October 2, 2013 Commissioner Rose Gill Hearn Department of Investigation 80 Maiden Lane New York, NY 10038 Dear Commissioner

Gill Hearn: In the fall of 2012, we were notified that the New York City Department of Homeless Services (DHS) intended to contract with Housing Solutions USA to open a 170-unit homeless shelter in a stalled 10-unit condominium and commercial development at 165 West 9th Street in Carroll Gardens, Brooklyn. We have communicated extensively with DHS and the New York City Department of Buildings (DOB) about this project, specifically expressing concerns about the fitness and track record of the operator, the procedures by which a contract would be reviewed, and the sites compliance with zoning. However, basic safety and integrity concerns appear to have been tossed aside to facilitate this project. We would welcome the opportunity to discuss the need for an investigation of this project with your staff. Below you will find a summary of our concerns:

Grave Concerns About Track Record of Operator The contract with Housing Solutions USA was issued using New York Citys emergency contracting procedures, despite a history of bad actions, a merger with the troubled not-for-profit shelter operator, Aguila, Inc., and concerns raised by numerous elected officials, including the New York City Comptroller. The attached letter of February 8, 2013 to Comptroller John Liu outlines a number of concerns regarding the integrity of this contract. DHS appears to be using emergency procurement of shelter beds to avoid sound planning, meaningful investigations of contract integrity, the Citys fair-share siting rules, and transparent public information about its proposed projects. Under the Citys emergency contracting procedures, the Mayors Office of Contracts does not review the agencys responsibility determination, which would normally provide an independent evaluation of the context of the solicitation and whether the contractor has the

technical capability and financial capacity to fully perform the requirements of the contract, as well as the business integrity to justify the award of public tax dollars. DHS has also failed to address serious questions about the history and relationships of the building owner, Alan Lapes, and the proposed operator, Housing Solutions USA/Aguila, Inc. This includes a history of operating unsafe facilities, Comptroller audits that revealed millions of dollars in improper and unsupported expenses, and the possibility of conflicts of interest between the owner of 165 W 9th Street, his associates, and the board members and contractors of Homeless Services USA and Aguila, Inc.

Building Violates Zoning Resolution The building in question was originally designed by Robert Scarano, an architect who was since charged by DOB with violating zoning and building codes in over two dozen buildings.1 As a result of Mr. Scarano abusing loopholes in the zoning for the 165 West 9th Street site, the site was overbuilt compared to the allowed zoning. Despite this, the DOB improperly issued a Certificate of Occupancy in 2010. An overview of how the building is non-compliant with zoning and building laws is detailed in an attached letter dated April 24, 2013 from Steven Kirkpatrick to DOB and the Law Department.

Extensive Work Without a Permit There is strong evidence that substantial construction work was conducted on the building without a permit, that DOB was made aware of the situation, and that they have taken no action to address this violation of law. The existing Certificate of Occupancy does not allow for the building to be operated as a homeless shelter. On March 14, 2013, DOB issued a building permit for conversion from residential use to a not-for-profit with sleep accommodations this would presumably allow the removal of kitchens, repartitioning the apartments as well as associated plumbing and electrical work. However, extensive construction work was conducted in the building apparently without a permit prior to October of 2012 (see attached letter to DOB dated January 24, 2013). These issues were underlined by an audit conducted by the DOB that found several objections, including those pertaining to the Zoning Resolution, Administrative Code and Multiple Dwellings Law (see attached letter from DOB dated May 21, 2013). DOB issued a letter of its Intent to Revoke the application on May 15, 2013 and specified that, if the applicant failed to respond to DOBs objections by May 30, 2013, all approvals and permits for the application would be revoked and a Stop Work Order issued.

Neuman, William. "More Accusations Against Architect The New York Times, May 28, 2006. http://www.nytimes.com/2006/05/28/realestate/28deal1.html
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DOB Audit Cleared Up Issues But Not Released to Elected Officials or the Public Despite these findings of the May 2013 DOB audit, my staff was informed in a recent exchange with DOB that all issues were cleared up by the applicant in August 2013. We have requested the audit and information about how the violations were abated but have not received any information or documents. This sudden green light from DOB for this project makes us very concerned about the integrity of the process especially given all of the above issues that have emerged about the site, the operator, the method of contract selection, the failure to have an independent review of the responsibility determination, and concerns around the construction approvals process over the past year. Again, we would welcome the opportunity to discuss with your staff about the need for an investigation. Please contact Catherine Zinnel in Council Member Brad Landers District Office at czinnel@council.nyc.gov or 718-499-1090. Sincerely,

Brad Lander Velmanette Montgomery New York City Councilmember New York State Senator 39th District 25th District

Joan Millman New York State Assemblywoman 52nd District