant financial grants were approved ​— ​until notified by the County Counsel’s office this year that there was a conflict of interest. Likewise, the grand jury report never mentioned that Gray’s administrative assistant, Susan Warnstrom, served as the president of Lompoc Housing’s board. While many in the nonprofit community have suggested that Gray’s connections inoculated Lompoc Housing from rudimentary oversight, no one has volunteered an instance in which Gray took an affirmative step to shield Lompoc Housing from scrutiny. In various news articles, Gray has denied any suggestion of impropriety. But to the extent the grand jury ever asked about such matters, there’s no indication in the report.

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