Fiscal board flags AAFAF for seeking $56 million for developer probed by feds
By The Star Staff
The Financial Oversight and Management Board has questioned the island government’s Fiscal Agency and Financial Advisory Authority (AAFAF by its Spanish initials) for requesting $56 million to assist a housing developer investigated in 2020 by federal officials for allegedly violating the Fair Housing and Americans with Disabilities acts.
In a letter dated Dec. 27, the oversight board, the federal regent of local fiscal affairs, reminded the AAFAF that it must approve all debt transactions by the Government of Puerto Rico or its instrumentalities. It asked the AAFAF to submit certain documents by Jan. 5 to determine if the request should move forward.
In a letter dated Dec. 19, the AAFAF asked the oversight board to allow the Puerto Rico Housing Finance Authority (HFA) to enter into a conduit financing transaction in an amount up to $56 million to assist in the financing of an affordable public housing project named “El Mirador Las Casas” in San Juan.
The debt transaction would lend the proceeds to El Mirador LLC as HFA’s borrower to partially cover the total construction and substantial rehabilitation costs of an existing 294-unit public housing complex, the letter notes.
According to the materials provided, the managing member of El Mirador LLC and developer of the project is Fernando L. Sumaza of Fernando L. Sumaza & Co. LLC., who has faced complaints in the past. The developer, whose main offices are in Mayagüez, manages 22 properties located around the island, according to the firm’s website. At press time, the company had not answered requests for comment.
“It has been brought to the Oversight Board’s attention that following an investigation of the United States Department of Justice on Fernando L. Sumaza & Co, Inc. and some of its affiliates, the US DOJ [Department of Justice] filed a complaint in the United States District Court for the District of Puerto Rico against Fernando L. Sumaza & Co, Inc. and its affiliates for alleged violations of certain provisions of the Fair Housing Act and the American with Disabilities Act, the oversight board noted.
As part of the complaint procedures, the parties reached an agreement and entered into a consent order on March 30, 2020 to remain in effect for a period of three years after the date of entry or until all of the actions required of the defendants were completed.
“Further, we have also become aware that there were also two cases, which are currently closed and solved, in the local courts against Fernando L. Sumaza Laborde for collection of money,” the oversight board said. “Under Fernando L. Sumaza & Co, Inc. as defendant, we found several cases for torts that are currently closed and inactive and one case that remains active and is in pre-judgement stage in the Mayaguez courts.”
After reviewing the supporting materials and considering the new information as part of the oversight board’s analysis under Section 207 of Puerto Rico Oversight, Management and Economic Stability Act, commonly known as PROMESA, the oversight board asked for a confirmation letter from the U.S. DOJ as to the compliance of Fernando L. Sumaza & Co Inc., in all material respects, with the terms and conditions of the consent order. The board also asked for a written confirmation from the HFA as to whether the complaint and consent order were evaluated as part of the application for the allocation of low-income housing tax credits and the Community Development Block Grant Disaster Recovery (CDBG-DR) Gap to award Low-Income Housing Tax Credit (LIHTC) programs and as part of the request to the HFA to issue tax-exempt obligations to finance the acquisition and construction of the project.
“The formal response should also address to what extent this information had an impact on the evaluation of the application for the requested benefits; and, written confirmation that HFA was aware of the local cases against Fernando L. Sumaza Laborde and his legal entities and whether these were evaluated as part of the application for the allocation of low-income housing tax credits and the CDBG-DR Gap to award LIHTC Programs and as part of the request to the HFA to issue tax exempt obligations to finance the acquisition and construction of the project,” the oversight board noted.
The formal response should also address to what extent the information had an impact on the evaluation of the application for the requested benefits, the letter said.